Motilal Oswal neutral on Cipla

Motilal Oswal has maintained neutral rating on Cipla with a target of Rs 360, in its August 1, 2012 research report.

“Cipla, core revenues grew 10% YoY to INR17.5b (v/s est of INR17.9b), core EBITDA grew 12% YoY to INR4.13b (v/s est INR4.21b) and Adj PAT grew 21% to INR3.05b (v/s est INR3.1b). Core topline growth was primarily led by 30% YoY growth in domestic formulation business but was tempered down by a 9% decline in formulation exports (excl one-offs) to INR5.98b and a 1.7% decline in API exports to INR1.68b. Adj PAT was partly boosted by forex gains of INR230m. Reported revenues (incl one-offs) grew by 23% to INR19.58b led by a 30% YoY growth in domestic formulations and 23% growth for formulation exports. We estimate exclusivity-based generic Lexapro supplies to Teva at INR2.1b for the quarter with EBITDA & PAT contribution of INR1.26b and INR951m respectively. Reported EBITDA grew by 46% YoY to INR5.4b while reported PAT grew by 58% YoY to INR4b, both boosted by one-off generic Lexapro supplies. Reported PAT was lower than our est of INR4.42b due to lower than expect sales of generic Lexapro.”

“Management has raised its FY13 topline growth guidance from previous 10% to 12-15%. Management has guided that FY13 PAT growth will outperform topline growth. We estimate topline growth (incl one-offs) at 12.3% and reported PAT growth at 21%. Cipla continues to face short-term headwinds in ramping up its formulation exports business despite a favorable currency. Its muted export performance raises uncertainty on the timelines of ramp-up at Indore SEZ. While 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 revised estimates, the stock trades at 22x FY13E and 19.6x FY14E earnings. Maintain Neutral with target price of INR360 (20x FY14 EPS),” says Motilal Oswal research report. 

Non-Institutions holding more than 90% in Indian cos

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