Cipla - March 2013 Results Preview - Motilal Oswal

- Cipla's top line for 4QFY13E is likely to grow 15% YoY to INR20.8b. Domestic formulations business would grow 17% YoY to INR8.4b, while exports would grow 14% YoY to INR11.88b, driven by 21% YoY growth in formulation exports to INR9.8b.

- EBITDA to grow 24% YoY to INR4.89. EBITDA margin is likely to expand 170bp YoY to 23.5%, led by lower other expenses on the back of improving capacity utilization at Indore SEZ.

- Thus, we expect adjusted PAT to grow 28% YoY to INR3.25b.

While export formulations grew 38% YoY in 3QFY13, Cipla's core quarterly performance has not been encouraging in the past many quarters. Its muted export performance had raised uncertainty on the timelines of ramp-up at Indore SEZ. While this facility recently got approved by the US FDA, Cipla expects to generate sales of INR6b from this facility in FY13 (same as in FY12). Though the large capex (for past few years) is a long term positive, we believe it is imperative for the company to improve asset utilization at Indore to drive future growth and derive benefits of operating leverage (overhead expenses continue to adversely impact performance). Based on our estimates, the stock trades at 19.8x FY14E and 17x FY15E EPS. Neutral.

Source : Equity Bulls

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