Prabhudas Lilladher is bullish on Cipla and has recommended accumulate rating on the stock with a target of Rs 420 in its May 30, 2014 research report.
"Cipla's net sales of Rs24.2bn and PAT of Rs2.6bn were in line with our estimates of sales at Rs24.5bn and PAT at2.8bn in Q4FY14. EBITDA margin was at 16.3 percent vs our estimate of 16.8 percent in Q4FY14. While exports grew at 32 percent with 63 percent contribution to sales, higher contributions of ARV drugs have resulted in lower operating margin of the company in Q4FY14. Domestic formulations gained traction with 19 percent YoY growth, while export formulations grew by 31 percent and export of APIs grew by 37 percent in Q4FY14. In FY14, Cipla's sales grew at 21 percent YoY with 15 percent growth in core business while 7 percent growth accrued from acquisition of Medpro in South Africa."
"Management guided launches of 15‐20 product in US and combination inhalers in EU in the next 12‐15 months. In initial 8‐10 months, the US may see launches of few back‐ended approvals and partnership drugs, while major generic opportunities and Cipla's own products are expected to be launched in the later period. The management expects key combination inhalers (generic substitutable) to be launched in EU in H2FY15. We believe that Cipla expects approvals in key markets such as Germany and UK which could provide them opportunity in market of size over US$1billion. With management guidance of 24‐30 months for Medpro acquisition to be accretive, we believe that Cipla's net income in FY15 to be impacted by a combination of higher contributions of ARV drugs and net loss in Medpro. The company however guided for mid‐teen growth in sales and maintainable EBITDA margin at 21 percent (including other operating income) in FY15E. While weak visibility is likely to impact valuation in short term, we expect launch of inhalers in EU in H2FY15 may boost sales and headline margins. We maintain 'Accumulate' and retain TP at Rs420," says Prabhudas Lilladher research report.
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