CIPLA beat the street expectations posting a strong revenue and profit growth led by better exports growth. Exports contributed 56% to overall revenues. Gross revenues at Rs 2,220 crore grew 23.6% y-o-y and 15.8% sequentially. With raw material costs to sales declining 36.3% in September’12 quarter compared to 40.5% in the June’12 quarter
The EBIDTA margins at 29.4% saw a 340 basis points improvement over the previous quarter and 700 basis points over same quarter last year. In the backdrop, profits at Rs 500 crore grew 62% y-o-y at and 25% sequentially - sharply ahead of estimates of around Rs 370 crore
Export formulations grew 38% y-o-y to Rs1,038.94 crore. This was much higher than estimates of around Rs 900 crore. This is likely to have driven by antidepressant drug Laxapro supplies to Teva that is marketing the generics on exclusivity. Associated pharma ingredients (API) exports on the other hand grew 9% y-o-y to Rs173.77 crore. Thus total exports at Rs 1,212.70 grew 33.1% year-on-year ahead of the general estimates of Rs 1100 crore.
Domestic sales growth slightly disappointed, with sales at Rs 961.70 crore growing 13.5% versus general estimates of 16% growth. Analysts however feel the same is fine looking at the subdued growth seen by the industry as a whole during this quarter.
Moving forward while domestic growth can continue and improve its growth momentum looking at the winter season approaching
that can boost Anti-bacterial sales. The chronic segment comprising of Anti-Asthmatic and Cardio-vascular range too will see increased traction. The only underlying concern is the new drug pricing policy that will have to be watched for. In the acute segment a number of number of products can come under Drug price control.
On the exports front with Teva likely to lose Lexapro exclusivity soon and competition stepping, the sales are bound to be impacted. Cipla being the supplier of generics to Teva will also see supplies decline.Hence the sustainance of export growth needs to be seen.
Looking at the above factors the stock prices at Rs 380.85 seems to be evenly priced. The consensus target price for the stock at Rs 394 as per Bloomberg data too indicates towards a limited upside.