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Cipla reported below our expected revenue growth 17.8%.
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.
| (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) |
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.
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.
| 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) |
