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UBS Investment Research
Cipla Ltd.
Q3FY11: Missing again on cost & currency
„ Sales Q3FY11: Rs 15.0bn (+12%YoY); EBITDA: Rs 3.2bn (-21%YoY)
India/Export revenues grew 11%/12%YoY respectively. However, revenues were
down 5%qoq partly due to 4%qoq USD depreciation vs INR which impacted
margins. EBITDA declined 21%YoY due to lower technology fees and higher staff
cost (+52%YoY) and other expenses (+26%YoY). Other expenses grew 12% qoq,
we believe primarily due to higher selling expenses. Net profit declined 19% YoY
to Rs 2.32bn (-12%qoq). We reduce our FY11/12 earnings by 9%/6% due to lower
than expected revenues and margins ytd.
„ Indore SEZ ramp up in FY12; EU inhalers still work in progress
The company expects growth to be robust in FY12 as Indore SEZ ramps up and
contributes Rs 4 - 5bn in revenues. The site has received approval from regulators
of S. Africa, UK and Aus. The company continues to work on 5-6 inhalers for the
EU and has completed clinical and regulatory work for some of those. The
company expects to launch a few inhalers in EU in the next one year, however
combination inhalers may take longer. It has launched the Seroflo inhaler in South
Africa and expects to launch in Russia soon.
„ Re-strategizing for future growth, model may shift
Mgmt. talked about re-strategizing for India, as well as evaluating best approach to
grow in other markets. The company may look to enter the US market on its own.
It currently has 22 partners in US and 50+ partners in EU.
„ Valuation: Maintain Sell, PT Rs 340
We derive our price target using DCF-based methodology and explicitly forecast
long-term valuation drivers using UBS’s VCAM tool and assume WACC of 11%.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Cipla Ltd.
Q3FY11: Missing again on cost & currency
„ Sales Q3FY11: Rs 15.0bn (+12%YoY); EBITDA: Rs 3.2bn (-21%YoY)
India/Export revenues grew 11%/12%YoY respectively. However, revenues were
down 5%qoq partly due to 4%qoq USD depreciation vs INR which impacted
margins. EBITDA declined 21%YoY due to lower technology fees and higher staff
cost (+52%YoY) and other expenses (+26%YoY). Other expenses grew 12% qoq,
we believe primarily due to higher selling expenses. Net profit declined 19% YoY
to Rs 2.32bn (-12%qoq). We reduce our FY11/12 earnings by 9%/6% due to lower
than expected revenues and margins ytd.
„ Indore SEZ ramp up in FY12; EU inhalers still work in progress
The company expects growth to be robust in FY12 as Indore SEZ ramps up and
contributes Rs 4 - 5bn in revenues. The site has received approval from regulators
of S. Africa, UK and Aus. The company continues to work on 5-6 inhalers for the
EU and has completed clinical and regulatory work for some of those. The
company expects to launch a few inhalers in EU in the next one year, however
combination inhalers may take longer. It has launched the Seroflo inhaler in South
Africa and expects to launch in Russia soon.
„ Re-strategizing for future growth, model may shift
Mgmt. talked about re-strategizing for India, as well as evaluating best approach to
grow in other markets. The company may look to enter the US market on its own.
It currently has 22 partners in US and 50+ partners in EU.
„ Valuation: Maintain Sell, PT Rs 340
We derive our price target using DCF-based methodology and explicitly forecast
long-term valuation drivers using UBS’s VCAM tool and assume WACC of 11%.
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