Hold Cipla; target of Rs 750: ICICI direct

ICICI direct's report on CiplaRevenues grew 24.8% YoY to Rs 3452.4 crore, on account of 50.8% growth in export formulation to Rs 1874 crore. Domestic formulations grew only 0.9% YoY to Rs 1262 croreEBITDA margins increased 269 bps to 22.9% mainly on account of better gross margins and lower other expenditureNet profit grew 44.4% YoY to Rs 431.2 crore on account of a better operational performance ValuationThe robust gNexium driven Q1 was the strong ever quarter for the company. Also, it has enhanced its FY16 revenue guidance to ~20% (from mid-teens in the past) with improvement in EBITDA margins by 100-150 bps. After a wash-out FY15, lots of growth opportunities are panning out in FY16 - ranging from tenders or niche launches or supplies for exclusivities. Though it is pretty early to confirm a full circle of successful transformation, it seems that things may have started working. Assuming a three to five year gestation period from FY11, the year in which the whole exercise was initiated, we expect a recovery process to continue slowly but surely. We have valued the stock at Rs 750 i.e.21x FY18E EPS of Rs 35.3, says ICICI direct research report.For all recommendations, click hereDisclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Read More