ANGEL BROKING RECOMMENDS : BUY CIPLA @ TARGET OF RS.377

Angel Broking is bullish on Cipla and has recommended buy rating on the stock with a target of Rs 377 in its May 5, 2011 research report.

“For 4QFY2011, Cipla reported mixed numbers with top-line growth beating our estimates but margin and bottom-line performance coming in below our expectations. The Indore SEZ (Rs900cr invested) is expected to contribute ~10% to Cipla’s total revenue in FY2012, which would boost its overall growth as well as margins.”

“For 4QFY2011, Cipla reported net sales of Rs1,615cr (Rs1,317cr), growth of 22.6% yoy and above our estimates of Rs1,478cr. Gross margin reported a dip of 310bp yoy to 50.5% (53.6%). Raw-material costs increased during the quarter due to change in product mix, which had higher proportion of anti-retrovirals in formulation exports. OPM came in at 15.4% (15.2%), led by increased manpower cost and negative contribution of Indore SEZ, as it is in the optimisation phase. Overall, other operating income reported a drop of 5.6% yoy to Rs54cr (Rs57cr) in 4QFY2011. Furthermore, adjusted net profit came in at Rs214cr (Rs181cr), growth of 18.5% yoy, lower than our estimates due to increased depreciation and interest costs during the quarter.”

“We have revised our estimates and expect net sales to post a 16.6% CAGR to Rs 8322 cr and EPS to record a 25.2% CAGR to Rs18.9 over FY2011–13E. The stock is trading at 19.9x and 16.1x FY2012E and FY2013E earnings, respectively. We recommend Buy on the stock with a revised target price of Rs 377,” says Angel Broking research report.

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