Cipla Limited (Cipla) is an India-based global pharmaceutical company. The Company’s research and development focus on developing products and drug delivery systems for different formulations. Africa contributes 25% of overall revenues, a testament to its focus on ensuring affordable access to patients across the world. As the Company that showed the way in manufacturing active pharmaceutical ingredients in India, Cipla has expanded its portfolio to approximately 200 products. The Company offers approximately 65 different inhaled products and has a range of inhaled medications and devices. Across markets, Cipla offers metered dose inhalers (pMDIs) with dose indicators, innovative dry powder inhalers, nasal sprays, nebulisers, non-electrostatic spacers, and infant and baby masks.
For 4QFY2015, Cipla’s top-line came in well above our expectations, while the OPM and net profit came in below our expectations. Sales came in at Rs2,981cr V/s an expected Rs2,672cr and V/s Rs2,429cr in 4QFY2014, i.e a yoy growth of 22.7%. On the operating front, the EBITDA margin was impacted by a 34.3% yoy rise in other expenditure. The EBITDA margin came in at 13.3% V/s an expected 15.1% and V/s 13.1% in 4QFY2014, an expansion of 14bp yoy. This was inspite of a 243bp yoy expansion in the GPM. The GPM for the quarter stood at 61.1% V/s 58.7% in 4QFY2014. Adj. PAT came in at Rs260cr V/s an expected Rs312cr and V/s Rs261cr in 4QFY2014, a yoy de-growth of 0.4%. This was on account of 29.2% rise in deprecation and only 3% rise in other income. We maintain our Neutral rating on the stock. Results lower than expectations on OPM and Net Profit front: For 4QFY2015, Cipla’s top-line came in well above our expectations, while the OPM and net profit came in below our expectations. Sales came in at Rs2,981cr V/s an expected Rs2,672cr and V/s Rs2,429cr in 4QFY2014, i.e. a yoy growth of 22.7%. On the operating front, the EBITDA margin was impacted by a 34.3% yoy rise in other expenditure. The EBITDA margin came in at 13.3% V/s an expected 15.1% and V/s 13.1% in 4QFY2014, an expansion of 14bp yoy. This was inspite of a 243bp yoy expansion in the GPM. The GPM for the quarter stood at 61.1% V/s 58.7% in 4QFY2014. Adj. PAT came in at Rs260cr V/s an expected Rs312cr and V/s Rs261cr in 4QFY2014, a yoy de-growth of 0.4%. This was on account of 29.2% rise in deprecation and only 3% rise in other income. Outlook and valuation: We expect the company’s net sales to post a 18.9% CAGR to Rs16,515cr and EPS to record a 21.2% CAGR to Rs28.9 over FY2015–17E. The growth in the top-line would be driven by domestic formulation sales and exports. We maintain our Neutral stance on the stock, taking into consideration the near term valuations.
Cipla posted a robust set of numbers for 1QFY2016. It posted sales of Rs3,777cr V/s `3,390cr expected and V/s Rs2,647cr in 1QFY2015, a yoy growth of 42.7%. The sales growth came in mainly on back of export formulations, which grew by 78.5% yoy. On the operating front, the gross margin came in at 66.9% V/s 63.4% expected and V/s 61.3% in 1QFY2015, mainly on back of improved sales mix. The OPM consequently came in at 25.5% V/s 19.5% expected and V/s 17.7% in 1QFY2015. Thus, the net profit came in at Rs651cr V/s Rs420cr expected and V/s Rs295cr in 1QFY2015, a yoy growth of 121%. For FY2016, the company expects a 20% yoy growth. We remain Neutral on stock. Results better than expectations on OPM & Net Profit fronts: The company posted sales of Rs3,777cr V/s Rs3,390cr expected and V/s Rs2,647cr in 1QFY2015, a yoy growth of 42.7%. The sales growth came in mainly on back of export formulations, which grew by 78.5% yoy. Overall, domestic formulations (Rs1,397cr) posted a growth of 8.4% yoy, while exports (Rs2,380cr) posted a yoy growth of 75.3%. The results include one-off revenue from the US market for the generic - Nexium. On the operating front, the gross margin came in at 66.9% V/s 63.4% expected and V/s 61.3% in 1QFY2015, mainly on back of an improved sales mix. The OPM consequently came in at 25.5% V/s 19.5% expected and V/s 17.7% in 1QFY2015. Thus, the net profit front came in at Rs651cr V/s Rs420cr expected and V/s Rs295cr in 1QFY2015, a yoy growth of 121%. Outlook and valuation: We expect the company’s net sales to post a 18.9% CAGR to Rs16,515cr and EPS to record a 20.2% CAGR to Rs28.4 over FY2015–17E. The growth in the top-line would be driven by domestic formulation sales and exports. We maintain our Neutral stance on the stock, taking into consideration the rich valuations.