Feb 8, 2018 - Result highlights. ⢠Cipla reported net sales of INR 39,138 Mn which was up by 8.01% y-o-y and down 3.85
Cipla Ltd.
RESULT UPDATE
8th February, 2018 22nd May 2017
India Equity Institutional Research II
Result Update – Q3FY18
II 8th February, 2018
Cipla Ltd
Page 2
Improved operational efficiencies driving margin expansion
CMP
Target
INR 600
INR 714
Potential Upside 19.1%
Market Cap (INR Mn)
Recommendation
Sector
458,163
BUY
Pharma
Result highlights • Cipla reported net sales of INR 39,138 Mn which was up by 8.01% y-o-y and down 3.85% q-o-q. The decline in revenues was due to muted sales from the domestic business. The company has registered healthy growth of 13% Q-o-Q in European market. The US business has performed well in the quarter due to strong uptake in gPulmicort and gDacogen with sales at INR 65 bn registering growth of 5.18 % Q-o-Q. • EBIDTA stood at INR 8,186 Mn which grew by 20.81% y-o-y and 1.78% q-o-q. Reduction in COGS led to improved EBITDA margins for the quarter. The EBITDA margins were at 20.92% which has increased by 121 bps Q-o-Q and 234 bps y-o-y. The company is going under certain cost reduction measure which has helped to improved the EBITDA margins. • The company has reported net profit of INR 4,034 Mn against profit of INR 4,349 Mn in Q2FY18.PAT Margin for the quarter stood at 10.31% down by 35 bps q-o-q and marginally increased by 3 bps y-o-y. The increase in depreciation with lower other income led to margins decline in margins MARKET DATA
KEY FINANCIALS
Shares outs (Mn)
Particulars (INR Mn) Revenues EBITDA APAT AEPS (Rs) P/E (x) EV/EBITDA(x) ROAE (%)
804
EquityCap (INR Mn)
1610
Mkt Cap (INR Mn)
458163
52 Wk H/L (INR)
663/479
Volume Avg (3m K)
1589
Face Value (INR)
2
Bloomberg Code
CIPLA IN
150
120
90
MARKET INFO SENSEX
34083
NIFTY
10477
Feb-18
Aug-17
Feb-17
Aug-16
Feb-16
Aug-15
Feb-15
60
Sensex
FY16 136,783 25,011 15,059 18.7 36.1 23.4 13.5
FY17 146,302 24,758 10,064 12.5 42.0 18.5 8.4
FY18E
FY19E
1,56,079 30,282 15,607 19.4 30.9 16.5 11.8
1,76,087 34,682 19,169 23.8 25.2 14.3 13.0
Source: Company, KRChoksey Research
SHARE PRICE PERFORMANCE
Cipla Ltd
FY15 113,454 21,618 11,808 14.7 46.0 25.6 11.3
Strong growth momentum with operating leverage benefits: •Cipla has delivered robust results with a growth of 8% Y-o-Y due to improved business in the tender markets of Europe which grew 13.2% Q-o-Q along with the US business which has registered growth of 5.18% Q-o-Q . The growth in European markets was aided on the back of healthy market share by approval of Beclomethasone in UK which is a first generic in the market. North America’s business witnessed growth: The North America’s business has witnessed growth with sales at INR 6500 Mn in Q3FY18 growth of 5.18% Q-o-Q and degrowth of 1.18% Y-o-Y on the back of healthy market share by Budesonide (gPulmicort) and Decitabine (gDacogen) . The company believes that that these drugs will further gain their market share which will help to boost the US sales. In the quarter Cipla has filed 2 ANDA’s and its plans to file more 10 products in Q4FY18. The company also plans to launch some virology drugs such as Truvada, Viread etc which are high margins that could help to boost the US sales in coming quarters. Business in Europe boosted the sales: The company recorded sales of INR 1710 mn which grew 13.25% Q-o-Q and 35.7% Y-o-Y. The company has expanded its respiratory franchise with approval of Beclomethasone in UK which happens to be a first generic in the market. Domestic business saw muted sales: The domestic business saw muted sales mainly due to some seasonal variation in the product mix. However the company has registered growth of 13.7% Y-o-Y Domestic sales stood at INR 16,010. The company has launched 6 inlicensed drugs in the Indian markets and is continuously leveraging its commercial strength to further strengthen its partnership.
SHARE HOLDING PATTERN (%) Particulars
Dec 17
Sep 17
Jun 17
Promoters
36.71
36.72
36.73
FIIs
23.36
22.33
21.81
DIIs
13.95
14.62
14.76
Others
25.99
26.33
26.7
100
100
100
Total
ANALYST Vaibhav Chowdhry,
[email protected], +91-22-6696 5571 Dhara Patwa,
[email protected], +91-22-6696 5585
9.7%
38%
Revenue CAGR between FY 17 and FY 19E KRChoksey Research is also available on Bloomberg KRCS Thomson Reuters, Factset and Capital IQ
PAT CAGR between FY 17 and FY 19E
+91-22-6696 5555 / +91-22-6691 9576 www.krchoksey.com
India Equity Institutional Research II
Result Update – Q3FY18
II 8th February, 2018
Page 3
Cipla Ltd. Strong growth going forward , operational efficiency to continue…. We believe that company will grow strongly FY19 on the back of approvals and launch of one limited competition product every quarter in the market. The company has a basket of total 244 US ANDA out of which 67 are under approval . The company has launched Sereflo (fluticasone and salmeterol) in UK which is used for the treatment of asthma will start contributing to the sales in full fledge from second half of FY19. Cipla has an exhaustive pipeline of inhalers and complex generics which has a huge market size. These opportunities will give an escalated growth trend to the company’s revenues and will give a boost to the topline in long run. Cipla has 16 Para IV filings and 15+ limited competition products in its pipeline which will help the company to maintain its growth trajectory. Valuations & Views: We believe in Cipla’s growth story led by its unique offerings of specialty drugs and inhalers. We expect Cipla to deliver robust growth on the back of its exclusive products and complex generics which are limited competition products. Along with the US, the domestic business and RoW will also grow strongly. Going ahead, we believe the topline to deliver a Y-o-Y growth of 6.68% with sales at INR 156,079 mn in FY18 and EBITDA at INR 30,282 with margins at 19.4%. At CMP of INR 600 the stock is trading at PE of 30.9x at FY19 with EPS of INR 19.4 We recommend “BUY” rating on the stock and value the stock at 30x FY20E EPS of INR 23.8 with a target price of INR 714 indicating 19.1% upside from CMP.
Sales breakup: INR Crs
Q3FY18
Q2FY18
Q3FY17
QoQ (%)
YoY (%)
Domestic
16,320
16,770
14,080
-2.7
15.9
Exports
22,820
24,050
21,860
-5.1
4.4
Total
39,140
40,820
35,940
-4.1
8.9
Source: Company, KRChoksey Research
ANALYST Vaibhav Chowdhry,
[email protected], +91-22-6696 5571 Dhara Patwa,
[email protected], +91-22-6696 5585
KRChoksey Research is also available on Bloomberg KRCS Thomson Reuters, Factset and Capital IQ
+91-22-6696 5555 / +91-22-6691 9576 www.krchoksey.com
India Equity Institutional Research II
Result Update – Q3FY18
II 8th February, 2018
Page 4
Cipla Ltd. Q3FY18 Result Snapshot Exhibit 1 Consolidated Result Update (INR Mn) INR Mn
Q3FY18
Q2FY18
Q3FY17
38345
39882
35500
-3.9
8.0
793
942
972
-15.8
-18.4
Total Income
39138
40824
36472
-4.1
7.3
Expenditure
30952
32780
29696
-5.6
4.2
Materials Consumed
13784
15531
13011
-11.2
5.9
Employee Cost
6573
6608
6331
-0.5
3.8
Other Exp
10594
10641
10354
-0.4
2.3
EBITDA
8187
8044
6777
1.8
20.8
EBITDA margin (%)
20.9%
19.7%
18.6%
121bps
234bps
Depreciation
5224
3022
2577
72.8
102.7
EBIT
2963
5021
4199
-41.0
-29.4
Other Income
529
1133
1535
-53.3
-65.5
Interest expenses
92
420
593
-78.2
-84.6
Net Sales Other operating income
Excep. Items
QoQ (%)
YoY (%)
0
0
0
3401
5734
5141
-40.7
-33.8
Tax
-642
1374
1283
-146.7
-150.1
Effective tax rate (%)
-18.9
24.0
25.0
-178.8
PAT
4043
4360
3858
-7.3
4.8
0
0
101
4043
4360
3959
-7.3
2.1
PBT
Share of Associates Reported PAT Adj PAT
4043
4360
3959
-7.3
2.1
Net Margin (%)
10.3%
10.7%
10.9%
-35bps
-52bps
5.0
5.4
5.8
-8.2
-13.9
AEPS Source: Company, KRChoksey Research
Key Con-call Highlights: • The company has increased its R&D spend from 6% to 7-8% in FY18 sales to fund its ongoing clinical trials. The company has Completed Phase 1study for Tizanidine patch and the results for the same are under analysis • Cipla has adopted various cost saving programs which has resulted in improvement in margins. The company plans to continue it going forward which will help to increase the EBITDA margins by 100 bps each year. • The company plans to focus on Non-US markets such as Australia, South Africa etc where the performance has been improved. In Australia the company plans too ramp-up its respiratory portfolio and have also launched a flagship product FSPM. • Cipla has guided that the domestic business of the company would see growth of 14-15% going ahead. • Cipla has now focused on building strong specialty portfolio for US and is looking forward to acquire assets in neurology and respiratory. • The company has guided for a tax rate of 25%.
ANALYST Vaibhav Chowdhry,
[email protected], +91-22-6696 5571 Dhara Patwa,
[email protected], +91-22-6696 5585
KRChoksey Research is also available on Bloomberg KRCS Thomson Reuters, Factset and Capital IQ
+91-22-6696 5555 / +91-22-6691 9576 www.krchoksey.com
India Equity Institutional Research II
Result Update – Q3FY18
II 8th February, 2018
Page 5
Cipla Ltd. Exhibit 2: Income Statement INR Mn Revenues Op. Expenses EBITDA Other Income Depreciation EBIT Interest PBT Tax PAT Minority Sh. of Associates Ex. ordinary Adj Pat
FY15 113,454 91,837 21,618 1,656 5,047 18,226 1,683 16,543 4,000 12,543 -735 0 0 11,808
FY16 136,783 111,772 25,011 2,089 5,417 21,683 1,613 20,070 4,396 15,674 -615 0 0 15,059
FY17 146,302 121,545 24,758 2,287 13,229 13,816 1,594 12,222 1,798 10,424 -360 0 0 10,064
FY18E 1,56,079 1,25,797 30,282 2,516 7,374 25,424 5,311 20,113 4,023 16,090 -483 0 0 15,607
FY19E 1,76,087 1,41,404 34,682 2,968 7,974 29,677 4,975 24,702 4,940 19,761 -593 0 0 19,169
Source: Company, KRChoksey Research
Exhibit 3 : Balance Sheet INR Mn
FY15
FY16
FY17
FY18E
FY19E
Equity Share Capital
1,606
1,607
1,609
Reserves & Surplus
106,409
113,555
123,645
Total Shareholders Fund
1,609 1,37,373 1,38,982 4,865 43,815 33,453 8,974 1,387 45,486 13,965 23,436 8,085 2,33,148
1,609 1,54,661 1,56,270 5,458 40,815 30,453 8,974 1,387 49,315 13,965 26,731 8,619 2,51,858
1,18,832 81,852 26,784 1,648 5,626 2,922 1,14,316 9,211 31,764 33,900 29,296 10,145 0 2,33,148
1,23,352 86,207 26,784 1,813 5,626 2,922 1,28,506 10,132 36,838 38,307 31,608 11,622 0 2,51,858
108,015
115,162
125,254
Minority Interest
1,805
3,501
4,382
Non- current liabilties
8,435
13,547
46,815
Long term Borrowings
3,109
2,219
36,453
Deferred tax liabilities
3,317
9,893
8,974
Other LT liabilties & prov
2,009
1,435
1,387
Current Liabilities
38,920
79,071
33,081
Short-term borrowings
13,925
49,695
4,672
Trade payables
15,757
22,137
22,286
Other cur liabilities & Prov
9,239
7,239
6,123
Total Liabilities
157,175
211,281
209,532
81,261
122,870
121,471
Fixed assets
48,521
87,236
84,766
Goodwill
25,585
27,056
26,784
Non-current investments
2,498
1,764
1,374
Long-term loans & adv
2,970
4,315
5,626
Other non-current assets
1,688
2,499
2,922
Current assets
75,914
88,412
88,061
Current investments
3,900
5,823
8,374
Trade receivables
20,043
24,932
28,898
Inventories
37,806
38,080
34,853
Cash & bank balances
5,638
8,582
6,104
Short-term loans & adv
7,074
10,863
9,003
Assets Non- current Assets
Other current assets Total Assets
1,454
133
829
157,175
211,282
209,532
Source: Company, KRChoksey Research
ANALYST Vaibhav Chowdhry,
[email protected], +91-22-6696 5571 Dhara Patwa,
[email protected], +91-22-6696 5585
KRChoksey Research is also available on Bloomberg KRCS Thomson Reuters, Factset and Capital IQ
+91-22-6696 5555 / +91-22-6691 9576 www.krchoksey.com
India Equity Institutional Research II
Result Update – Q3FY18
II 8th February, 2018
Page 6
Cipla Ltd. Exhibit 4: Cash flow statement INR Mn PBT Depreciation Interest Exp Others CF before W.cap Inc/dec in W.cap Op CF after W.cap Less Taxes Net CF From Operations Inc/(dec) in F.A + CWIP (Pur)/sale of Investments others CF from Invst Activities Loan Raised/(repaid) Equity Raised Dividend Others CF from Fin Activities Net inc /(dec) in cash Op. bal of cash Cl. balance of cash
FY15 16543 5047 1683 -430 22844 -7186 15658 -3923 11735 -6256 -3534 379 -9411 3526 0 -1879 0 1648 3972 1752 5638
FY16 20070 5417 1613 158 27258 -4242 23016 -5077 17939 -10527 -35389 121 -45795 32807 29 -1809 0 31027 3171 5638 8709
FY17 12222 13229 1594 -1026 26019 2307 28326 -4503 23824 -10776 -2519 169 -13127 -10803 120 -3845 1290 -13239 -2541 8709 6104
FY18E 19081 7374 5311 0 31766 -2153 29613 -3816 25796 -4460 -1112 0 -5572 982 0 -1880 0 -898 19326 6104 25430
FY19E 22449 7974 4975 0 35398 -6758 28640 -4490 24150 -12329 -1086 0 -13415 -7975 0 -1880 0 -9855 880 25430 26310
FY15 17.3 21.9 125.2 2.0 11.6
FY16 14.7 21.0 134.4 2.0 13.6
FY17 18.7 25.5 143.3 2.0 10.7
FY18E
FY19E
19.4 28.6 172.8 2.0 10.3
23.8 33.7 194.2 2.0 8.4
39.1 5.4 25.9 0.3
46.0 5.0 25.6 0.3
36.1 4.7 23.4 0.3
30.9 3.5 16.5 0.3
25.2 3.1 14.3 0.3
21.1 13.7 14.6 15.9
19.1 10.4 11.3 13.3
18.3 11.0 13.5 12.5
19.4 10.0 11.8 12.0
19.7 10.9 13.0 12.8
0.0 0.1 0.6 12.1 3.3
0.0 0.1 0.8 9.8 2.9
0.0 0.4 2.1 12.1 2.8
0.2 0.1 1.6 4.3 3.3
0.2 0.1 1.3 5.4 3.3
22.0 -2.9 -7.8
12.3 1.3 -15.0
20.6 15.7 27.5
6.7 22.3 55.1
12.8 14.5 22.8
1.6 99 62
1.6 112 61
1.3 104 61
1.2 82 73
1.3 76 73
Source: Company, KRChoksey Research
Exhibit 5: Ratio Analysis INR Mn EPS CEPS BVPS DPS Payout (%) Valuation (x) P/E P/BV EV/EBITDA Dividend Yield (%) Return ratio (%) EBIDTA Margin PAT Margin ROAE ROACE Leverage Ratios (x) Long Term D/E Net Debt/Equity Debt/EBITDA Interest Coverage Current ratio Growth Ratios (%) Income growth EBITDA growth PAT growth Turnover Ratios F.A Turnover x Inventory Days Debtors Days Source: Company, KRChoksey Research
ANALYST Vaibhav Chowdhry,
[email protected], +91-22-6696 5571 Dhara Patwa,
[email protected], +91-22-6696 5585
KRChoksey Research is also available on Bloomberg KRCS Thomson Reuters, Factset and Capital IQ
+91-22-6696 5555 / +91-22-6691 9576 www.krchoksey.com
India Equity Institutional Research II
Result Update – Q3FY18
II 8th February, 2018
Page 7
Cipla Ltd. Rating Legend
Cipla Ltd. Date 08-Feb-18 08-Nov-17 14-Aug-17 09-Feb-16 10-Nov-16 16-Aug-16 27-May-16 11-Feb-16 06-Nov-15 14-Oct-15 17-Aug-15 8-Jul-15 30-May-15 9-Apr-15
CMP (INR) 600 630 542 587 528 513 468 539 659 676 741 652 650 728
TP (INR) 714 736 627 690 616 616 616 646 751 765 765 704 704 754
Recommendation BUY BUY BUY BUY BUY BUY BUY BUY ACCUMULATE ACCUMULATE HOLD ACCUMULATE ACCUMULATE HOLD
Our Rating
Upside
Buy
More than 15%
Accumulate
5% - 15%
Hold
0 – 5%
Reduce
-5% – 0
Sell
Less than -5%
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ANALYST Vaibhav Chowdhry,
[email protected], +91-22-6696 5571 Dhara Patwa,
[email protected], +91-22-6696 5585
KRChoksey Research is also available on Bloomberg KRCS Thomson Reuters, Factset and Capital IQ
+91-22-6696 5555 / +91-22-6691 9576 www.krchoksey.com