07th September, 2023

Q1FY24 RESULT UPDATE

Retail Equity Research

Cipla Limited BUY
Pharmaceuticals 12 Months Investment Period Rating as per Large Cap
BSE CODE: 500087 NSE CODE: CIPLA CMP Rs. 1,249 TARGET Rs. 1,420 RETURN 14%
(Closing: 07-09-23)
Bloomberg CODE: CIPLA:IN SENSEX: 65,266

KEY CHANGES: TARGET RATING EARNINGS

Company Data
Robust performance; margin guidance raised. Market Cap (cr) Rs.100,035
Cipla is a leading global pharmaceutical company with more than 1,500 Enterprise Value (cr) Rs.99,142
products across various therapeutic categories. It has a presence in over 80 Outstanding Shares (cr) 80.8
countries. Free Float 66.0%
• Revenue grew 17.7% YoY to Rs. 6,329cr in Q1FY24, supported by strong Dividend Yield 0.7%
'One India’ and North American business revenues, up 11.6% YoY and 52 week high Rs.1,278
52.0% YoY, respectively. 52 week low Rs.852
• EBITDA margin expanded to 23.6% in Q1FY24 from 21.3% in Q1FY24, 6m average volume 80,406
driven by mix and improved operating efficiency. Reported PAT rose Beta 0.3
41.0% YoY to Rs. 997cr in Q1FY24. Face value Rs.2
• Strong performance in the key geographies, such as the US and India, Shareholding % Q3FY23 Q4FY23 Q1FY24
supported a healthy growth in the topline. New launches in the US and Promoters 33.6 33.6 33.5
India are expected to boost earnings performance in the near term. We, FII’s 28.4 27.4 25.5
therefore, maintain our rating on the stock at BUY, with a revised target MFs/Insti. 21.1 22.1 24.3
price of Rs. 1,420, based on 26x FY25E adj. EPS. Public 16.5 16.7 16.4
Others 0.3 0.3 0.3
North America and India operations drive top line
Total 100.0 100.0 100.0
In Q1FY24, revenue increased 17.7% YoY to Rs. 6,329cr, because of strong Promoters’ pledge 0.0 0.0 0.0
performance across all major businesses. One India business revenue rose 11.6% YoY
Price Performance 3 Month 6 Month 1 Year
to Rs. 2,772cr, aided by strong growth across branded prescriptions, trade generics
Absolute Return 28.4% 41.0% 22.0%
and consumer health. The company’s North American business reported the highest-
Absolute Sensex 4.5% 9.3% 11.2%
ever revenue of Rs. 1,822 mn (USD 222mn) in Q1FY24, up 52% YoY, because of
traction in the differentiated portfolio. Additionally, the company expects the average Relative Return* 23.8% 31.6% 10.8%
run-rate of the US business to be in the range of USD 210-215 mn in Q2FY24. The *over or under performance to benchmark index
international market (Emerging Markets and Europe) rose 8.3% YoY to Rs. 779cr,
driven by strong performance across markets despite the challenging macroeconomic 1,400 CIPLA Sensex Rebased
environment. However, SAGA business revenue (includes South Africa, Sub-Saharan
Africa, QCIL and Cipla Global Access) declined 5.0% YoY to Rs. 748cr. 1,200
EBITDA margin expands; FY24 guidance increased
1,000
EBITDA surged 30.7% YoY to Rs. 1,494cr in Q1FY24, mainly because of favorable mix
and efficiency in operations. Resultantly, EBITDA margin grew 233bps YoY to 23.6%. 800
This is despite a 11.6% YoY increase in employee expenses and a 27% YoY rise in R&D Sep-22 Dec-22 Mar-23 Jun-23 Sep-23
investments. Higher R&D expenses were mainly due to continued growth in clinical
trials on key pipeline assets and other developmental efforts. Moreover, the company Consolidated (cr) FY23A FY24E FY25E
has revised its full-year EBITDA margin guidance to 23% from 22% earlier. Reported Sales 22,753 26,012 29,098
PAT stood at Rs. 998cr, up 41.3% on a YoY basis. Growth (%) 4.5 14.3 11.9
Key concall highlights EBITDA 5,027 5,970 6,824
• In FY24, capital expenditure (for sustainability, modernization and capacity EBITDA Margin (%) 22.1 23.0 23.5
enhancements) is expected to be in the range of Rs 10 to 15bn (about 4-5% of Adj. PAT 2,984 3,795 4,399
revenue). Growth (%) 10.6 27.2 15.9
• The company is planning to file 15 products annually in the US. Once receive the Adj. EPS 36.9 47.0 54.5
approval from regulatory authority the same will be launched in the market. Growth (%) 10.5 27.2 15.9
• The company’s branded business performed well and has added 200-250 P/E 24.4 26.4 22.7
representatives in Q1FY24. The number of representatives are expected to P/B 3.1 3.8 3.3
increase from 400 to 500 by the second quarter of FY24. EV/EBITDA 14.4 16.6 14.4
Valuation ROE (%) 12.1 14.2 14.4
We believe sustained focus on India and the US markets will continue to support Cipla’s D/E 0.0 0.0 0.0
earnings performance in the near term. The company has a strong product launch
pipeline for the US, India, and Emerging Markets, which is expected to boost the sales
and profitability. Importantly, the company gained market share in the market for
Lanreotide injection. We, therefore, reiterate our BUY rating on the stock, with a
revised target price of Rs. 1,420, based on 26x FY25E adj. EPS.

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Quarterly Financials (Consolidated)
Profit & Loss Account
Q1FY24 Q1FY23 YoY Growth % Q4FY23 QoQ Growth %
Revenue 6,329 5,375 17.7 5,739 10.3
EBITDA 1,494 1,143 30.7 1,174 27.3
EBITDA margins 23.6 21.3 230bps 20.5 310bps
Depreciation 239 254 (6.0) 346 (30.9)
EBIT 1,255 889 41.1 828 51.6
Interest 16 18 (8.0) 34 (52.3)
Other Income 136 103 31.8 135 1.2
Exceptional Items - - - (182) 100.0
Share of profit from Associate - - - - -
PBT 1,375 975 41.0 745 84.4
Tax 378 268 41.1 222 70.1
Reported PAT 997 707 41.0 523 91.0
Minority Interest 2 20 (88.0) (4) n.m.
PAT att. to shareholders 996 686 45.1 526 89.4
Adjustments - - - 182 (100.0)
Adj. PAT 996 686 45.1 708 40.6
No. of shares 80.8 80.8 0.0 80.7 0.0
Adj. EPS (Rs.) 12.3 8.5 45.1 8.8 40.6

Segment Revenue
Q1FY24 Q1FY23 YoY Growth % Q4FY23 QoQ Growth %
India (Rx+Gx+CHL) 2,772 2,483 11.6 2,259 22.7
US 1,822 1,199 52.0 1,677 8.6
SAGA 748 788 (5.1) 832 (10.1)
South Africa 514 568 (9.5) 619 (17.0)
International markets 779 720 8.2 784 (0.6)
APIs 136 135 0.7 134 1.5
Others 71 51 39.2 53 34.0
Total sales 6,329 5,375 17.7 5,739 10.3

Change in Estimates
Old estimates New estimates Change %
Year / Rs. cr FY24E FY25E FY24E FY25E FY24E FY25E
Revenue 25,321 28,475 26,012 29,098 2.7 2.2
EBITDA 5,558 6,478 5,970 6,824 7.4 5.3
Margins (%) 22.0 22.8 23.0 23.5 95bps 65bps
Adj. PAT 3,483 4,119 3,795 4,399 9.0 6.8
Adj. EPS 43.1 51.0 47.0 54.5 9.0 6.8

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PROFIT & LOSS BALANCE SHEET
Y.E March (Rs. cr) FY21A FY22A FY23A FY24E FY25E Y.E March (Rs. cr) FY21A FY22A FY23A FY24E FY25E
Revenue 19,160 21,763 22,753 26,012 29,098 Cash 1,401 1,928 1,565 1,847 2,351
% change 11.8 13.6 4.5 14.3 11.9 Accounts Receivable 3,446 3,424 4,057 4,526 5,063
EBITDA 4,252 4,553 5,027 5,970 6,824 Inventories 4,669 5,350 5,156 6,098 6,923
% change 32.6 7.1 10.4 18.8 14.3 Other Cur. Assets 3,693 4,024 6,497 8,277 10,107
Depreciation 1,068 1,052 1,172 1,190 1,238 Investments 545 417 632 639 645
EBIT 3,185 3,501 3,855 4,780 5,586 Gross Fixed Assets 5,527 5,547 6,388 7,428 8,563
Interest 161 106 110 108 96 Net Fixed Assets 4,956 5,164 4,991 4,842 4,739
Other Income 266 99 293 285 257 CWIP 571 383 689 689 689
PBT 3,290 3,493 4,038 4,957 5,746 Intangible Assets 4,836 4,841 4,514 4,555 4,597
% change 51.0 6.2 15.6 22.8 15.9 Def. Tax (Net) 315 449 457 422 489
Tax 889 934 1,203 1,191 1,380 Other Assets 720 1,120 905 907 909
Tax Rate (%) 27.0 26.7 29.8 24.0 24.0 Total Assets 25,152 27,101 29,463 32,801 36,511
Reported PAT 2,401 2,559 2,835 3,767 4,366 Current Liabilities 4,257 4,505 4,589 4,808 5,071
PAT att. to common Provisions 116 100 102 103 104
- - - - -
shareholders
Debt Funds 1,833 1,083 843 643 343
Adj* - 182 182 - -
Other Liabilities 360 295 215 449 513
Adj PAT 2,405 2,699 2,984 3,795 4,399
Equity Capital 161 161 161 161 161
% change 55.5 12.2 10.6 27.2 15.9
Reserves & Surplus 18,165 20,680 23,246 26,356 30,069
No. of shares (cr) 80.7 80.7 80.8 80.8 80.8
Shareholder’s Fund 18,327 20,842 23,408 26,517 30,230
Adj EPS (Rs.) 29.8 33.4 36.9 47.0 54.5
Minority Interest 259 276 306 280 250
% change 55.5 12.2 10.5 27.2 15.9
Total Liabilities 25,152 27,101 29,463 32,801 36,511
DPS (Rs.) 5.0 5.0 8.5 8.5 8.5
BVPS (Rs.) 227 258 290 328 374

RATIOS
CASH FLOW
Y.E March FY21A FY22A FY23A FY24E FY25E
Y.E March (Rs. cr) FY21A FY22A FY23A FY24E FY25E
Profitab. & Return
Net inc. + Depn. 3,469 3,611 4,008 4,956 5,604
EBITDA margin (%) 22.2 20.9 22.1 23.0 23.5
Non-cash adj. (85) (108) (211) 276 (9)
EBIT margin (%) 16.6 16.1 16.9 18.4 19.2
Changes in W.C 372 (177) (559) (1,209) (1,117)
Net profit mgn.(%) 12.6 11.6 12.3 14.6 15.1
C.F. Operation 3,755 3,326 3,238 4,023 4,478
ROE (%) 13.1 12.3 12.1 14.2 14.4
Capital exp. (791) (681) (1,136) (1,082) (1,176)
ROCE (%) 15.6 15.8 15.7 17.4 18.1
Change in inv. (1,633) (1,249) (1,375) (1,647) (1,697)
W.C & Liquidity
Other invest.CF 37 58 122 (18) (18)
Receivables (days) 65.6 57.4 65.1 63.5 63.5
C.F – Investment (2,387) (1,872) (2,388) (2,747) (2,892)
Inventory (days) 231.8 229.9 228.1 236.7 240.9
Issue of equity 0 0 0 - -
Payables (days) 102.6 107.8 108.7 98.2 94.5
Issue/repay debt (1,168) (1,098) (486) (200) (300)
Current ratio (x) 2.9 3.0 3.4 3.9 4.4
Dividends paid - (403) (403) (686) (686)
Quick ratio (x) 1.6 1.5 1.7 2.1 2.5
Other finance.CF (162) (98) (69) (108) (96)
Turnover & Leverage
C.F – Finance (1,330) (1,600) (958) (994) (1,082)
Gross asset T.O (x) 3.5 3.9 3.8 3.8 3.6
Chg. in cash 38 (146) (109) 282 504
Total asset T.O (x) 0.8 0.8 0.8 0.8 0.8
Closing cash 1,401 1,928 1,565 1,847 2,351
Int. coverage ratio (x) 19.8 32.9 35.2 44.2 58.0
Adj. debt/equity (x) 0.1 0.1 0.0 0.0 0.0
Valuation
EV/Sales (x) 3.5 3.8 3.2 3.8 3.4
EV/EBITDA (x) 15.6 17.9 14.4 16.6 14.4
P/E (x) 27.4 30.5 24.4 26.4 22.7
P/BV (x) 3.6 3.9 3.1 3.8 3.3

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Recommendation Summary (Last 3 Years) Dates Rating Target
1,800 20-May-20 HOLD 640
11-Nov-20 BUY 880
1,400
18-May-21 BUY 1,050
1,000
29-Oct-21 BUY 1,050
600 17-May-22 BUY 1,080
10-Nov-22 HOLD 1,230
200
Sep-20 Mar-21 Sep-21 Mar-22 Sep-22 Mar-23 Sep-23 17-May-23 BUY 1,120
Source: Bloomberg, Geojit research 7-Sep-23 BUY 1,420
Investment Rating Criteria
Ratings Large caps Midcaps Small Caps
Buy Upside is above 10% Upside is above 15% Upside is above 20%
Accumulate - Upside is between 10%-15% Upside is between 10%-20%
Hold Upside is between 0% - 10% Upside is between 0%-10% Upside is between 0%-10%
Reduce/sell Downside is more than 0% Downside is more than 0% Downside is more than 0%
Not rated/Neutral

Definition:
Buy: Acquire at Current Market Price (CMP), with the target mentioned in the research note.
Accumulate: Partial buying or to accumulate as CMP dips in the future.
Hold: Hold the stock with the expected target mentioned in the note.
Reduce: Reduce your exposure to the stock due to limited upside.
Sell: Exit from the stock.
Not rated/Neutral: The analyst has no investment opinion on the stock.

To satisfy regulatory requirements, we attribute ‘Accumulate’ as Buy and ‘Reduce’ as Sell.

The recommendations are based on 12 month horizon, unless otherwise specified. The investment ratings are on absolute positive/negative return
basis. It is possible that due to volatile price fluctuation in the near to medium term, there could be a temporary mismatch to rating. For reasons of
valuations/ return/lack of clarity/event we may revisit rating at appropriate time. Please note that the stock always carries the risk of being upgraded
to BUY or downgraded to a HOLD, REDUCE or SELL.

General Disclosures and Disclaimers

CERTIFICATION

I, Vinod T P author of this Report, hereby certify that all the views expressed in this research report reflect our personal views about any or all of the subject
issuer or securities. This report has been prepared by the Research Team of Geojit Financial Services Limited, hereinafter referred to as Geojit.

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Digitally signed by VINOD

VINOD T P TP
Date: 2023.09.07 17:25:37
+05'30'

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