IOL Chemicals and Pharmaceuticals is our top pick from pharma sector. It’s business is comprised of two segments, chemicals and pharmaceuticals. The chemical segment manufactures Ethyl Acetate, Iso Butyl Benzene (IBB), Acetyl Chloride and Mono Chloro acetic Acid (MCA), while under pharmaceuticals the company manufactures active pharmaceutical ingredient (APIs) i.e. Ibuprofen.
Company sells branded formulation and ibuprofen in export markets like Europe, Latin America and Middle East. Apart from Ibuprofen, it also manufactures Metformin Hydrochloride, Lamotrigine, Fenofibrate and Clopidogrel Bi sulphate.
It is one of the largest producers of Ethyl Acetate (87,000 TPA) and ISO Butyl Benzene in India with over 30% of the global market share and a major player in Ibuprofen. It has forward integrated this vertical to the pharmaceutical segment with end products such as IBB (9000 TPA), MCA (7200 TPA) and Acetyl Chloride (5200 TPA) used as key raw materials for Ibuprofen. It is the world’s only backward-integrated Ibuprofen producer (8,000 TPA) that manufactures all intermediates and key starting materials at one location.
It has augmented its pharma business by moving up the value-chain by entering into lifestyle drugs for pain management, anti-depressant, anti-diabetic, anti-platelet and anti-convulsion.
Currently, 6 APIs are already commercialized and 10 APIs are in the advance stage of development. The chemical and pharmaceutical segments contribute equally to the revenue. We have initiated coverage at Rs 95 with Target of Rs 175. For short term one can buy with target of Rs 125 keeping stoploss of Rs 98.
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