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Cipla 3QFY2013 performance highlights and results update

Contributed by Angel Broking

For 3QFY2013, Cipla’s numbers have come in lower than expected on the bottom-line front, but in-line on the sales front. The net sales and profits for the quarter came in at Rs.2,031cr and Rs.339cr, registering a growth of 18.7% yoy and 25.5% yoy respectively. However, the major positive highlight of the quarter is the improvement in the OPM, which expanded by 215bp yoy to 22.3% (vs 24.9% expected). For FY2014, the Management has given a revenue growth guidance of 15% yoy, while EBITDA margin is expected to be ~22%. We recommend a Neutral rating on the stock.

Results lower than expectations: For 3QFY2013, the company reported lower-than-expected numbers on the bottom-line front. The net sales and profits for the quarter came in at Rs.2,031cr and Rs.339cr, registering a growth of 18.7% yoy and 25.5% yoy respectively. On the profitability front, the gross margin and operating profit margin came in much lower than expectations, at 60.7% and 22.3% respectively. Consequently the net profit came in at Rs.339cr, ie lower than expected, mainly on account of the lower-than-expected OPM.

Outlook and valuation: For FY2014, the Management has given a revenue growth guidance of around 14% while the EBITDA margin is estimated to be at around 22%. We expect the company’s net sales to post a 14.0% CAGR to Rs.9,130cr and EPS to record a 23.2% CAGR to Rs.21.6 over FY2012–14E. We recommend a Neutral on the stock.