Buy Cipla - Motilal Oswal

Cipla (CIPLA IN; Mkt Cap USD5.7b, CMP Rs324, Buy)

Net revenues grew by 8%YoY to Rs15.54b, EBITDA declined by 21% to Rs3.18b (vs estimate of Rs3.57b) and PAT de-grew by 19.5% to Rs2.33b.

Revenue growth was impacted due to lower domestic formulation sales (up 11.5%) and lower growth for formulation exports (up 11.7% vs estimate of 15.3%).

EBITDA margins contracted 760bps to 20.5%. EBITDA was impacted mainly due lower topline growth and increased expenses related to the Indore SEZ.

PAT de-grew by 19.5%YoY to Rs2.33b reflecting the muted operational performance but was partly boosted by higher than expected other income at Rs257m.

We have revised our EPS estimates downwards by 6-7%each for FY11E, FY12E and FY13E. Its large manufacturing infrastructure, strong chemistry skills and huge inhaler capacity make it a partner of choice for global MNCs. Temporary slow-down in overall growth, increased expenses to maintain the Indore SEZ and increasing working capital requirements remain our concerns. Maintain Buy with a target price of Rs370 (22x FY13E EPS).

Source : Equity Bulls

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