Cipla Ltd. - Moneycontrol.comimages.moneycontrol.com/static-mcnews/2020/08/Cipla... · 2020. 8. 12. · Cipla Ltd. ANALYST head [email protected], +91 22 6696 5413 Valuation

12th Aug 2020 RESULT UPDATE

Cipla Ltd.

2 Page India Equity Institutional Research II Result Update – 1QFY21 II 12th Aug, 2020

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Cipla Ltd.

ANALYST Parvati Rai, [email protected], +91-22-6696 5413

CMP

INR 778 Target

INR 894 Potential Upside

15.0% Market Cap (INR Mn)

INR 628,069 Recommendation

BUY Sector

Pharmaceuticals

Shares outs (Mn) 806

Equity Cap (INR Mn) 160,573

Mkt Cap (INR Mn) 628,069

52 Wk H/L (INR) 814/355

Volume Avg (3m K) 8,622

Face Value (INR) 2

Bloomberg Code CIPLA IS

MARKET DATA

SHARE PRICE PERFORMANCE

SENSEX 38,407

NIFTY 11,323

MARKET INFO

KEY FINANCIALS

Source: Company, KRChoksey Research

Result Highlights of 1QFY21 • Cipla reported Revenue growth of 9.0% YoY (-0.7% QoQ) to INR 43,462 mn in 1QFY21 on the back of strong growth in the

domestic market, Europe, Emerging Markets & SAGA region. • EBITDA for the quarter rose 15.9% YoY (+65.5% QoQ) to INR 10,487 mn. EBITDA margin expanded 145 bps YoY to 24.1% in 1QFY21

(from 22.7% in last year). On sequential basis, EBITDA margin expanded 965 bps QoQ from 14.5% in 4QFY20. • Net Profit rose 20.9% YoY (up 135% QoQ). Net Profit Margin for the quarter expanded 131 bps YoY to 13.3% (up 768 bps QoQ). • R&D investment for the quarter stood at INR 2.0 bn at 4.6% of sales. Company has 262 ANDAs as of 30th June 2020, with 66

ANDAs pending for USFDA approval.

SHARE HOLDING PATTERN (%)

Revenue CAGR between FY20 and FY22E

9.1%

PAT CAGR between FY20 and FY22E

37.9%

Revenue beat with broad based growth: India which is the largest revenue contributor at 37% of sales grew 15.9% YoY (down 7.1% QoQ) led by strong growth across prescription (+9.0% YoY) on the back of strong traction in chronic therapies despite lock down challenges. Trade generics (+46.0% YoY) & CHL businesses also posted strong growth rates for the quarter. This is 3rd consecutive double-digit growth in the domestic market. Emerging Markets sales rose 63.8% YoY (up 10.1% QoQ, 11% of sales) driven by strong demand and base effect from last year. SAGA region (18% of sales) grew 10.4% YoY (-7.5% QoQ) led by strong (+24% YoY in local currency) growth in SA private business & 6.0% YoY (local currency) in tender business. Europe business (6% of sales) rose 19.4% YoY (+3.4% QoQ) led by good performance in key DTM (Direct-to-Market) markets. API business (4% of sales) was muted and grew 1.1% YoY (-25.5% QoQ). North America declined 8.8% YoY (up 19.3% QoQ, 23% of Sales). Other revenue for the quarter declined 43.0% YoY (+2.8 QoQ, 2% of sales).

Cost optimization leads to sequential EBITDA margin improvement: Gross margin for the quarter was 63.4%, an improvement of ~200bps QoQ. On YoY basis, 658bps decline in GPM was due to absence of contribution of high margin Cinacalcet in 1QFY21. Cost optimization resulted in EBITDA margin improvement of 965bps QoQ & 145bps on YoY basis with lower other expenses & lower employee costs.

Other expenses declined to 21.5% of revenue in 1QFY21 (vs 28.4% in 1QFY20) & employee cost declined to 17.8% of revenue (vs 19.0% in 1QFY20). Cost saving to reverse to an extent with higher R&D expenditure in the future & return of field force related expenses.

Net Profit growth of 20.9% YoY (+135% QoQ) was despite lower other income (down by 16.5%) at INR 655 mn (vs INR 784 mn in 1QFY20) but was supported by lower finance cost.

To benefit from comprehensive presence in COVID-19 care: Cipla currently has most comprehensive portfolio of drugs to treat COVID-19, such as Cipremi (Remdesivir), Actemra (Toclizumab), & Ciplenza (Favipiravir) as well as hand sanitizer under the brand name Ciphands. With COVID-19 pandemic still being unabated, higher demand of these products will add to company’s top line & bottom line.

Beat on all fronts, cost saving improves margins

Particulars Jun-20 (%) Mar-20 (%) Dec-19 (%)

Promoters 36.7% 36.7% 36.7%

FIIs 18.6% 20.3% 20.3%

DIIs 21.3% 20.8% 20.8%

Others 23.4% 22.2% 22.2%

Total 100% 100% 100%

INR Millions FY18 FY19 FY20 FY21E FY22E

Revenue 1,52,193 1,63,624 1,71,320 1,90,161 2,03,796

EBITDA 28,264 30,973 32,060 42,406 48,503

PAT 14,881 15,279 15,465 23,056 29,411

EPS (INR) 18.5 19.0 19.2 28.6 36.5

EBITDA Margin 18.6% 18.9% 18.7% 22.3% 23.8%

NPM 9.8% 9.3% 9.0% 12.1% 14.4%

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Cipla Nifty





Cipla Ltd.


Valuation and view: With increased demand for respiratory drugs due to COVID-19, Cipla was able to garner 65% market share in Poventil market with its newly launched Albuterol Sulfate. Approval for another promising ANDA, Advair Diskus of GSK (having an addressable market of USD 2.9 bn) is also expected soon. Cipla’s domestic business is on track after disruption in trade generics business, as significant recovery and stabilization is seen with consecutive double-digit growth in last three quarters. Cost optimization has led to one of the highest ever EBITDA margin in 1QFY21. With better than expected ramp up in the newly launched Albuterol Sulfate (only Indian company), industry beating broad based growth & improvement in margins, we have upwardly revised our FY21E Revenue/PAT by 4%/36% & FY22E by 4%/28%, respectively. Overall, we expect Cipla’s topline to grow by CAGR of 9.1% over FY20-22E period and net profit to grow by CAGR of ~38%. Since our last update on the stock (at INR 600/share), the shares of Cipla have rallied ~30% (achieving our previous target of INR 700/share) and are currently trading at a P/E of 27.2x/21.4x on FY21E/22E earnings. We are optimistic of company’s growth prospects and continue to apply P/E multiple of 24.5x on FY22E EPS of INR 36.5/share & raise our target price to INR 894 per share (previous TP: INR 700/share) ; an upside potential of 15%. Accordingly, we reiterate a “BUY” rating on the shares of Cipla.

Key Concall Highlights: : (i) Ramp up in Albuterol helped company to post USD 135 mn in the US sales. Cipla achieved 65% market share in Poventil market. Across the three Albuterol HFA products (Proventil, ProAir and Ventolin) Cipla has 6.2% of weekly prescription market share in the total market and 8.3% of weekly prescription market share in the generic market as per IQVIA ending in July 2020 (ii) Effective tax rate for FY21E to be same as of 1QFY21 (28.5%) (iii) Continuing with consumerization policy, company transferred two products from trade generics to CHL business (iv) Long-term debt stands at USD 317 mn, of which USD 275 mn is towards Invagen acquisition and ZAR 729 mn is towards Miren acquisition. With higher collections, Cipla achieved zero net debt status.


Segments Result (INR Mn) 1QFY20 2QFY20 3QFY20 4QFY20 1QFY21

Total 39,890 43,950 43,720 43,760 43,460

India 13,880 17,450 17,770 17,300 16,080

North America 11,190 9,530 9,460 8,560 10,210

SAGA 6,910 7,400 8,310 8,250 7,630

SA 5,320 5,460 5,940 5,320 5,480

Emerging Markets 2,790 4,510 3,230 4,150 4,570

Europe 2,010 1,900 1,900 2,320 2,400

API 1,820 1,570 1,650 2,470 1,840

Others 1,280 1,590 1,400 710 730

Segments Result (% YoY) 1QFY20 2QFY20 3QFY20 4QFY20 1QFY21

Total 1.3% 9.6% 9.1% -0.6% 8.9%

India -10.1% 6.1% 12.1% 15.3% 15.9%

North America 67.0% 25.7% 11.4% -25.1% -8.8%

SAGA -16.8% -1.9% 7.2% 0.2% 10.4%

SA -7.5% 8.5% 6.6% 3.7% 3.0%

Emerging Markets -40.5% -4.4% -17.8% 2.2% 63.8%

Europe 50.0% 34.8% 0.5% -1.7% 19.4%

API -9.0% -8.2% 7.1% 42.0% 1.1%

Others 40.7% 120.8% 118.8% -41.8% -43.0%

Revenue Mix (%) 1QFY20 2QFY20 3QFY20 4QFY20 1QFY21

Total 100% 100% 100% 100% 100%

India 34.8% 39.7% 40.6% 39.5% 37.0%

North America 28.1% 21.7% 21.6% 19.6% 23.5%

SAGA 17.3% 16.8% 19.0% 18.9% 17.6%

SA 13.3% 12.4% 13.6% 12.2% 12.6%

Emerging Markets 7.0% 10.3% 7.4% 9.5% 10.5%

Europe 4.6% 4.8% 4.3% 5.3% 5.5%

API 4.6% 3.6% 3.8% 5.6% 4.2%

Others 3.2% 3.6% 3.2% 1.6% 1.7%





Cipla Ltd.


Exhibit 1: Profit & Loss Statement


KEY FINANCIALS

Exhibit 2: Cash Flow Statement

Exhibit 3: Key Ratios



INR Millions FY 18 FY 19 FY 20 FY 21E FY 22E

Revenues 1,52,193 1,63,624 1,71,320 1,90,161 2,03,796

COGS 54,384 57,845 59,914 64,465 65,622

Gross profit 97,808 1,05,779 1,11,406 1,25,696 1,38,174

Employee cost 26,901 28,565 30,270 33,278 35,664

Other expenses 42,644 46,241 49,076 50,012 54,006

EBITDA 28,264 30,973 32,060 42,406 48,503

EBITDA Margin 18.6% 18.9% 18.7% 22.3% 23.8%

Depreciation & amortization 13,228 13,263 11,747 12,854 13,878

EBIT 15,036 17,710 20,313 29,552 34,626

Interest expense 1,142 1,684 1,974 986 633

Other income 3,577 4,766 3,442 3,821 5,095

PBT before excep. items 17,470 20,791 21,782 32,386 39,087

Exceptional Items 775 0 0 0 0

PBT 16,695 20,791 21,782 32,386 39,087

Tax 2,501 5,694 6,312 9,230 9,576

Share of Profit/(Loss) of Associates/Minority -88 181 -5 -100 -100

PAT 14,105 15,279 15,465 23,056 29,411

EPS (INR) 18.5 19.0 19.2 28.6 36.5


Net Cash Generated From Operations 14,628 16,911 30,685 26,019 39,242

Net Cash Flow from/(used in) Investing Activities (8,540) (16,687) 1,040 (8,457) (7,643)

Net Cash Flow from Financing Activities (3,855) (3,487) (29,488) (8,741) (10,879)

Net Inc/Dec in cash equivalents 2,233 (3,262) 2,237 8,821 20,719

Opening Balance 6,104 8,535 5,084 7,424 16,245

Closing Balance Cash and Cash Equivalents 8,535 5,084 7,424 16,245 36,964

Key Ratio FY18 FY19 FY20 FY21E FY22E

EBITDA Margin (%) 18.6% 18.9% 18.7% 22.3% 23.8%

Tax rate (%) 15.0% 27.4% 29.0% 28.5% 24.5%

Net Profit Margin (%) 9.3% 9.3% 9.0% 12.1% 14.4%

RoE (%) 10.2% 10.0% 9.6% 12.8% 14.4%

RoCE (%) 8.0% 9.0% 10.8% 14.5% 15.5%

Current Ratio (x) 2.82 3.29 2.66 3.05 3.81

EPS (INR) 17.5 19.0 19.2 28.6 36.5





Cipla Ltd.


Exhibit 4: Balance Sheet



Non-current assets

Property, plant and equipment 53,154 51,144 48,053 45,961 43,210

Capital work-in-progress 5,124 3,311 4,210 4,210 4,210

Goodwill (Net) 28,147 28,691 29,340 29,340 29,340

Other intangible assets 18,191 15,630 14,965 10,288 5,276

Intangible assets under development 4,690 3,451 4,035 4,035 4,035

Investments accounted for using equity method 96 2,345 2,350 2,608 2,795

Financial assets

Investments 1,470 1,939 2,195 2,437 2,611

Loans 417 494 524 582 623

Other financial assets 1,591 932 420 753 807

Deferred tax assets (Net) 1,877 2,014 2,398 2,661 2,852

Tax assets (Net) 3,886 3,456 4,686 5,202 5,575

Other non-current assets 1,823 1,960 6,387 7,089 7,597

Total non-current assets 1,20,465 1,15,367 1,19,564 1,15,167 1,08,932

Current assets

Inventories 40,447 39,648 43,776 47,101 47,947

Financial assets

Investments 11,022 21,258 10,165 10,165 10,165

Trade receivables 31,025 41,507 38,913 43,193 46,290

Cash and cash equivalents 8,535 5,084 7,424 16,245 36,964

Bank balances other than above 1,122 1,105 2,615 2,615 2,615

Loans 199 63 56 56 56

Other financial assets 5,748 4,979 5,223 7,182 7,697

Other current assets + Current Tax Assets 10,044 10,603 8,866 12,550 13,450

Assets classified as held for sale 0 20 23 23 23

Total current assets 1,08,141 1,24,266 1,17,062 1,39,130 1,65,207

TOTAL ASSETS 2,28,606 2,39,633 2,36,626 2,54,296 2,74,139

EQUITY AND LIABILITIES

Equity

Equity share capital 1,610 1,611 1,613 1,613 1,613

Other equity 1,40,682 1,48,511 1,56,018 1,74,924 1,99,041

Equity attributable to the equity shareholders 1,42,292 1,50,123 1,57,630 1,76,536 2,00,653

Non-controlling interests 3,524 3,320 2,943 2,953 2,963

Total equity 1,45,816 1,53,443 1,60,573 1,79,489 2,03,616

Liabilities

Non-current liabilities

Financial liabilities

Borrowings 36,621 38,301 23,693 20,787 18,787

Other financial liabilities 501 3,875 2,769 2,769 2,769

Provisions 1,379 1,214 1,333 1,333 1,333

Deferred tax liabilities (Net) 5,033 4,253 3,652 3,652 3,652

Other non-current liabilities + Trade payables 933 833 675 675 675

Total non-current liabilities 44,467 48,476 32,121 29,216 27,216

Current liabilities

Financial liabilities

Borrowings 4,359 4,862 4,472 3,862 1,000

Trade payables 21,191 19,480 22,818 24,551 24,992

Other financial liabilities 4,202 3,984 5,304 5,706 5,809

Other current liabilities 2,269 1,434 1,763 1,897 1,931

Provisions 6,271 7,368 9,482 9,482 9,482

Current tax liabilities (Net) 31 587 93 93 93

Total current liabilities 38,322 37,715 43,931 45,592 43,307

Total liabilities 82,789 86,191 76,053 74,807 70,523

TOTAL EQUITY AND LIABILITIES 2,28,606 2,39,633 2,36,626 2,54,296 2,74,139





Cipla Ltd.


Rating Legend (Expected over a 12-month period)

Our Rating Upside

Buy More than 15%

Accumulate 5% – 15%

Hold 0 – 5%

Reduce -5% – 0

Sell Less than – 5%

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Cipla Ltd.

Date CMP (INR)

TP (INR) Recommendation

11-Aug-20 779 894 BUY

18-May-20 600 700 BUY

13-Apr-20 593 683 BUY

06-Feb-20 440 539 BUY

08-Nov-19 472 539 ACCUMULATE

13-Aug-19 485 539 ACCUMULATE

24-May-19 565 631 ACCUMULATE
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Documents

Cipla Ltd. - Moneycontrol.comimages.moneycontrol.com/static-mcnews/2020/08/Cipla... · 2020. 8. 12. · Cipla Ltd. ANALYST head [email protected], +91 22 6696 5413 Valuation