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Cipla Ltd Research Report - 21st Jan 2016

Pharmaceutical | Published on Nov 09th 2015

IT

For 2QFY2016, Cipla posted numbers more or less in line with our expectations on the sales and net profit front while beating our estimates on the OPM front. The company posted sales of Rs3,362cr V/s Rs3,343cr expected and V/s Rs2,630cr in 2QFY2015, a yoy growth of 27.8%. On the operating front, the OPM came in at 20.8% V/s 16.0% in 2QFY2015 and V/s an expected 19.7%, driven by gross margin expansion and higher sales growth. Thus, the Net Profit came in at Rs432cr V/s an expected Rs458cr and V/s Rs299cr in 2QFY2015, a yoy growth of 44.4%. The Management reiterated its guidance of sales growth of 22% in FY2016 and EBDITA margin improvement of 100-150bp. We currently have a Neutral rating on the stock. Results better than expectations on the OPM front: The company posted sales of Rs3,362cr V/s Rs3,343cr expected and V/s Rs2,630cr in 2QFY2015, a yoy growth of 27.8%. The growth on the top-line came through a 52.3% yoy growth in exports driven by formulation exports (on back of generic Nexium). Export API, on the other hand posted a 61.4% yoy growth during the quarter. Domestic formulation (Rs1,262cr) posted a flat growth of 0.9% yoy. On the operating front, the gross margins came in at 63.8% V/s 61.4% in 2QFY2015, leading to margin expansion. The OPM came in at 20.8% V/s 16.0% in 2QFY2015 and V/s an expected 19.7%, driven by gross margin expansion and higher sales growth. However, inspite of a 66.0% rise in operating profit, the PAT rose only by 44.4% yoy, on back of an 80.0% yoy rise in tax expenses. Thus, the net profit came in at Rs432cr V/s Rs458cr expected and V/s Rs299cr in 2QFY2015, a yoy growth of 44.4%. Outlook and valuation: We expect the company to post a 19.2% CAGR in net sales to Rs16,611cr and EPS to record a 21.4% CAGR to Rs28.9 over FY2015–17E. The growth in the top-line would be driven by domestic formulation sales and exports. We maintain our Neutral stance on the stock.

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CMP 658
Target Price
Investment Period12 Months

Stock Info

MCAP BSE (Rs in Cr)45,875.39
MCAP NSE (Rs in Cr)45,911.58
P/E (x)48.82
EPS (Rs.)11.68
BV (Rs.)153.11
Div Yield (%)0.35
FV (Rs.)2.00
P/BV (x)3.73
EV/Sales (x)3.69
EV/EBITDA (x)19.66

Shareholding Pattern (%)

Promoter37.0
Foreign26.0
Public & Others17.0
Institution16.0
Corporate4.0
Grand Total100.0

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