Cipla’s results for 4QFY2016 have come much below our expectations. Sales
came in at Rs3,207cr V/s Rs3,274cr expected, a yoy growth of 7.6%. The sales
growth was driven by domestic formulations (Rs1,258cr), as expected, which grew
15.9% yoy, while exports posted a yoy growth of 7.4%. On the operating front,
the EBDITA came in at 5.0% V/s 13.3% in 4QFY2015 and against 13.8%
expected. The reported EBDITA margins include a lot of one-offs, adjusting for
which the OPM was at 15.8%. The net profit thus came in at Rs81cr V/s Rs399cr
expected and V/s Rs260cr in 4QFY2015, a yoy de-growth of 68.9%. We remain
Neutral on the stock.
Results much lower than expectations: Sales for the quarter came in at Rs3,207cr
V/s Rs3,274cr expected, a yoy growth of 7.6%. The sales growth was driven by
domestic formulations (Rs1,258cr), as expected, which grew 15.9% yoy, while
exports posted a yoy growth of 7.4%. Exports of formulations increased 3.2% to
Rs1,744cr during 4QFY2016, while exports of APIs were flat at Rs204cr during
4QFY2016. On the operating front, the EBDITA came in at 5.0% V/s 13.3% in
4QFY2015 and against 13.8% expected. The decline was mainly owing to a dip
in gross profit margins, which came in at 55.8% V/s 61.1% in 4QFY2015. The
reported EBDITA margins include a lot of one-offs, adjusting for which, the OPM
was 15.8%. The net profit thus came in at Rs81cr V/s `399cr expected and V/s
Rs260cr in 4QFY2015, a yoy dip of 68.9%.
Outlook and valuation: We expect the company to post a 16.3% CAGR in
net sales to Rs18,089cr and EPS to record a 20.4% CAGR to Rs27.2 over
FY2016–18E. We recommend our neutral stance on the stock owing to the
company’s poor return ratios.
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