Cipla Ltd., Strong Results Beat Estimates On The Back Of US Gain

Cipla reported Q4 results above our estimates. In Q4FY19, net sales came at Rs. 42.7bn, up 22% YoY (above est. Rs.34bn), largely driven by US sales of $163mn, up 55% YoY (our est. $108mn), on account of a key product gSensipar being launched. The management has not given any further guidance on gSensipar as it is currently under litigation. Normalized growth was seen in the Middle East business and tender business, on a sequential basis. The India business reported sales of Rs.15bn, up 11% YoY (below est. Rs.16.2bn). South Africa and the global access business stood at Rs.8.2bn (below estimates Rs.9.1bn). The management said that the disruption in the Middle East and Venezuela are expected to continue and these markets are expected to normalize by FY20. We believe that cost-saving initiatives will help to boost the EBITDA margin by 100bps in FY21E, largely on account of US gains going ahead. We believe the growth story has started picking up. We slightly our tweaked FY19/20/21 estimates. At the CMP, the stock trades at 24.0x FY20E and 20.4x FY21E EPS of Rs.23.0 and Rs27.1 respectively (earlier Rs.24.0 FY20E and Rs.29 FY21E). Maintain ACCUMULATE with a revised target price of Rs. 596

Q4FY19 result snapshot: Cipla reported Q4 results above our estimates. Net sales grew 22% YoY, led by strong performance of the US business, and gross margin came higher at 65% owing to the 326bps growth YoY. R&D spend for Q4 stood lower on sequential basis at Rs3bn. EBITDA for the quarter came in at RS9.6bn, mainly driven by traction in gSensipar sales in the US owing to a margin of 22% YoY. PBT was impacted due to impairment charges of Rs2.07bn incurred in the US acquisition. Q4 PAT stood at Rs3.6bn, up 105% YoY (above est. Rs.2.5bn). – Medical Buyer Bureau

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