Cipla's Q1FY20 results (Downgrade to Neutral) - Soft quarter ex-gSensiparcontribution
Q1FY20 result highlights
- Revs for the quarter stood at Rs40bn vs est of Rs44.6bn; Q4 was Rs 44bn. Beat primarily driven by the US business - Revs of $161mn vs est of $150mn due to continued momentum on gSensipar (est - $40-45m for the qtr with ~90% GMs). Run-rate to drop from Q2 onwards.
- India business revs declined by 10% qoq to Rs 13.6bn vs est of Rs 17bn. Mgt cited Rs2bn impact due to a churn of distributors in the trade generics segment and Rs600m impact of deferrals in branded generic dispatches. Adj. India branded rev grew at ~4%, still muted vs IPM; SAGA sales also missed est with rev of Rs6.9bn vs est of Rs8.2bn
- EBITDA was Rs9bn (-6% qoq) vs est of Rs9.6bn; EBITDAM- 22.7% (21.8% in Q4) vs 21.6% est. GMs came higher at 69.3% (65.2% in Q4) vs est of 64.8%, boosted by higher-than-expected gSensipar sales & favourable business mix. Overheads came at Rs18.9bn (-9% qoq) vs est of Rs19.6bn. R&D spends were lower at Rs2.6bn vs Rs3bn in Q4.
- Reported PAT stood higher at Rs4.5bn (25% qoq) vs est Rs5.1bn.
- Mgt indicated gSensipar will cease to be meaningful from Q2, with more limited competition launches expected from latter part of Q3. Domestic trade Gx is expected to pickup from Q3 onwards while mgt remains hopeful of double digit growth in branded Gx for FY20.
Impact on financials: We have decreased our FY20/21 est by 9/7% to account for lower domestic / SAGA revenues.
Valuations & view
Post a positive FY19, Cipla now faces multiple headwinds due to challenges across multiple business segments including domestic trade generics, US and as well continued softness in Global Access business. Patchy growth in the core domestic formulation business and imperative to enhance R&D spends is adding to these challenges. Going forward, earnings recovery will be largely contingent on launch of incremental limited competition products in US in late Q3/Q4. Likely initiation of gAlbuterol MDI / gTruvada supplies should add to the US sales momentum in FY21. Given the muted earnings growth outlook in the near term and reasonably rich valuations (18.6x FY21E PER), we believe upsides are capped from current levels. Downgrade to Neutral with a price target of Rs554 (20x FY21E EPS). Improvement in US / India business growth visibility will be trigger for upgrade.
Cipla is a global pharmaceutical company based in India. Co. manufactures over 1,000 pharmaceutical products for therapeutic areas such as cardiovascular, children's health, dermatology and cosmetology, diabetes, human immunodeficiency virus/acquired immuno deficiency syndrome (HIV/AIDS), infectious diseases and others. Co.'s operations are organized along four business units: Active Pharmaceutical Ingredients (API - 200 generic and complex APIs); Respiratory (inhalation therapy); Cipla Global Access (HIV/AIDS, malaria, multi drug-resistant tuberculosis, and reproductive health); and Veterinary. Co.'s products are sold in India, Africa, Middle East, Europe, Americas, Asia and Australia.
IDFC Securities Ltd., a subsidiary of the Infrastructure Development Finance Company (IDFC) wherein the Government of India holds a 20% interest, is India's leading equities broker catering to most of the prominent financial institutions, both foreign and domestic investing in Indian equities. A research team of experienced and dedicated experts ensures the flow of critically investigated stock ideas and portfolio strategies for our clients. Our coverage spans across various growth sectors such as agriculture, automobiles, Consumer Goods, Technology, Healthcare, Infrastructure, Media, Power, Real Estate, Telecom, Capital Goods, Logistics, Cement amongst other sectors. Our clients value us for our strong research-led investment ideas, superior client servicing track record and exceptional execution skills.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.