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Cipla (CIPL.BO)
Sell Equity Research
In line with expectations: Domestic growth under pressure; CL-Sell
What surprised us
Cipla reported 1QFY12 revenue of Rs15.91bn which was below GSe /
Bloomberg estimate by -4.8% / -6.0%. The revenue miss was largely on
weakness seen in the domesic businesses (yoy +10.1%) and exports which
saw a sequential decline of 14.8%. EBIT at Rs 2.99bn was higher than GSe by
8.8% (but below Bloomberg estimates, -10.8%) on: 1. Better product mix; 2.
Greater-than-anticipated utilization levels at Indore facility. Net income of Rs
2.53 bn which came 7.3% ahead of GSe (but below Street by -4.2%) was
helped by other income. We maintain our revenue growth forecast of 12.8%,
compared with management reaffirming guidance of 10% revenue growth for
FY 2012. We expect consensus numbers to come down for both sales and
margin after today’s -6.0% (top line) miss and -100bp contraction in margins.
Management indicated on the conference call a greater focus to consolidate
the domestic business which is lately seeing competitive pressure through a
combination of: 1. New product launches; 2. Optimization of Medical reps; 3.
Focus on Chronic therapeutic areas.
What to do with the stock
We reiterate our Conviction Sell on Cipla and maintain our 12-month Director’s
Cut-based TP of Rs244 . Cipla, currently trades at 22.1x on FY 2012 EPS implying
a premium of 31% vs. sector ,which, in our view, is overvalued. We maintain
our 13% revenue growth for FY 2012 (above guidance of 10%) and make no
changes to our FY12E-FY14E EPS giving us a CAGR of 14%. Risks: Partnership
with global pharma companies, recovery in domestic revenue growth.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Cipla (CIPL.BO)
Sell Equity Research
In line with expectations: Domestic growth under pressure; CL-Sell
What surprised us
Cipla reported 1QFY12 revenue of Rs15.91bn which was below GSe /
Bloomberg estimate by -4.8% / -6.0%. The revenue miss was largely on
weakness seen in the domesic businesses (yoy +10.1%) and exports which
saw a sequential decline of 14.8%. EBIT at Rs 2.99bn was higher than GSe by
8.8% (but below Bloomberg estimates, -10.8%) on: 1. Better product mix; 2.
Greater-than-anticipated utilization levels at Indore facility. Net income of Rs
2.53 bn which came 7.3% ahead of GSe (but below Street by -4.2%) was
helped by other income. We maintain our revenue growth forecast of 12.8%,
compared with management reaffirming guidance of 10% revenue growth for
FY 2012. We expect consensus numbers to come down for both sales and
margin after today’s -6.0% (top line) miss and -100bp contraction in margins.
Management indicated on the conference call a greater focus to consolidate
the domestic business which is lately seeing competitive pressure through a
combination of: 1. New product launches; 2. Optimization of Medical reps; 3.
Focus on Chronic therapeutic areas.
What to do with the stock
We reiterate our Conviction Sell on Cipla and maintain our 12-month Director’s
Cut-based TP of Rs244 . Cipla, currently trades at 22.1x on FY 2012 EPS implying
a premium of 31% vs. sector ,which, in our view, is overvalued. We maintain
our 13% revenue growth for FY 2012 (above guidance of 10%) and make no
changes to our FY12E-FY14E EPS giving us a CAGR of 14%. Risks: Partnership
with global pharma companies, recovery in domestic revenue growth.
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