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Recommendations India

Cipla 4QFY2014 performance highlights and results update

June 2, 2014, Monday, 05:55 GMT | 00:55 EST | 09:25 IST | 11:55 SGT
Contributed by Angel Broking


For 4QFY2014, Cipla posted numbers much below our expectation at the net profit level due to lower-than-expected OPM; however sales came in slightly above our expectation. During the quarter, the company posted net sales of Rs.2,429cr V/s an expected Rs.2,382cr, posting a yoy growth of 26.7%. On the operating front, the OPM (excluding technical know-how fees) came in at 13.1% V/s an expected 21.2%, which led the net profit to come in at Rs.261cr V/s an expected Rs.361cr, down by 5.7% yoy. Currently, we have a Buy rating on the stock with a target price of Rs.431.

Results lower than expectations, except for sales: During the quarter, the company posted net sales of Rs.2,429cr V/s an expected Rs.2,382cr, a yoy growth of 26.7%. The growth was aided by exports, which grew by 31.5% yoy, while domestic sales grew by 19.3% yoy. On the operating front, Its OPM (excluding technical know-how fees) came in at 13.1% V/s an expected 21.2%, which led the net profit to come in at Rs.261cr V/s an expected Rs.361cr, down by 5.9% yoy. The dip in the OPM was due to a decline in the GPM by 4.3%, on back of higher proportion of the export mix in sales (62.6% V/s 60.3% in the corresponding period of last year).

Outlook and valuation: We expect the company’s net sales to post a 16.1% CAGR to Rs.13,152cr and EPS to record a 17.7% CAGR to Rs.24.0 over FY2014–16E. The growth in the top-line would be driven by domestic formulation sales and exports .We maintain our Buy on the stock with a price target of Rs.431.