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Cipla (CIPLA)
Pharmaceuticals
No recovery in sight. PAT at Rs2.5 bn was 17% lower than our estimate due to poor
sales growth in India and exports and lower margin, which was flat yoy although up
qoq due to lower ARV exports. We lower our FY2012-13E estimates by 13% to
Rs14.5/16.5. Cipla trades at 20X FY2012E estimate despite offering (1) relatively inferior
growth prospects and (2) India finished dosage (46% of revenues) growing at belowmarket
rate since FY2010. Maintain REDUCE with a TP of Rs325 (18X FY2013E EPS).
Revenues at Rs15.7 bn, 8% lower than our estimate and up only 9% yoy
Sales were up 9% yoy due to (1) muted growth in India business which grew 10% yoy on a low
base of 4% growth last year and (2) 5% growth in finished dosage exports which saw lower ARV
export sales at 22% of finished dosage sales, lower than 30% last year and boosted by a pick-up
in sales at the Indore SEZ.
EBITDA margin flat yoy; PAT at Rs2.5 bn, 17% lower than our estimate
Sales were 8% lower than our estimate, EBITDA margin at 21% was 150 bps lower and remained
flat yoy. Gross margin improved by 400 bps yoy due to (1) better product mix on account of lower
ARV finished dosage exports and (2) higher contribution from the Indore SEZ. However, staff costs
increased by 18% due to annual increments and increase in staff (7,000 MRs in India, the highest
among peers) which led to margin remaining flat yoy. (1) Increase in interest cost on account of
short-term working capital loan taken in FY2011 and (2) higher tax rate at 20% versus our
estimate of 17% led to PAT miss of 17%.
We lower our FY2012-13E EPS estimate by 13%, factor in recovery in India/export business
We lower our FY2012-13E EPS estimate by 13% to Rs14.5 and Rs16.5. We factor in recovery in
India business in 2HFY12E with sales growth at 12% on account of (1) low base effect with overall
sales growth at 11% in India in FY2012E and 14% in FY2013E and (2) finished dosage exports
growth at 16% in rupee terms versus 5% reported in 1QFY12 aided by Indore SEZ sales. At the
current run rate reported in 1QFY12, we factor in sales/asset turnover of around 0.6X at the
Indore SEZ in FY2012E and we expect it to improve to 1X in FY2014E.
Valuations remain rich, maintain REDUCE with PT of Rs325
Cipla trades at 20X FY2012E estimates. A pick-up in the growth trajectory is incumbent upon (1)
launch of combinations inhalers and (3) rapid utilization of its SEZ likely post a potential supply
deal with a big pharma. Given the lack of visibility on these drivers, we reiterate REDUCE with PT
of Rs325.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Cipla (CIPLA)
Pharmaceuticals
No recovery in sight. PAT at Rs2.5 bn was 17% lower than our estimate due to poor
sales growth in India and exports and lower margin, which was flat yoy although up
qoq due to lower ARV exports. We lower our FY2012-13E estimates by 13% to
Rs14.5/16.5. Cipla trades at 20X FY2012E estimate despite offering (1) relatively inferior
growth prospects and (2) India finished dosage (46% of revenues) growing at belowmarket
rate since FY2010. Maintain REDUCE with a TP of Rs325 (18X FY2013E EPS).
Revenues at Rs15.7 bn, 8% lower than our estimate and up only 9% yoy
Sales were up 9% yoy due to (1) muted growth in India business which grew 10% yoy on a low
base of 4% growth last year and (2) 5% growth in finished dosage exports which saw lower ARV
export sales at 22% of finished dosage sales, lower than 30% last year and boosted by a pick-up
in sales at the Indore SEZ.
EBITDA margin flat yoy; PAT at Rs2.5 bn, 17% lower than our estimate
Sales were 8% lower than our estimate, EBITDA margin at 21% was 150 bps lower and remained
flat yoy. Gross margin improved by 400 bps yoy due to (1) better product mix on account of lower
ARV finished dosage exports and (2) higher contribution from the Indore SEZ. However, staff costs
increased by 18% due to annual increments and increase in staff (7,000 MRs in India, the highest
among peers) which led to margin remaining flat yoy. (1) Increase in interest cost on account of
short-term working capital loan taken in FY2011 and (2) higher tax rate at 20% versus our
estimate of 17% led to PAT miss of 17%.
We lower our FY2012-13E EPS estimate by 13%, factor in recovery in India/export business
We lower our FY2012-13E EPS estimate by 13% to Rs14.5 and Rs16.5. We factor in recovery in
India business in 2HFY12E with sales growth at 12% on account of (1) low base effect with overall
sales growth at 11% in India in FY2012E and 14% in FY2013E and (2) finished dosage exports
growth at 16% in rupee terms versus 5% reported in 1QFY12 aided by Indore SEZ sales. At the
current run rate reported in 1QFY12, we factor in sales/asset turnover of around 0.6X at the
Indore SEZ in FY2012E and we expect it to improve to 1X in FY2014E.
Valuations remain rich, maintain REDUCE with PT of Rs325
Cipla trades at 20X FY2012E estimates. A pick-up in the growth trajectory is incumbent upon (1)
launch of combinations inhalers and (3) rapid utilization of its SEZ likely post a potential supply
deal with a big pharma. Given the lack of visibility on these drivers, we reiterate REDUCE with PT
of Rs325.
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