Angel Broking recommends Buy on Cipla with a Target Price of Rs. 431

For 4QFY2014, Cipla posted numbers much below our expectation at the net profit level due to lower-than-expected OPM; however sales came in slightly above our expectation. During the quarter, the company posted net sales of Rs. 2,429cr V/s an expected Rs. 2,382cr, posting a yoy growth of 26.7%. On the operating front, the OPM (excluding technical know-how fees) came in at 13.1% V/s an expected 21.2%, which led the net profit to come in at Rs. 261cr V/s an expected Rs. 361cr, down by 5.7% yoy. Currently, we have a Buy rating on the stock with a target price of Rs. 431.

Results lower than expectations, except for sales: During the quarter, the company posted net sales of Rs. 2,429cr V/s an expected Rs. 2,382cr, a yoy growth of 26.7%. The growth was aided by exports, which grew by 31.5% yoy, while domestic sales grew by 19.3% yoy. On the operating front, Its OPM (excluding technical know-how fees) came in at 13.1% V/s an expected 21.2%, which led the net profit to come in at Rs. 261cr V/s an expected Rs. 361cr, down by 5.9% yoy. The dip in the OPM was due to a decline in the GPM by 4.3%, on back of higher proportion of the export mix in sales (62.6% V/s 60.3% in the corresponding period of last year).

Outlook and valuation: We expect the company's net sales to post a 16.1% CAGR to Rs. 13,152cr and EPS to record a 17.7% CAGR to Rs. 24.0 over FY2014–16E. The growth in the top-line would be driven by domestic formulation sales and exports .We maintain our Buy on the stock with a price target of Rs. 431.

Shares of CIPLA LTD. was last trading in BSE at Rs.395.55 as compared to the previous close of Rs. 387. The total number of shares traded during the day was 292155 in over 6941 trades.

The stock hit an intraday high of Rs. 397 and intraday low of 387. The net turnover during the day was Rs. 114712219.

Source : Equity Bulls

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