That the ongoing slowdown has not touched the pharmaceutical sector is apparent from Cipla’s June quarter numbers. The company has managed to surpass market expectations due to a robust 30 per cent domestic growth and one-off revenue from sales of anti-depressant escitalopram (Lexapro) to Teva in its 180-day exclusivity period. In reaction to its results Cipla is now trading at a 52-week high level.
While Cipla posted a strong performance in the domestic market, sales in exports markets were lacklustre. Constant currency growth, net of escitalopram sales, was at 2 per cent and including it was at 10 per cent. The market expectation for export growth was 24 per cent for the quarter.
Domestic growth, on the other hand, was well above its three-year average quarterly growth of 12 per cent. Branded formulations grew 23 per cent while its generic formulations posted a much higher growth on account of antibiotics and anti-asthma sales.
Cipla also benefited on account of forex gains of Rs 23 crore which resulted in the company posting a profit of Rs 401 crore compared to Rs 253.4 crore in June 2011 and Rs 291.6 crore in March 2012.
Analysts have revised their earnings and price target after the company’s positive guidance. They have raised the EPS estimate from Rs 14.5 to Rs 16 for FY13. At these levels, the current stock price of Rs 353 discounts its earnings by 22 times which is at the higher end of its valuation band of 18-22.
Further, Cipla will have the benefit of escitalopram sales for one more quarter before the exclusivity period expires. Thus, the company is unlikely to post such robust growth after its September quarter.
Cipla has moved up from a low of Rs 300 in mid-June to the current level of Rs 353 bringing it within reach of its all-time high level of Rs 370. However, not many analysts are expecting the company to breach this level.
