Month: October 2021

1. Cipla:

For the pharma major in therapeutic category with more than 50 dosage options, the brokerage firm has suggested a buy for a target price of Rs. 1085. The stock last trades at a price of Rs. 914.8, implying gains to the tune of 18.6 percent.

Key takeaways on the company

The company’s 40 percent revenues are accounted by branded formulations and enjoys leadership in areas including respiratory, anti-infective, cardiac,

gynaecology & gastro-intestinal.

21% export revenues garnered from the US followed by South Africa, Europe etc.

The company’s Q2fy22 numbers came in good with sales increasing YoY by almost 10 percent. EBITDA was at Rs. 1226.2 crore, up 4% YoY with margins at 22%. Likewise adjusted PAT has been at Rs. 711.4 crore (up 6.9% YoY)

Brokerage rationale for the buy on Cipla

The buy has been suggested as the brokerage continues to focus on the company’s core strength of followinga calibrated approach of focusing more on branded products and core therapies across the world

Target Price and Valuation: We value Cipla at Rs. 1085 i.e. 25x P/E on FY23E EPS +

Rs. 42 NPV for gRevlimid.

Key triggers for future price performance:

The company’s strategy of focusing four verticals viz. One-India, South Africa & EMs, US generics & specialty and lung leadership

• Across the board transformation with adoption of private model from tenderised model in exports market and more focus towards consumerisation of important TGx,

Rx products in Indian branded formulations

• The company is focusing on front-end model, especially for the US, along with a gradual shift from loss making HIV and other tenders to more

lucrative respiratory and other opportunities in the US and EU

• Expects significant momentum from H2FY23 onwards in the US on the back of possible approvals and launches of gRevlimid, gAdvair and gAbraxane

besides momentum gains from Albuterol portfolio

Note the buy on the stock has been given for 12 months

2. Sanofi India:

This is another pharma company for which the brokerage is bullish for gains up to 19.5 percent. The target price for the stock is Rs. 9800, while the last traded price is Rs. 8199.95.

After the company delivered its 3rd quarter results for the calendar year 2021 has come in good with good margins. The company’s sales increased 10 percent YoY while its EBITDA margins came in improved. Also PAT gained YoY by 15 percent.

ICICI Direct values Sanofi at Rs. 9800 i.e. 35x P/E on FY23E EPS

Key triggers for future price performance:

• Focus on leveraging high margin portfolio through divesture of lower margin product basket

• Strong balance sheet, good dividend payout track record and comfort on corporate governance

• Consistent performer despite four core brands being under price control

• Future launches from its global staple along with brand extensions

• Access to innovative molecules from parent like recently launched anti-diabetic drug Toujeo

Sanofi is into offering drugs in therapeutic areas such as cardiology, thrombosis, anti-infective, CNS, allergy, vitamins, minerals & supplements. Lantus, Allegra & Combiflam are in Top 100 pharmaceutical brands in India

Alternate Stock Idea: the brokerage apart from Sanofi has suggested a buy call on the stock of

Abbott that is the fastest growing

listed MNC pharma companies. It

has outperformed the industry on a consistent basis in women’s health, GI,

metabolic, pain, CNS among others.

Disclaimer:

Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article. This article is for educational purpose.

Ramco Cements- Margin under pressure; demand outlook stays firm

With an 18% upside potential, the brokerage has set a price target of Rs 1200 on Ramco Cements.

Q2FY22 Results

• During Q2FY22, operational performance remained modestly better than our expectations, with tax adjustments inflating earnings.
• Revenue grew 18% year over year to $ 1493 crore. Volumes increased by 22.5 percent year over year to 2.71 MT, but realizations decreased by 3.7 percent due to the monsoon.
• Cost pressure and a high base resulted in a margin loss of 896 basis points year over year to 26.4 percent.
• Due to a deferred tax adjustment of Rs 306 crore, PAT was much higher at Rs 517 crore.

Target and Valuation

“Long operational history, brand equity and cost efficiency has helped the company to raise debt at competitive rates. Post completion of major capex, debt levels would peak out while growth to accelerate with revenue CAGR of 22.6%. Hence, maintain BUY rating Target Price and Valuation: We value Ramco at Rs 1,200 i.e.15.5x FY23E EV/EBITDA,” the brokerage has said.

The brokerage believes that from FY23 onwards, incremental volumes from new operations (1 MT Odisha GU, 1.5 MT & 2.25 MT clinker units in Jayanthipuram & Kurnool) would help the company develop. During FY21-23E, expect a CAGR of 18% in sales volume. Debt levels are expected to peak in FY22E. After three years, the company hopes to be debt-free.

Buy Orient Cement with upside potential of 54%

With a 54% upside potential, the brokerage has set a price target of Rs 250 on Orient Cement.

Q2FY22 Result

• A healthy volume increase of over 25% year over year was reported. Despite cost concerns, margins remained around 20% or above.
• Revenues increased by 28.4% year over year to 613.2 crore. Revenues were down 11.2 percent on a quarterly basis in September 2021 due to heavy monsoons in key countries.
• EBITDA/t decreased.
• EBITDA margin was 21.9 percent, down from 27 percent in the previous quarter and 23.7 percent a year ago.
• PAT of 56.8 crore was up 63.1 percent year over year but down 36.5 percent quarter over quarter.

Target and Valuations

“Orient Cement’s share price has grown 92% over the past three years (from ~| 90 in October 2018 to Rs 174 in 2021). With a strong business outlook, we remain positive on the company and maintain our BUY rating Target Price and Valuation: We value the company at Rs 250 i.e.7.5x FY23E EV/EBITDA,” the brokerage has said.

According to the brokerage, For FY22E, the volume growth forecast remains unchanged. Price increases are projected to protect margins from further erosion in the future. Before going into the next phase of expansion, the corporation is planning a large debt reduction. A total CAPEX of Rs 3,600 crore is required to reach 14.5 MT cement capacity by FY26E with an eye on the Rajasthan market.

Ambuja Cements with upside potential of 24%

With a 24% upside potential, the brokerage has set a price target of Rs 475 on Ambuja Cements.

Q3CY21 Results

• The Q3CY21 results from Ambuja Cements were in line with expectations.
• Revenues increased by 13.5 percent year on year to Rs 3237 crore. Sales volumes and realisations both increased by 9.3% and 3.8 percent year over year, respectively. Revenues were down 3.4 percent on a quarter-over-quarter basis.
• Despite lower-than-expected margins, reported EBITDA of Rs 703.1 crore (up 3.3 percent YoY) was in line with our expectations.
• Due to lower other income, net profit remained flat year on year at Rs 441.2 crore.

Target and Valuation

“Strong brand with pan India presence, cost-efficient and robust balance sheet are the key positives. With new capacities coming on stream from Q3CY21, we expect healthy double-digit growth during CY20-22E. Hence, we maintain BUY rating. Target Price and Valuation: We value Ambuja at Rs 475 i.e.17x CY22E EV/EBITDA,” the brokerage has said.

According to brokerage, from Q3CY21, new clinker capacity in Marwar Mundwa, Rajasthan (1.8 MT cement, 3 MT clinker) would provide additional sales of 5 MT per year. The company has also begun a new brownfield development of 1.5 MT cement grinding mill in Punjab, with the goal of reaching 50 MT capacity.

Disclaimer

The above stocks are picked from the brokerage report of ICICI Direct. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.