Accumulate Cipla; target of Rs 419: Angel Broking

Angel Broking is bullish on Cipla and has recommended accumulate rating on the stock with a target of Rs 419 in its November 5, 2012 research report.

“Cipla’s numbers came much better than expected both on the top-line and bottom-line front for 2QFY2013,. The net sales and profits for the quarter came in at Rs2,146cr and Rs500cr, registering a growth of 23.9% yoy and 61.8% yoy respectively. However, the major positive highlight of the quarter was the improvement in the OPM which expanded by 684bp yoy for the quarter at 29.0%. For FY2013, the management has upgraded its revenue guidance from 12-15% to 15%+, with the bottom-line growing higher than that.”

“For 2QFY2013, the company reported better-than-expected numbers. The net sales and profits for the quarter came in at Rs2,146cr and Rs500cr, registering a growth of 23.9% yoy and 61.8% yoy respectively. On the profitability front, the gross margins and operating profits came in much higher than expectations. The gross margin and operating margin came in at 63.3% and 29.0%.The expansion in the margins came on the back of an improvement in the product mix. Consequently the net profit came in at Rs500cr, higher than the expectations mainly on the back of the higher-than-expected sales and OPM.”

“For FY2013, Cipla has revised its revenue guidance upwards to 15%+, while the bottom-line growth is expected to be higher than that. We expect the company to maintain its OPM of 23–24% (excluding tech fees) for FY2013. We expect the company’s net sales to post a 14.0% CAGR to Rs9,130cr and EPS to record a 21.2% CAGR to Rs20.9 over FY2012–14E. The stock is trading at 19.4x and 18.2x FY2013E and FY2014E earnings, respectively. We recommend accumulate on the stock,” says Angel Broking research report.

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