Cipla dips 4% on lower than expected March quarter earnings

The company's performance in Q4FY21 was weighed by moderate YoY growth in India Domestic Formulation (DF)/South Africa and decline in API sales for the quarter

Shares of Cipla were down 4 per cent at Rs 870 on the BSE in intra-day trade on Monday after the company reported lower than expected March quarter earnings (Q4FY21), with total revenue from operations growing 5 per cent to Rs 4,606 crore as against Rs 4,376 crore in the year-ago quarter. The company’s performance in Q4FY21 was weighed down by moderate year-on-year (YoY) growth in India Domestic Formulation (DF)/South Africa and a decline in API sales for the quarter.

Earnings before interest, taxes, depreciation and amortization (EBITDA) rose 22 per cent YoY to Rs 796 crore from Rs 652 crore in the corresponding quarter of the previous fiscal. EBITDA margin improved 239 basis points to 17.3 per cent from 14.9 per cent. Profit after tax (PAT) jumped 68 per cent to Rs 413 crore from Rs 246 crore in the previous year quarter.

“Cipla’s Q4 results were below our estimates on all fronts amid lower-than-expected formulations sales across geographies (ex-South Africa) and operational performance. We continue to focus on the management’s long-drawn strategy of targeting four verticals -- India, South Africa & Emerging Markets (Ems), US generics & speciality and lung leadership," ICICI Securities said in a note.

The timely launch of Albuterol sulphate (Proventil HFA) in the US amid rising demand for Albuterol products in the pandemic vindicates the company's lung leadership quest, the brokerage said while adding that in the US, the focus will be on speciality including hospitals and value accretive generics and in India, the focus will be on branded (Rx) and trade generics (TGx).

On the African front, Cipla continues to rebase its business model towards private business in the backdrop of shrinking tender opportunities. 

"Another key aspect to watch would be the R&D recalibration. Across the board transformation from tenderised model to private model in exports market and more focus towards consumerisation of important TGx, Rx products in Indian branded formulations bode well for the company," the brokerage firm said in result update.

Cipla’s FY22 goals include ramping up the Covid portfolio, outperforming the generics franchise in India/South Africa, prioritising potential complex generics launches in the US, scaling up the business in Europe/other emerging markets, and accelerating digital transformation across markets. 

Brokerage Motilal Oswal Securities cut its EPS estimate for Cipla by 12 per cent/11 per cent for FY22/FY23E, factoring in lower operating leverage, increased price erosion in the US base business, and inferior execution in the API segment.

At 10:19 am, Cipla was trading 3 per cent lower at Rs 877 on the BSE, as compared to a 1 per cent rise in the S&P BSE Sensex. A combined 8.8 million equity shares had changed hands on the counter on the NSE and BSE.