Driven by a smart 50 per cent growth in exports, the Rs 4,227 crore Cipla posted a top line growth of nearly 34 per cent in the June 2008 quarter. The relatively low base of Q1FY08 and a weaker rupee notwithstanding, this is the fourth quarter of successive good growth recorded by the drug major.
Revenues from the home market in June too have grown at a reasonably good 16 per cent and consequently the operating profit margin expanded 360 basis to 22 per cent, after adjusting for a forex loss of Rs 75 crore. The forex loss, however, depressed the net profit which rose just 17 per cent to Rs 140 crore.
Exports accounted for about half the firm's revenues of Rs 1207 crore last quarter. Analysts believe the higher sales of active pharmaceutical ingredients (API) could have included supplies to Teva, for a product sold exclusively in the US for a period of 180 days.
However, since such orders for supplies during periods of exclusivity do not recur too often, it will be sales of formulations that will determine the pace of Cipla's exports in subsequent quarters.
To sustain a 25-30 per cent growth in exports, however, the company will need to increase the proportion of high value products, like inhalers, to regulated markets. Cipla, which has launched asthma inhalers in Germany, Spain and Portugal, is looking to gain a foothold in the CFC-free inhaler market.
Cipla has one of the strongest pipelines of generics among Indian companies.
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The company has pursued a strategy of teaming up with players overseas but does not get involved in patent litigation. It has recently roped in a couple of partners in the US and EU and plans to supply over 100 products to overseas markets in the next few years.
The management believes the company's revenues can grow at 12-15 per cent in FY09 and net profits at around 11-13 per cent.
The earnings per share is estimated to increase by about 20 per cent. In a weak market, the pharma sector has been outperforming, with Cipla's stock gaining 7 per cent since the start of 2008. At the current price of Rs. 238, the stock trades at a shade over 21 times estimated FY09 earnings and is a tad expensive.