CIPLA– Market Perform, Great Result But Not Completely Sustainable

Date: 2015-07

“Q2FY13 result was ahead of our estimates largely on account of higher than expected export formulation sales led by generic Lexapro (under 180-day) and improvement in Q-o-Q EBITDA margin by 330 bps. Part of the EBITDA margin improvement was ascribed to rationalization of procedures. We also consider Indore SEZ to have aided the margin of the company.
As expected Vancomycin’s contribution remained insignificant. Going forward, we do not expect growth momentum to continue given the dearth of high value product launches and a high FY13 base. On a longer term basis, we do not remain enthused about Cipla’s inhaler opportunity in Europe as it has lost the first mover advantage.
We upgrade our earnings estimate by 7-8%. We upgrade our target price to Rs.360 but retain our Market Perform rating.”

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