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The key positive 1QFY12 takeaway is qoq EBITDA margin expansion of 580bp, which we believe
is sustainable. While revenue growth was muted, we think growth momentum can accelerate and
surpass management's conservative guidance. We maintain our Buy rating and fine tune our TP
to Rs365.
1Q12 top line was muted; we expect growth momentum to accelerate
1Q12 revenue growth was muted at 9% yoy at Rs15.5bn driven by 10% growth in domestic
formulations (47% of 1Q12 revenues), 5% growth in export formulations (42%) and 22% growth
in Active Pharma Ingredients (APIs, 11%). We expect growth momentum to accelerate as: 1)
Contribution from Indore SEZ is ramping up (revenues of Rs1.48bn in 1QFY12 vs. Rs1.1bn in
FY11) coupled with management increasing the guidance of Indore SEZ’s share of revenue
contribution to export formulations from 8-10% to 12-15%; 2) 60% of the Cipla’s domestic product
portfolio is focused in the relatively faster growing chronic segment; and 3) olanzapine API
supplies to drive API business growth.
EBITDA margin expansion, sustainable in our view, is the key positive takeaway
The key positive takeaway from the results was the 580bp qoq increase in core EBITDA margin
(ie, ex-technical know-how income) to 21.2%, ahead of our 18.1% estimate. This was led by 1)
better product mix (lower exposure to low-margin anti-retrovirals (ARVs)); 2) improved utilization
of its Indore SEZ facility; and 3) increased contribution from API business. We expect margin
improvement to continue as Cipla guides for increased contribution from Indore SEZ coupled with
our expectation of further improvement in API sales. PAT at Rs2.5bn (-2% yoy) was affected by a
higher tax rate due to expiry of tax benefits on Export Units (EOUs).
We continue to believe Cipla could exceed its FY12 guidance; maintain Buy
We continue to believe Cipla could exceed its FY12 revenue guidance of 10-12% (we estimate
14.9%) and EBITDA margin of 18-20% (21.4%) given: 1) Indore SEZ utilization increasing; 2)
strong API sales; and 3) traction in inhalers for Europe and EMs. We roll forward our valuation to
FY13 and fine tune our TP to Rs365, a 21.4x FY13F PE multiple (a 10% premium to the FY13F
sector multiple) versus an earlier target price of Rs371
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
The key positive 1QFY12 takeaway is qoq EBITDA margin expansion of 580bp, which we believe
is sustainable. While revenue growth was muted, we think growth momentum can accelerate and
surpass management's conservative guidance. We maintain our Buy rating and fine tune our TP
to Rs365.
1Q12 top line was muted; we expect growth momentum to accelerate
1Q12 revenue growth was muted at 9% yoy at Rs15.5bn driven by 10% growth in domestic
formulations (47% of 1Q12 revenues), 5% growth in export formulations (42%) and 22% growth
in Active Pharma Ingredients (APIs, 11%). We expect growth momentum to accelerate as: 1)
Contribution from Indore SEZ is ramping up (revenues of Rs1.48bn in 1QFY12 vs. Rs1.1bn in
FY11) coupled with management increasing the guidance of Indore SEZ’s share of revenue
contribution to export formulations from 8-10% to 12-15%; 2) 60% of the Cipla’s domestic product
portfolio is focused in the relatively faster growing chronic segment; and 3) olanzapine API
supplies to drive API business growth.
EBITDA margin expansion, sustainable in our view, is the key positive takeaway
The key positive takeaway from the results was the 580bp qoq increase in core EBITDA margin
(ie, ex-technical know-how income) to 21.2%, ahead of our 18.1% estimate. This was led by 1)
better product mix (lower exposure to low-margin anti-retrovirals (ARVs)); 2) improved utilization
of its Indore SEZ facility; and 3) increased contribution from API business. We expect margin
improvement to continue as Cipla guides for increased contribution from Indore SEZ coupled with
our expectation of further improvement in API sales. PAT at Rs2.5bn (-2% yoy) was affected by a
higher tax rate due to expiry of tax benefits on Export Units (EOUs).
We continue to believe Cipla could exceed its FY12 guidance; maintain Buy
We continue to believe Cipla could exceed its FY12 revenue guidance of 10-12% (we estimate
14.9%) and EBITDA margin of 18-20% (21.4%) given: 1) Indore SEZ utilization increasing; 2)
strong API sales; and 3) traction in inhalers for Europe and EMs. We roll forward our valuation to
FY13 and fine tune our TP to Rs365, a 21.4x FY13F PE multiple (a 10% premium to the FY13F
sector multiple) versus an earlier target price of Rs371
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