n       Revenue growth revives. After four quarters of single-digit growth, Cipla reported 12% revenue growth. With the base effect kicking in, domestic formulations grew strong at 19.8% yoy mainly due to the heavy monsoons in Q2FY11; export formulations grew 14.1% yoy led by commercialisation of the new plant at the Indore SEZ.

n       Margin pressures persist. Despite the revived revenue growth, EBITDA margin continued under pressure and slid 320bp yoy to 22.7%. The decline stemmed chiefly from the Indian currency appreciation and higher operating expenses at Indore SEZ plant.

n       Outlook. We expect the growth to continue to be in the range of 10-12% yoy for the next few quarters as a pick-up in revenue from the Indore SEZ would come about gradually. We believe that margins would continue to be ~23-24%.

n       Valuation. At CMP, Cipla trades at a stretched valuation of 21.5x FY12e earnings. We retain our target price of `308 and re-iterate Sell. Upside risk: any large products-supply deal with an MNC.