Hold Cipla; target of Rs 510: ICICI Direct

ICICI Direct's research report on Cipla

Cipla’s Q2FY19 results were weaker-than-expected on the operational front. Revenues de-grew 1.7% YoY to Rs 4012 crore (I-direct estimate: Rs 4042.4 crore) mainly due to high base of restocking in the domestic market and a fall in the tender opportunity in South Africa and other emerging markets EBITDA margins contracted 220 bps YoY to 17.5% (I-direct estimate: 19.1%) due to higher other expenditure and employee cost. EBITDA de-grew 12.7% YoY to Rs 702.2 crore (I-direct estimate: Rs 771 crore) Net profit fell 15.6% YoY to Rs 356.8 crore (I-direct estimate: Rs 368.9 crore) mainly due to a below expected operational performance.

Outlook

Accordingly, we reduce our EPS estimates for FY19E, FY20E by 22%, 18% to Rs 17.5, Rs 23.1, respectively. Accordingly, our new target price is Rs 510 based on 22x FY20E EPS.