Cipla Q2 Preview: Analysts expect lukewarm growth in sales, profit

Indian pharmaceutical giant Cipla is scheduled to post its financial results for the second quarter (July-September) of fiscal year 2024-25 (Q2FY25) on Tuesday, October 29. 

 

Analysts expect Cipla to register a low single digit rise in the topline and bottomline, with margins being impacted by modest sales in the US and domestic formulations. 

 

According to brokerages tracked by Business Standard, Cipla is expected to report an average net profit Rs 1,174 crore in Q2FY25, a rise of 1.55 per cent year-on-year (Y-o-Y) against Rs 1,156 crore in Q2FY24. Meanwhile profits may stay flat or decrease by 0.17 per cent quarter-on -quarter, compared with a profit after tax (PAT) of Rs 1,176 in the June quarter of FY25. 

 

 

Cipla’s average revenue will potentially increase 4.1 per cent Y-o-Y to Rs 6,957 crore as against Rs 6,678 crore in Q2FY24. Sequentially revenues may rise by 3.92 per cent. The pharma company registered revenues of Rs 6,694 crore in the June quarter of FY25. 

 

Moreover, here’s what key brokerages expect from Cipla Q2 results:

 

Kotak Institutional Equities: KIE expects Cipla to report 10 per cent Y-o-Y growth in domestic sales in 2QFY25, led by 8 per cent growth in its organic business and contribution from Sanofi's CNS portfolio. In addition, analysts expect some negative impact for two months due to the transition in the trade generics model in the previous quarter. 

 

They build US sales at $239 million down 4 per cent Q-o-Q, led by stable market share in Albuterol amid supply challenges for Lanreotide, along with Revlimid sales of $30 million tad higher than 1QFY25. 

 

Sales in South Africa may grow 7 per cent Y-o-Y, with growth being boosted by the Actor Pharma acquisition, while in Africa and global access, KIE factors in a 71 per cent Y-o-Y decline, following the divestment of Cipla's Ugandan subsidiary, QCIL. In addition, they bake in 12 per cent Y-o-Y growth in EU/ROW sales. Overall, Cipla is expected to log a 3 per cent Y-o-Y growth in sales.

 

“We expect gross margin to decline 50 bps Q-o-Q to 66.7 per cent, due to lower US sales. We expect overall EBITDA to remain flat yoy (flat qoq) at Rs17.2 bn, with the Ebitda margin declining by 100 bps Y-o-Y to 25 per cent in 2QFY25,” analysts at KIE said.

 

Axis Securities: Analysts at the brokerage expect Cipla could face challenges in maintaining a stable market share in Albuterol, while it is gaining market share in Brovana. The company is gradually building market share in Lanreotide injections, they said,  anticipating that Albuterol, Lanreotide, Revlimid, and Brovana will contribute to stable sales of $238 million in the US market. Additionally, Axis Securities expects $30 million in sales for Revlimid in the last quarter. 

 

Nuvama Institutional Equities: Nuvama expect Cipla’s revenue to grow at 6.6 per cent Y-o-Y with domestic business growing 7 per cent Y-o-Y with partial recovery in the trade generics business. US business is expected to grow by 3 per cent Y-o-Y to $235 million in absence of a major new launch during the quarter. They anticipate Ebitda to grow 3.5 per cent Y-o-Y with Ebitda margins seeing Y-o-Y/Q-o-Q contraction.

 

PhillipCapital: Analysts at PhillipCapital expect a 4 per cent growth in sales as a result of - continued benefit of Revlimid ($ 90 million in Q2), 2) rampup in Lanreotide, competition in Albuterol and moderated 7 per cent growth in domestic formulations. 

 

Margins are expected to remain flat sequentially at 25.1 per cent on account of Revlimid and progress in Lanreotide ANDA (about 10 per cent market share). In line with muted Ebitda margins resultant Ebitda remains flat Y-o-Y. In line with muted operating performance, PAT may deliver 5 per cent Y-o-Y growth.

 

BNP Paribas: BNP Paribas predicted that the Cipla’s US revenue may slide marginally sequentially to $235 million with lower Revlimid contribution. They expect domestic business to clock higher single-digit growth Y-o-Y and expect its trade generics revenue to normalise from 3QFY25 onwards.