Professional Documents
Culture Documents
February 6, 2013
Cipla
Performance Highlights
Y/E March (` cr) Net sales Other income Gross profit Operating profit Net profit 3QFY2013
2,031 93 1,233 453 339
NEUTRAL
CMP Target Price
% chg qoq
(5.4) (15.3) (9.1) (28.2) (32.2)
`405 -
2QFY2013
2,146 110 1,357 631 500
3QFY2012
1,711 77 996 345 270
% chg yoy
18.7 21.7 23.8 31.3 25.5
Investment Period
Stock Info Sector Market Cap (` cr) Net Debt (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code
Pharmaceutical 32,485 (61) 0.5 435/287 191,978 2 19,640 5,959 CIPL.BO CIPLA@IN
For 3QFY2013, Ciplas numbers have come in lower than expected on the bottom-line front, but in-line on the sales front. The net sales and profits for the quarter came in at `2,031cr and `339cr, registering a growth of 18.7% yoy and 25.5% yoy respectively. However, the major positive highlight of the quarter is the improvement in the OPM, which expanded by 215bp yoy to 22.3% (vs 24.9% expected). For FY2014, the Management has given a revenue growth guidance of 15% yoy, while EBITDA margin is expected to be ~22%. We recommend a Neutral rating on the stock. Results lower than expectations: For 3QFY2013, the company reported lower-than-expected numbers on the bottom-line front. The net sales and profits for the quarter came in at `2,031cr and `339cr, registering a growth of 18.7% yoy and 25.5% yoy respectively. On the profitability front, the gross margin and operating profit margin came in much lower than expectations, at 60.7% and 22.3% respectively. Consequently the net profit came in at `339cr, ie lower than expected, mainly on account of the lower-than-expected OPM. Outlook and valuation: For FY2014, the Management has given a revenue growth guidance of around 14% while the EBITDA margin is estimated to be at around 22%. We expect the companys net sales to post a 14.0% CAGR to `9,130cr and EPS to record a 23.2% CAGR to `21.6 over FY201214E. We recommend a Neutral on the stock.
Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 36.8 17.8 26.2 19.2
3m 4.4 2.1
FY2011
6,130 14.4 990 0.4 12.3 18.6 32.8 15.7 13.1 4.9 5.3 28.6
FY2012
7,021 14.5 1,144 15.6 14.3 23.6 28.4 16.0 17.5 4.3 4.6 19.3
FY2013E
8,151 16.1 1,619 41.5 20.2 25.8 20.1 19.4 20.8 3.6 3.9 15.0
FY2014E
9,130 12.0 1,736 7.3 21.6 24.8 18.7 17.6 19.1 3.1 3.3 13.5
3QFY2013
2,031 93.3 2,124 1233 60.7 453 22.3 9.3 78 459 120 339 0 339 4.2
2QFY2013
2,146 110.1 2,256 1357 63.3 631 29.4 5.4 74 662 162 500 0 500 6.2
% chg qoq
(5.4) (15.3) (5.9) (9.1) (28.2) 73.5 5.5 (30.6) (25.6) (32.2) (32.2)
3QFY2012
1,711 76.7 1,788 996 58.2 345 20.2 3.2 76 343 73 270 0 270 3.4
% chg yoy
22.0 30.6 22.4 30.3 48.7 (35.4) 6.2 55.2 78.5 48.9 48.9
Actual
2,031 93 453 120 339
Estimates
2,024 113 504 125 404
Variance
0.3 (17.6) (10.2) (4.0) (16.0)
February 6, 2013
(` cr)
4QFY2012
3QFY2013
(%)
20 15 10 5 0
3QFY2012
4QFY2012
1QFY2013
2QFY2013
3QFY2013
February 6, 2013
(` cr)
3QFY2012
4QFY2012
1QFY2013
2QFY2013
3QFY2013
Concall takeaways
For FY2014, the company has guided for a revenue growth +14% yoy on sales. EBDITA margin is expected to be around 22% in FY2014. Growth in the domestic market is expected to be around 15% for FY2013. Total MRs is at around 7500. The company filed 5 abbreviated new drug applications (ANDAs) in 9MFY2013. Total approved ANDAs stand at 76 while 23 await approval. The tax rate has been guided at 24%-25% of PBT in FY2013-2014.
Recommendation rationale
Export segment to be the growth driver: Cipla exports to more than 180 countries, with growth coming through marketing alliances and distribution tie-ups in various markets. Exports contributed 59% to the total turnover of FY2012, with Africa, US and Latin America constituting more than 60% of total exports. In the US, Cipla has entered into a partnership with more than 22 players and has a strong product pipeline of ANDAs, of which 49 have been launched, while 30 are pending for approval. Another long term growth driver for the company is the launch of the CFC-free inhalers in the regulated markets. CFC-free inhalers in Europe and US address a potential market size of more than US$3bn. The Management has also indicated that it is negotiating with MNCs such as Pfizer, GSK and Boehringer for long-term supply agreements.
February 6, 2013
Increasing penetration in the domestic market: Cipla is one of the largest players in the domestic formulation market, with a market share of around 5%, contributing 41% to the total turnover in FY2012. The company is the market leader in key therapeutic areas such as respiratory care, anti-viral and urological. Ciplas distribution network in India consists of a field force of around 7,500 employees. The company plans to increase its focus on domestic markets with new therapies such as oncology and neuro-psychiatry in the offing. Cipla plans to focus on growing its market share and sales by increasing penetration in the Indian market, especially in rural areas and plans to expand its product portfolio by launching biosimilars, particularly relating to the oncology, anti-asthmatic and anti-arthritis categories. Valuation: For FY2013, Cipla is expected to post upto 15%+ sales growth, while the bottom-line growth is expected to be higher than that. We expect the company to maintain its OPM at 26% (excluding tech fees) for FY2013. We expect the companys net sales to post a 14.0% CAGR to `9,130cr and EPS to record a 23.2% CAGR to `21.6 over FY201214. The stock is trading at 20.1x and 18.7x FY2013E and FY2014E earnings, respectively. We recommend a Neutral rating on the stock.
(`)
February 6, 2013
Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13
Price 10x 15x 20x 25x
Company Background
Cipla is a leading pharma company in India with a strong presence in both, the export and domestic markets. On the export front, where it follows the partnership model, it has 5,700 product registrations in around 180 countries. Cipla is a market leader in the domestic formulation market with over 5% market share. Cipla is likely to continue on the growth trajectory owing to its entry into the inhalers market in the EU and potential new long-term manufacturing contracts with Global Innovators.
February 6, 2013
February 6, 2013
February 6, 2013
February 6, 2013
Key Ratio
Y/E March Valuation Ratio (x) P/E (on FDEPS) P/CEPS P/BV Dividend yield (%) EV/Sales EV/EBITDA EV / Total Assets Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value Dupont Analysis EBIT margin Tax retention ratio Asset turnover (x) ROIC (Post-tax) Cost of Debt (Post Tax) Leverage (x) Operating ROE Returns (%) ROCE (Pre-tax) Angel ROIC (Pre-tax) ROE Turnover ratios (x) Asset Turnover (Gross Block) Inventory / Sales (days) Receivables (days) Payables (days) WC cycle (ex-cash) (days) Solvency ratios (x) Net debt to equity Net debt to EBITDA Int. Coverage (EBIT / Int.) 0.2 0.9 24.2 (0.01) (0.1) 39.2 0.1 0.4 (0.0) (0.0) (0.1) (0.3) (0.2) (0.7) 2.1 88 114 45 186 2.0 94 111 54 196 1.8 98 88 59 174 1.6 102 81 57 142 1.7 101 81 55 129 1.8 49 40 26 136 16.1 17.4 24.8 15.6 17.3 19.2 13.1 14.3 15.7 17.5 18.6 16.0 20.7 22.8 19.4 19.0 22.4 17.6 16.1 86.1 1.1 14.8 3.8 0.2 16.6 16.8 81.6 1.0 13.5 4.0 0.1 14.4 14.4 83.2 1.0 11.4 5.3 0.0 11.6 19.2 78.8 0.9 14.3 10.6 0.0 14.4 22.0 76.0 1.0 17.0 89.4 (0.0) 20.0 21.1 76.0 1.0 16.7 89.4 0.0 16.7 9.9 9.9 11.9 2.0 55.9 12.3 12.3 15.5 2.0 73.6 12.3 12.3 15.5 2.8 83.0 14.3 14.3 18.1 3.0 95.2 20.2 20.2 24.0 4.0 113.0 21.6 21.6 25.9 4.3 132.3 40.8 34.1 7.2 0.5 6.5 34.1 5.9 32.9 26.0 5.5 0.5 6.1 30.4 5.3 32.8 26.1 4.9 0.7 5.3 28.6 4.4 28.4 22.3 4.3 0.7 4.6 19.3 4.0 20.1 16.8 3.6 1.0 3.9 14.9 3.4 18.7 15.6 3.1 1.1 3.3 13.4 2.8 FY2009 FY2010 FY2011 FY2012 FY2013E FY2014E
February 6, 2013
10
E-mail: research@angelbroking.com
Website: www.angelbroking.com
DISCLAIMER
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report.
Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered
Cipla No No No No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors
Ratings (Returns):
February 6, 2013
11