Cipla (Q3 FY13)

India Infoline News Service | Mumbai |

Cipla reported below our expected revenue growth 17.8%.

CMP Rs407, Target Rs463, Upside 13.8% 
  • Overall weak Q3 FY13 results; Revenue grew by 17.8% yoy to Rs20.7bn was below our estimates

  • Domestic market grew unexpectedly lower than the market growth; grew by 10.2% yoy to Rs9.5bn

  • Export business witnessed growth 27.8% yoy to Rs11bn; largely backed by some amount of Lexapro generic and Dymista supply to Meda

  • Margin improved 154 bps yoy but sharp qoq decline of 708 bps to 23.8% was led by loss of its  one time Lexapro opportunity along with the higher expenses at operating front

  • In line with the revenues and margins even PAT was below our estimate by ~20%; PAT grew by 25.5% to Rs3.3bn yoy

  • We maintain our earnings estimates for FY13 - FY14 and introduce FY15 estimations. As we roll over our multiple to FY15, we raise our 9-month target price to Rs463 from Rs436 earlier and maintain BUY.

Result table
(Rs mn) Q3 FY13 Q3 FY12 % yoy Q2 FY13 % qoq
Net sales 20,705 17,580 17.8 21,918 (5.5)
(Inc)/dec in stock (2,202) (313) 604.5 (509) 332.8
Consumption of Materials (7,400) (6,110) 21.1 (6,557) 12.9
Purchase of Traded Goods (2,778) (1,355) 105.0 (1,838) 51.1
Employees' Cost (2,586) (1,875) 37.9 (2,426) 6.6
Other Expenditure (5,214) (4,638) 12.4 (4,837) 7.8
Operating profit 4,929 3,915 25.9 6,770 (27.2)
OPM (%) 23.8 22.3 154 bps 30.9 (708) bps
Depreciation (780) (757) 3.0 (740) 5.5
Net Interest income (93) (32) 187.0 (54) 73.5
Other income 535 302 77.3 641 (16.6)
PBT 4,591 3,426 34.0 6,618 (30.6)
Tax (1,203) (727) 65.4 (1,618) (25.6)
Effective tax rate (%) 26.2 21.2 498 bps 24.4 176 bps
PAT 3,388 2,699 25.5 5,000 (32.2)
PAT margin (%) 16.4 15.4 101 bps 22.8 (645) bps
Ann. EPS (Rs) 16.9 13.4 25.5 24.9 (32.2)
Source: Company, India Infoline Research

Overall weak Q3 FY13 results; Revenue grew by 24% yoy to Rs22bn

Cipla reported below our expected revenue growth 17.8%. Domestic business clocked in revenue growth of 10.1% yoy lower than our expectations and also lower than the market growth. Export formulation grew by 38% yoy to Rs9.7bn, whereas exports APIs declined by 16% to Rs1.35bn. Overall Export business witnessed growth 27.8% yoy to Rs11.1bn; largely backed by some amount of Lexapro generic and Dymista supply to Medas. Cipla Medpro has won a government tender of ~ US$162mn to be supplied till 2014, which will aid Cipla to report robust revenue growth. Additionally Indore SEZ (now has USFDA approval) along with the improvement in Dymista supply would boost the export growth.


EBITDA margin at 23% was lower than our expectation; led by lower contribution from the domestic business and loss of revenue from its Lexapro exclusivity

Cipla recorded an OPM of 23%, was lower than our expectation of 27%. Margin improved 154 bps yoy but sharp qoq decline of 708 bps to 23.8% was led by loss of its one time Lexapro opportunity along with the higher R&D and other operating cost. We expect improvement in margin with Dymista scaling up. Company has started supplies for Dymista to Meda in this quarter. Dymista has also received EU approval and company plans to launch in the region over next 1-2 quarters. 


Revenue Break-up
Rsmn.  Q3FY13 Q3FY12 % yoy Q2FY13 % qoq
Domestic 9,562 8,687 10.1 9,617 (0.6)
Total Exports 11,067 8,658 27.8 12,127 (8.7)
Formulations 9,692 7,022 38.0 10,389 (6.7)
APIs & others 1,375 1,637 (16.0) 1,738 (20.9)
Other operating income 398 465 (14.5) 460 (13.4)
Technical knowhow/fees 168 78 114.7 46 262.3
Others 230 387 (40.6) 413 (44.4)
Total 21,027 17,810 18.1 22,203 (5.3)

As a % of net sales Q3FY13 Q3FY12 bps yoy Q2FY13 bps qoq
Raw material 25.1 33.0 (787) 27.6 (249)
Purchases 13.4 7.7
 

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