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Cipla’s Q2FY12 adjusted PAT at INR2.98bn grew 20% YoY, ahead of our
estimate of INR2.79bn, led by better product mix and higher utilization at
Indore SEZ. Revenue growth of 10% YoY was in line; however domestic
growth of 12% YoY was ahead of the estimated 9% and was on higher
base of 20% YoY in Q2FY11. We believe the company’s domestic business
has gained momentum and should deliver strong performance in H2FY12.
We maintain our estimates and reiterate ‘BUY’ with TP of INR350.
Profitable growth and sustained improvement in margin
Cipla’s sales grew 10% YoY, in line, led by strong growth in domestic and ROW markets.
Despite lower tech income (INR77mn vs. est. INR100mn), operating performance was
strong driven by improved product mix and higher utilization from Indore SEZ. EBITDA
margin (ex‐tech income and forex gain) catapulted 247bps YoY and 163bps QoQ.
Notably, gross margin improved 6.3% YoY on back of higher sales from domestic
business and improved efficiency.
Domestic growth surpassed our expectations
Domestic growth at 12% YoY surpassed our expectation and was on a higher base of
20% YoY in Q2FY11, reflecting improved performance (refer our Monthly review dated
Oct 20, 2011). Cipla’s recent focus on high growth chronic segment and mature brands
led to superior growth in the portfolio. We believe visible growth traction and strong
seasonal respiratory sales should lead to better trajectory in ensuing quarters.
Inhaler opportunity in EU could be medium term growth driver
Inhaler opportunity offers USD2.3bn‐6.0bn addressable market opportunity in ROW
and EU markets. After initial regulatory hurdles, the company has launched Salmeterol
inhaler in a few EU markets. It has also launched Seroflo combination inhaler in Russia,
which has gained strong traction. Cipla plans to launch Seroflo in EU markets (12‐15
months) which could be a medium term growth driver to export formulations.
Outlook and valuations: Positive; maintain ‘BUY’
We believe that expected recovery in domestic business and margin improvement in
SEZ will impart higher earnings growth (21% CAGR over FY11‐13E). Risk‐reward is in
favor and, hence, we reiterate ‘BUY/Sector Outperformer’.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Cipla’s Q2FY12 adjusted PAT at INR2.98bn grew 20% YoY, ahead of our
estimate of INR2.79bn, led by better product mix and higher utilization at
Indore SEZ. Revenue growth of 10% YoY was in line; however domestic
growth of 12% YoY was ahead of the estimated 9% and was on higher
base of 20% YoY in Q2FY11. We believe the company’s domestic business
has gained momentum and should deliver strong performance in H2FY12.
We maintain our estimates and reiterate ‘BUY’ with TP of INR350.
Profitable growth and sustained improvement in margin
Cipla’s sales grew 10% YoY, in line, led by strong growth in domestic and ROW markets.
Despite lower tech income (INR77mn vs. est. INR100mn), operating performance was
strong driven by improved product mix and higher utilization from Indore SEZ. EBITDA
margin (ex‐tech income and forex gain) catapulted 247bps YoY and 163bps QoQ.
Notably, gross margin improved 6.3% YoY on back of higher sales from domestic
business and improved efficiency.
Domestic growth surpassed our expectations
Domestic growth at 12% YoY surpassed our expectation and was on a higher base of
20% YoY in Q2FY11, reflecting improved performance (refer our Monthly review dated
Oct 20, 2011). Cipla’s recent focus on high growth chronic segment and mature brands
led to superior growth in the portfolio. We believe visible growth traction and strong
seasonal respiratory sales should lead to better trajectory in ensuing quarters.
Inhaler opportunity in EU could be medium term growth driver
Inhaler opportunity offers USD2.3bn‐6.0bn addressable market opportunity in ROW
and EU markets. After initial regulatory hurdles, the company has launched Salmeterol
inhaler in a few EU markets. It has also launched Seroflo combination inhaler in Russia,
which has gained strong traction. Cipla plans to launch Seroflo in EU markets (12‐15
months) which could be a medium term growth driver to export formulations.
Outlook and valuations: Positive; maintain ‘BUY’
We believe that expected recovery in domestic business and margin improvement in
SEZ will impart higher earnings growth (21% CAGR over FY11‐13E). Risk‐reward is in
favor and, hence, we reiterate ‘BUY/Sector Outperformer’.
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