ICRA has assigned the fundamental grade '3' and a valuation grade 'A' to Ind-Swift Laboratories Ltd (ISLL) in its report. The fundamental grade '3' assigned implies that the company has good fundamentals and the valuation grade 'A' assigned implies the the company is significantly undervalued on a relative basis.


According to ICRA report, ISLL's key strengths include its leadership position in clarithromycin API in semi-regulated markets, leading presence in certain molecules with large business that are expected to go off-patent in the near term, expanding product pipeline comprising several complex difficult-to-manufacture high-value APIs, established relationships with leading generic players in Eastern and Central European markets, sizeable investments in R&D to drive foray into regulated markets and significant experience of the management team.


At current valuation (5.2x FY12 earnings), ISLL trades at a significant discount to its closest listed peers in the bulk drugs/contract manufacturing segment (i.e. Orchid Chemicals, Dishman Pharma) as well as the broader indices (i.e. S&P CNX Nifty).


ICRA stated that it believe execution remains a key challenge for the company over the medium term to achieve the full potential for is R&d investments. At present the ISLL scrip is moving around Rs.100-110 on BSE with its 52-week peak level of Rs.158.