Buy Cipla; target of Rs 750: Centrum

Centrum's research report on Cipla

We maintain buy rating for Cipla and revise our TP to Rs750 (earlier Rs730) based on 24x March’20E EPS of Rs31.1. Cipla’s Q1FY19 revenues and EBIDTA margin were in line with our and consensus estimates. However, net profit exceeded our expectations. Cipla’s revenues grew 12% YoY, margin improved 10bps to 18.4% and net profit grew by 5%YoY to Rs4.46bn from Rs4.25bn. The domestic business (39% of revenues) grew 22% YoY on a lower base in Q1FY18 due to GST uncertainties. Steady growth in the domestic market, with leadership position in respiratory, oncology and anti-infective segments would drive future growth.

Outlook

We maintain Buy rating for Cipla and revise our TP to Rs750 (earlier Rs730) based on 24x March’20E EPS of Rs31.1, and with an upside of 18.5% over CMP. We have revised our FY19E downwards by 2% and FY20E upwards by 3%. We expect the domestic and South African businesses to drive future growth. Key risks to our assumptions include slow growth in the domestic market and regulatory risks for its manufacturing facilities catering to global markets.

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