Hold Cipla; target of Rs 490: ICICI Direct

ICICI Direct's research report on Cipla

Revenues grew 9.1% YoY to Rs 4371 crore (I-direct estimate: Rs 4310 crore) mainly due to 12.1% YoY growth in the domestic market to Rs 1777 crore (I-direct estimate: Rs 1564.3 crore). US revenues grew 11.4% YoY to Rs 946 crore (I-direct estimate: Rs 996 crore). EBITDA margins declined 31 bps, 334 bps YoY, QoQ, respectively, to 17.3% (I-direct estimate: 20.5%) due to drop in gross margin (62.4% vs. 63.5% in Q3FY19). EBITDA grew 7.2% YoY to Rs 758.3 crore (I-direct estimate: Rs 883.5 crore). PAT grew 5.7% YoY to Rs 351 crore (I-direct estimate: Rs 444.7 crore), in line with operational performance.

Outlook

Across the board transformation from tenderised model to private model in the exports market and towards rapid consumerisation of important Tx and Bx in India is likely to continue for some time and this may have some implications on the quarterly performances. We arrive at a target price of Rs 490 based on 18x FY22E EPS Rs 27.3.