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Cipla: 2QFY02 results preview

Oct 19, 2001

Cipla is expected to declare its second quarter results tomorrow. We expect the company to register a 23% rise in revenues, fuelled by an expected 84% growth in exports. On the back of increasing contribution of exports to the total revenues, we expect a 90 basis points rise in operating margins. Operating for first half are expected to remain flat as there was a drop of 100 basis point in 1QFY02, on the back of increase in marketing expenses.

(Rs m) 2QFY01 2QFY02E Change H1FY01 H1FY02E % Change
Sales 2,697 3,316 23.0% 5115 6295 23.1%
Other Income 100 60 -40.0% 176 121 -31.1%
Expenditure 2,063 2,507 21.5% 3992 4913 23.1%
Operating Profit (EBDIT) 634 809 27.7% 1122 1382 23.2%
Operating Profit Margin (%) 23.5% 24.4%   21.9% 22.0%  
Interest 1 3 130.8% 5 6 3.8%
Depreciation 45 48 6.7% 83 96 15.8%
Profit before Tax 687 818 19.0% 1210 1402 15.9%
Other Adjustments - -     0  
Tax 170 140 -17.6% 305 280 -8.2%
Profit after Tax/(Loss) 517 678 31.1% 905 1122 24.0%
Net profit margin (%) 19.2% 20.4%   17.7% 17.8%  
No. of Shares (eoy) (m) 60.0 60.0   60.0 60.0  
Diluted Earnings per share 34.5 45.2   30.2 37.4  
P/E (at current price)   24     30.9  

Cipla Sales Mix
(Rs m) 2QFY01 2QFY02E % Growth
Domestic 2,114 2,241 6%
Exports 583 1,075 84%
Total 2,697 3,316 23%

The uncertainty prevailing over the export of generic Omeprazole, which is considered to be key earning opportunity for Cipla has further intensified. Just to recall, Cipla has an arrangement to supply Omeprazole (bulk drug) to Andrx. Andrx in turn claims to have a six month marketing exclusivity for the drug. However, the issue is caught in a long legal tangle. Recently, the US FDA had granted two more patents to AAI Pharma which has intensified the ongoing legal battle. Read more on the Omeprazole legal tangle.

In a recent development, the company has offered to supply Anthrax drug Ciprofloxacin to the US markets. Ciprofloxacin is currently under patent and hence only the patent holder viz, Bayer AG is allowed to sell the drug. Read more on Ciprofloxacin opportunity. However, the US administration announment to include other anti-biotics for anti-anthrax drive could open an opportunity for Cipla and other Indian companies. Cipla has the US FDA clearance for selling amoxyciline, (a substitute for ciprofloxacin) in the US markets.

At the current market price of Rs 1,155 the stock is trading at 26x FY02E earnings.

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