Hold Cipla; target of Rs 520: ICICI Direct

ICICI Direct's research report on Cipla

Revenues grew 1.3% YoY to Rs 3989 crore (I-direct estimate: Rs 4330 crore) mainly due to 67% YoY growth in the US to Rs 1119 crore (I-direct estimate: Rs 984.7 crore). Domestic revenues de-grew 12.2% YoY to Rs 1355 crore (I-direct estimate: Rs 1729.3 crore) mainly due to realignment of distributors in the trade generics and deferral of dispatches in branded formulations. EBITDA margins improved 424 bps YoY to 22.7% (I-direct estimate: 21.0%) due to strong gross margins performance (70.0% vs. 63.9% in Q1FY19). EBITDA grew 24.5% YoY to Rs 904.6 crore (I-direct estimate: Rs 909.3 crore). Net profit grew 8.2% YoY to Rs 476.2 crore (I-direct estimate: Rs 484.1 crore), in line with operational performance.

Outlook

Across the board transformation from tenderised model to private model in the exports market and from trade generics (Tx) to promotional (Rx) in India is likely to continue for some time. This may have some implications on the quarterly performance. We ascribe a target price of Rs 520 based on 20x FY21E EPS Rs 25.9.