Cipla Ltd. share price target

Q4FY19 revenues grew 19.1% YoY to | 4404 crore (I-direct estimate: | 3783 crore) mainly due to 69% YoY growth in the US to | 1143 crore (I-direct estimate: | 814.3 crore) led by launched of gSensipar at risk. Domestic revenues grew 10.9% YoY to | 1500 crore (I-direct estimate: | 1420.7 crore). EBITDA margins improved 676 bps YoY to 21.8% (I-direct estimate: 16.1%) due to mainly due to gSensipar launch. EBITDA grew 72.6% YoY to | 961 crore (I-direct estimate: | 607.9 crore). Net profit grew 60.9% YoY to | 383...

Cipla reported a 13% beat on sales and EBITDA adjusting for gSensipar contribution in the US (US$ 40mn per management) during Q4. The beat was led by recovery in Europe & South Africa (private market), a higher US DTM mix and India growth. Cipla sees low litigation risk in the gSensipar at-risk launch and is guiding for an improved FY20, with double-digit growth in the US (incl. one inhaler launch). FY19 reported EPS is Rs 19 (Rs 2 from non-core...

29% YoY to INR2b, driven by sales ramp-up in a few molecules and favorable FX. Domestic business outperformed industry in the key therapeutic areas, with growth of 11% YoY to INR15b (34% of sales). South African Global Access (SAGA) business, however, was flat YoY at INR8b. Limited-competition products drive profitability: Gross margin (GM) improved ~330bp YoY to 65.2%. EBITDA margin expanded at an even higher pace of ~680bp YoY to 21.8% due to a superior product mix and lower opex. Absolute EBITDA increased ~73% YoY to INR9.7b (our estimate: INR7.2b). R&D; spend was at 7% of...

Cipla reported mere 2% YoY growth in revenue in Q3FY19 as strong 31% YoY growth in North America business (contributing 21% to revenue) was offset by weak India revenue (down 1% YoY), which contributes ~40% of Cipla's revenue. Further, revenue from Cipla SAGA (South Africa, Sub-Saharan Africa and Cipla Global Access) business which is largely tender based, declined by 11% YoY in Q3FY19 impacted by certain one-time low-margin sales both for South Africa and CGA tender business, leading to inventory liquidation. However, South Africa private market continued its strong trajectory growing at 4x the market at 9.1%. Revenue from Europe business grew by 11% YoY in Q3FY19 on the back of expansion in respiratory franchise. Decline in India revenue was primarily due to high base last year on account of...

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Economic data in the week pointed to a dip in global growth momentum. Manufacturing activity in both US and China decelerated. Trade talks between US and China and a positive surprise in US growth drove global equity markets higher, especially China. Even as Fed indicated to be patient and crude prices edged lower, global yields went up. Indian yields were lower as geo-political tensions eased and GDP growth slowed to a six-quarter low of 6.6%. This may...

The South African government has announced results of three-year (2019-21) ARV tenders for TEE (Tenofovir, Emtricitabine and Efavirenz) and TLD (Tenofovir Lamivudine, Dolutegravir) 3-in-1 combinations effective Jul'19. While full details are yet to emerge, our interaction with Cipla suggests an allocation of ~US$ 30mn-35mn in tender value (10% share of the US$ 1bn tender) on an annualised basis, assuming a high double-digit price discount. The share represents a ~42% decrease from the previous tender in 2014....

The stock is trading at 24.6/18.3x FY20/21E EPS, a ~15% discount to its historical average. Maintain BUY with a TP of Rs 605 (22x Dec-20E EPS). Ciplas reported an in-line quarter with revenue at Rs 40.1bn, up 2% YoY/ flat QoQ. EBITDA stood at Rs 7.1bn with margin at 17.7%, down 326bps YoY due to continued API cost inflation and falling prices in the tender business. PAT at Rs 3.3bn was down 17/12% YoY/QoQ (in-line). With a ~9% QoQ jump in US revenues (US$ 118mn), Cipla will most likely overshoot its guidance of US$ 125mn US revenues in 4Q.

Q3FY19 results were in line on the operational front but net profit was higher than I-direct estimates due to higher other income. Revenues grew 2.4% YoY to | 4007.5 crore (I-direct estimate: | 4081.6 crore). A 31% YoY growth in the US to | 849 crore (I-direct estimate: | 781.2 crore) was largely offset by 1% decline in domestic market to | 1585 crore (I-direct estimate: | 1681.1 crore) EBITDA margins contracted 326 bps YoY to 17.7% (I-direct estimate: 17.0%) due to lower gross margins and higher employee cost....