Cipla shares rose over 3 percent to a 52-week high of Rs 395.65 on Tuesday after the street cheered its healthy growth in the second quarter.
The India's third largest pharmaceutical company had on Monday reported better-than-expected 62 percent year-on-year jump in July-Sep quarter net profit at Rs 500 crore, helped by strong growth in exports and a decline in raw material costs. Quarterly revenue rose 24 percent to Rs 2,220 crore.
Analysts had expected Cipla to report a net profit of Rs 361 crore, on revenue of Rs 2,030 crore in the second quarter.
Cipla's EBITDA last quarter grew 61 percent to Rs 630 crore and margins surged 680 bps to 29.4 percent, driven by better product mix, higher Lexapro margins and operating leverage benefits.
Also Read: Aim to see turnover of USD 5 billion by 2020, says Cipla Chairman
"We had in our initiation note highlighted that with Cipla focusing on high margin products we expect asset utilization and margins to improve leading to growth acceleration. This has borne over the first half FY13 with margins improving 500 bps over FY12 and EPS growth of 60 percent," Piyush Nahar of Jefferies said.
He further added that with Indore facility receiving US Food and Drug Administration approval and launch of high margin products like Dymista and inhalers, base margins are likely to see further improvement. Nahar expects its base margins to expand 500 bps over FY12-14.
The brokerage maintained its "buy" rating on Cipla and raised its target price to Rs 435 from Rs 390.
Here's how other analysts viewed Cipla's blokbuster results:
Edelweiss: While the benefit from currency and Lexapro may not sustain, operational improvement could remain over the rest of the fiscal, giving 250-300 bps margin upside. We increase our FY13-14 estimates by 6%-3%, respectively. Rating: Buy. Target: Raised to Rs 425 from Rs 410.
IDFC: Cipla's first half performance is symbolic of an inflection point in its growth trajectory. Post management changes, Cipla's focus on revitalising its business and enhancing profitability has clearly begun delivering returns. We anticipate step-up in growth aggression through strategic moves like pursuing M&A deals as Cipla leverages its Rs 1,400 crore cash reserves. Rating: Outperformer. Target: Rs 465.
IIFL: We continue to believe Cipla has largely completed a strong investment phase and expect its meaningful impact in the next 2-3 years. We believe with the operating leverage looming in and improvement in margin and return ratio, will lead Cipla into high multiple trading range. We raise our estimates to factor in higher guidance along with better performance. Rating: Buy. Target: Rs 436.
At 9:30 hrs, Cipla shares were at Rs 393.45, up 3.5 percent on NSE.
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