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what should investors do with cipla post q3: buy, sell or hold?

Thursday, Feb 6 2020 11:14AM

Cipla share price added 3.5 percent in the early trade on February 6 after the company reported better numbers for the quarter ended December 2019.

The company has reported a 5.7 percent year-on-year growth in consolidated profit at Rs 351 crore versus Rs 332.2 crore in the same period last year.

Revenue during the quarter grew 9.1 percent year-on-year to Rs 4,371 crore with India business showing a 13 percent growth and North America 11 percent.

At the operating level, consolidated earnings before interest, tax, depreciation and amortisation (EBITDA) rose 7.2 percent year-on-year to Rs 758.3 crore, but margin contracted 30bps YoY to 17.3 percent during the quarter

Credit Suisse | Rating: Neutral | Target: Rs 445 per share

Execution is the key for new strategic focus in India, however, the product concentration is still high.

India business registered healthy growth of 13 percent, buoyed by recovery of trade generics. The South Africa private market growth was strong.

US sales beat driven by lower-than-expected erosion in gSensipar.

Research house positive on new initiatives in India and move to limit specialty investments. It stays neutral as top 3 products are 25 percent of US sales.

Jefferies | Rating: Hold | Target: Cut to Rs 465 from Rs 520 per share

Jefferies has cut EPS estimates by 7-8 percent as it factors a lower US run-rate.
The execution for the company has been mixed. The US sales were below expectation despite new launches. It expects India business growth to remain steady.

Morgan Stanley | Rating: Equal-weight | Target: R 578 per share

The downside risk to growth & full valuation keep us equal-weight. The US base business is expected to have a quarterly run-rate of USD 120-130 million, said Morgan Stanley.

The company expects India & S Africa market growth momentum to continue in FY21, it added

CLSA | Rating: Sell | Target: Cut to Rs 410 from Rs 460 per share

The delayed in US approvals drives further earnings cut.

Q3 gross margin was at 2-year low results in a weak operating performance. The strong India sales growth of 13 percent was offset by flat QoQ US sales.

FY21 US growth could be muted if key approvals see delays. The benefits of its renewed strategy will only be visible in FY22, said CLSA.

It has cut FY20-22 EPS estimate by 4-11 percent.

At 09:37 hrs Cipla was quoting at Rs 455.35, up Rs 8.55, or 1.91 percent on the BSE.


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