Cipla Q4 Results Preview: Profits may jump up to 75% on higher volumes

Indian pharmaceutical major Cipla is set to witness a sequential decline of 5-10 per cent in revenue in the January-March quarter of financial year 2023-24 (Q4FY24) owing to seasonal weakness, said analysts. 

However, the Cipla may show a 3-10 per cent jump in its topline year-on-year (Y-o-Y), registering revenues in the range of Rs 5,939 crore and Rs 6,292 crore, according to brokerage estimates. The company recorded a revenue of Rs 5,739 in the Q4FY23. 

The pharma major may see a similar trend in net profits also as the profit after tax (PAT) is set to jump by 62-75 per cent Y-o-Y in the range of Rs 852 crore to Rs 921 crore, while the PAT could lag by 26-31 per cent quarter on quarter (Q-o-Q) compared to the previous quarter of FY24. The company posted a net profit of Rs 525 crore in Q3FY24. 

Key monitorables: The street will watch out for site compliance and timeline of new launches, an update on progress on pipeline of (Advair/Abraxane/Symbicort). And an update on status of Goa facility remain key monitorables and risks.

Here’s what key brokerages expect:

Nomura: The global brokerage expects India sales of Cipla to decline Q-o-Q on seasonal weakness, while Y-o-Y growth will be supported by acquisitions. 

It estimates sales growth in South Africa at 3 per cent Y-o-Y in constant currency terms which in its view should be aided to an extent by the acquisition of Actor Pharma. 

“INR growth is low due to the depreciation of ZAR against INR over the past one year. We factor in flattish US sales q-q, not considering any material rise q-q from Revlimid,” the company said in a preview note. 

The brokerage’s estimates for the Ebitda margin for FY24 is at 24.3 per cent versus management guidance of 23-24 per cent.

Kotak Institutional Equities: It expects Cipla to report 10 per cent Y-o-Y growth in domestic sales in Q4FY24. While building US sales of $230 million, flat Q-o-Q. The brokerage predicts Revlimid sales at $28 million (tad higher than $25 million in Q3FY24), along with marginal boost in volumes of Albuterol and Lanreotide. 

Overall, those at Kotak expect Cipla's 4QFY24 sales to grow at 10 per cent Y-o-Y while dipping by 5 per cent sequentially.

It further estimates South America sales to grow 3 per cent Y-o-Y in Q4FY24, while in Africa and global access, it factors in a 10 per cent Q-o-Q decline, due to divestment of Cipla's Ugandan subsidiary, QCIL, effective November 14, 2023. In addition, it factors in a 5 per cent Y-o-Y growth in European Union and rest of the world sales. 

“We expect gross margins to decline 270 bps Q-o-Q to 63.7 per cent and bake in sequentially higher R&D expenses at 6.4 per cent of sales. We expect overall Ebitda to grow 17 per cent Y-o-Y to Rs 1,373 crore, with 470 bps Q-o-Q Ebitda margin decline to 21.8 per cent in Q4FY24 on account of seasonal weakness,” the brokerage said. 

ShareKhan: The domestic brokerage said that Cipla’s sales growth is expected to pick up in the domestic branded market and the one plus segment while it will get help from easing of price erosion in the US market. 

It further concurred that the company’s margins will decline sequentially due to lower Revlimid sales and higher marketing spend. However, it maintained that healthy operations will lead to healthy profitability. 

Centrum: Analysts at Centrum predict the domestic formulation sales of Cipla will grow by 11 per cent Y-o-Y, on better traction in key therapies (respiratory/cardiac) and increase in market share. 

It further said that the US sales may grow by 11.7 per cent Y-o-Y to $228 million, led by Revlimid and Lanreotide and offset by market share loss in Albuterol.

Nirmal Bang: Those at Nirmal Bang estimate Cipla’s revenues to grow by 9 per cent Y-o-Y, driven by Revlimid in the US and 10 per cent Y-o-Y growth in the domestic business. However, on a Q-o-Q basis, the US business is expected to decline by 5 per cent to $220 million due to a decline in the base business (including Albuterol Sulphate HFA). 

Ebitda margin is expected to improve by 165 basis points Y-o-Y to 22 per cent mainly due to easing of pricing pressure and lower costs, the brokerage wrote in a report. 

It expects net profit to grow by 75 per cent Y-o-Y, mainly driven by higher other income, absence of one-time expense and lower depreciation.