Technology

Cipla posted lower than expected numbers for 1QFY2017. Sales came in at
Rs3,500cr V/s Rs3,743cr expected and V/s Rs3,761cr in 1QFY2016, a dip of 6.9%
yoy. Domestic sales (Rs1,449cr) rose 5% yoy, while exports (Rs2,051cr) dipped by
14.0% yoy. On the operating front, the EBITDA margin came in at 14.8% V/s
18.6% expected, V/s 26.0% in 1QFY2016, and V/s Adj. OPM of 15.8% in
4QFY2016. Thus, the Adj. net profit came in at Rs365cr V/s Rs435cr expected and
V/s Rs649cr in 1QFY2016, a yoy de-growth of 43.7%. We maintain our Neutral
rating on the stock.
Results much lower than our expectations: The company posted lower than
expected numbers for 1QFY2017. Sales came in at Rs3,500cr V/s Rs3,743cr
expected and V/s Rs3,761cr in 1QFY2016, a dip of 6.9% yoy. Domestic sales
(Rs1,449cr) rose 5% yoy, while exports (Rs2,051cr) dipped by 14.0% yoy. On the
operating front, the EBITDA margin came in at 14.8% V/s 18.6% expected, V/s
26.0% in 1QFY2016, and V/s Adj. OPM of 15.8% in 4QFY2016. Thus, the Adj.
net profit came in at Rs365cr V/s Rs435cr expected and V/s Rs649cr in 1QFY2016,
a yoy de-growth of 43.7%.
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 reiterate our Neutral stance on the stock owing to the
company’s poor return ratios.

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