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Elara Capital
Cipla (Accumulate)
CMP: ₹570.35
Target: ₹615
Cipla posted an EBITDA of ₹960 crore, 28 per cent ahead of our estimates of ₹770 crore, on account of higher US sales and other operating income. Revenue was up 19.1 per cent y-o-y at ₹4,440 crore vs estimates of ₹4,140 crore. Domestic formulations grew at 11 per cent y-o-y to ₹1,500 crore vs our estimates of ₹1,550 crore. Exports formulations grew 28.9 per cent y-o-y to ₹2,610 crore, ahead of our estimates. The US grew 37.2 per cent q-o-q to $162 million vs estimates of $125 million, benefitted from new launches such as gSensipar. We believe the company has booked about $35-38 million from gSensipar with relatively high margin. Gross margins expanded 270 bp q-o-q to 65.2 per cent. However, overheads were up 11.2 per cent q-o-q on one-off litigation cost of ₹50 crore related to gSensipar. Depreciation charges were higher at ₹500 crore as it included one-time impairment charges of ₹210 crore related to US generics. Adjusted for impairment charges, PAT was at ₹520 crore, higher than our estimates.
We increase our FY20E EPS by 7 per cent and FY21E EPS by 2 per cent. Post a subdued FY19, we expect earnings to improve from FY20, given the scale-up in its US business, cost-trimming and rationalising business. Recent niche approvals in the US add comfort on Cipla’s ability to grow its US business.
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