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3QFY12F domestic formulation growth at 13% y-y
We project domestic sales growth of 13% y-y for 3QFY12. As per AIOCD AWACS data,
there are some signs of revival in domestic sales growth for Cipla as October-November
2011 sales growth was largely in line with the broader market at ~14%. A pickup in the
anti infective and gastro-intestinal segments is positive for Cipla, in our view. Cipla’s
presence in the hospital segment and unbranded generics (18-20% of sales) has been
volatile in the past and presents some uncertainties to growth estimates, in our view.
Expect Cipla to be a big beneficiary of INR depreciation
The export growth for Cipla is likely to be very robust during the quarter. This is on
account of 1) significant currency depreciation and 2) a low base in 3QFY11. The
average INR/USD rate in 3QFY12 has been 51.13, its highest ever and compares to
45.78 recorded in the previous quarter. Assuming similar export volumes as in the
previous quarter and the ramp up in Indore SEZ to continue, we forecast 30% (y-y)
export growth.
INR depreciation is positive for margins
We believe Cipla will be a beneficiary of INR depreciation against export currencies
primarily as its costs are largely in INR terms. For cash flow hedging, we understand that
the company takes hedging contracts month to month and doesn't have long-term
hedges. We have assumed other operating income at levels similar to 2QFY12, building
in similar quantum of forex gains.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
3QFY12F domestic formulation growth at 13% y-y
We project domestic sales growth of 13% y-y for 3QFY12. As per AIOCD AWACS data,
there are some signs of revival in domestic sales growth for Cipla as October-November
2011 sales growth was largely in line with the broader market at ~14%. A pickup in the
anti infective and gastro-intestinal segments is positive for Cipla, in our view. Cipla’s
presence in the hospital segment and unbranded generics (18-20% of sales) has been
volatile in the past and presents some uncertainties to growth estimates, in our view.
Expect Cipla to be a big beneficiary of INR depreciation
The export growth for Cipla is likely to be very robust during the quarter. This is on
account of 1) significant currency depreciation and 2) a low base in 3QFY11. The
average INR/USD rate in 3QFY12 has been 51.13, its highest ever and compares to
45.78 recorded in the previous quarter. Assuming similar export volumes as in the
previous quarter and the ramp up in Indore SEZ to continue, we forecast 30% (y-y)
export growth.
INR depreciation is positive for margins
We believe Cipla will be a beneficiary of INR depreciation against export currencies
primarily as its costs are largely in INR terms. For cash flow hedging, we understand that
the company takes hedging contracts month to month and doesn't have long-term
hedges. We have assumed other operating income at levels similar to 2QFY12, building
in similar quantum of forex gains.
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