Key takeaways
Muted quarter. Cipla’s 4QFY13 revenue grew 5.4% yoy to `19.7bn, less than
our expected `20.9bn, chiefly due to lower domestic growth and a decline in
APIs. Its EBITDA margin declined 60bps yoy to 20.8%, less than our
estimated 23.8%, on lower domestic revenue and a 300-bp yoy increase in staff
costs. Adjusted PAT fell 8.3% yoy to `2.7bn (vs our expected `3.5bn) on the
lower revenue growth, EBITDA margin decline and a higher effective tax rate.
Export formulations – key growth driver. Revenue growth at 5.4% yoy
was restrained. Export formulations was the key growth driver, with a 12%
yoy increase in revenue led by the anti-asthma, anti-allergy, ARVs and antidepressant
segments. However, on the high base, export API revenue fell
24% yoy. Domestic formulations registered 5.2% yoy growth, much less than
our estimated 10% due to the slowdown in industry growth particularly in the
acute segments.
Our take. We believe that the weak performance chiefly stemmed from
restrained growth in domestic formulations and the shift of some tender
business in Africa to FY14. This also cut into the margin. Management is
confident of healthy double-digit growth in FY14 and has guided to more
R&D expenditure to build a future pipeline. Considering 4QFY13’s subdued
performance, the 100-bp rise in R&D spend and the higher tax rate, we lower
our FY14e and FY15e revenue 1.6% and 0.3% respectively, and adjusted
PAT estimates 5.7% and 5.3%. The Cipla Medpro acquisition is expected to
be complete by 2QFY14 and we expect it to be 3.5% EPS accretive in FY15.
We have not factored this acquisition into our estimates but have valued it
separately.
We maintain a Buy on the stock, with a revised target of `472 based on 21x
Sep’14e earnings and `17 for the Cipla Medpro acquisition. Risks. Currency
fluctuations, regulatory hurdles.
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Muted quarter. Cipla’s 4QFY13 revenue grew 5.4% yoy to `19.7bn, less than
our expected `20.9bn, chiefly due to lower domestic growth and a decline in
APIs. Its EBITDA margin declined 60bps yoy to 20.8%, less than our
estimated 23.8%, on lower domestic revenue and a 300-bp yoy increase in staff
costs. Adjusted PAT fell 8.3% yoy to `2.7bn (vs our expected `3.5bn) on the
lower revenue growth, EBITDA margin decline and a higher effective tax rate.
Export formulations – key growth driver. Revenue growth at 5.4% yoy
was restrained. Export formulations was the key growth driver, with a 12%
yoy increase in revenue led by the anti-asthma, anti-allergy, ARVs and antidepressant
segments. However, on the high base, export API revenue fell
24% yoy. Domestic formulations registered 5.2% yoy growth, much less than
our estimated 10% due to the slowdown in industry growth particularly in the
acute segments.
Our take. We believe that the weak performance chiefly stemmed from
restrained growth in domestic formulations and the shift of some tender
business in Africa to FY14. This also cut into the margin. Management is
confident of healthy double-digit growth in FY14 and has guided to more
R&D expenditure to build a future pipeline. Considering 4QFY13’s subdued
performance, the 100-bp rise in R&D spend and the higher tax rate, we lower
our FY14e and FY15e revenue 1.6% and 0.3% respectively, and adjusted
PAT estimates 5.7% and 5.3%. The Cipla Medpro acquisition is expected to
be complete by 2QFY14 and we expect it to be 3.5% EPS accretive in FY15.
We have not factored this acquisition into our estimates but have valued it
separately.
We maintain a Buy on the stock, with a revised target of `472 based on 21x
Sep’14e earnings and `17 for the Cipla Medpro acquisition. Risks. Currency
fluctuations, regulatory hurdles.
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