Earnings Outlook
Cipla to see growth in Apr-Jun profits led by US ops
This story was originally published at 16:55 IST on 25 July 2024
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By Apoorva Choubey
MUMBAI – Cipla Ltd is expected to report growth in earnings for the June quarter on the back of market share gains in the US, new complex drug launches, and healthy growth in Indian sales, despite a one-time impact of restructuring of its domestic trade generics business. The drugmaker's consolidated net profit is seen rising over 12% from a year ago to 11.18 bln rupees, the average of estimates given by 10 brokerage houses showed.
The lowest bottom-line estimate was 9.85 bln rupees while the highest was 12.06 bln rupees. The projections for Cipla's profit after tax for the June quarter are quite varied, which could be due to the fact that analysts are divided on the estimate for sales and profits for the Indian market.
The city-based drugmaker's consolidated net sales are seen 7% higher on year at 67.6 bln rupees for the June quarter, according to estimates. The top-line projections were in the range of 67.34 bln rupees and 69.13 bln rupees.
"We expect Cipla to report 9% on-year growth in domestic sales, led by 8% growth in its organic business and contribution from Sanofi's CNS (central nervous system) portfolio," said Kotak Institutional Equities in an earnings preview report. The company had entered into a distribution agreement with Sanofi India a few months ago, which may result in an advantage of 1.5-2.0% in sales growth rates, according to Nomura Financial Advisory and Securities India.
India is the largest contributor to Cipla's consolidated sales with a share of 45%. Nomura expects 4% sales growth from Indian operations as it sees some impact on the Apr-Jun performance due to a change in the distribution model of the trade generics segment, which might lead to inventory drawdowns.
However, the sales affected by the disruption are expected to be recovered in the rest of the year, as per the company's management, the brokerage noted. Cipla has changed its distribution model to consolidate channels and increase direct touch-points for better trade visibility and positioning.
Differing views on the performance of the Indian operations could have led to varied opinions on how Cipla's operating margins will fare. Some analysts expect a marginal fall in profitability for the June quarter due to the hit from the trade generics segment while others see a slight 50-60-basis-point expansion in operating margin due to higher revenue share of complex drugs in the US.
The company's operating margin for the year-ago period was 23.6%. It has guided for consolidated operating margin of around 25% during the current financial year ending March, with sales in the US and India seen growing at a stronger pace than that seen in 2023-24 (Apr-Mar).
Analysts see Cipla's US sales between $230 mln and $236 mln during the June quarter, which would beat the upper band of the company's guided quarterly run rate of $220 mln-$225 mln given since last year. Market share gains in niche medicines such as lanreotide, scale-up of Revlimid generic, and recovery in prices of some generic drugs are seen underpinning the strong sales in the US, analysts said.
The US is an important market for Cipla as the region accounts for 28-30% of revenue, but it is deemed an even bigger contributor to profitability due to the high margins of drugs sold there. Cipla had said the quarterly run rate of US sales will improve and be higher than the $226 mln it clocked in Jan-Mar. This growth will be driven by new launches as well as market share gains in lead assets in the region, the company had said.
The company's South Africa sales may grow 20% in constant currency terms during Apr-Jun, aided to an extent by the acquisition of Actor Pharma and recovery in tender sales, Nomura said. On a sequential basis, Cipla's net sales for the June quarter are likely to rise 9.7% while net profit is seen 19% higher.
When the company details Apr-Jun earnings on Friday, investors will monitor the management's outlook on demand, drug prices, progress on the new launch pipeline, and update on the resolution of regulatory issues at the drugmaker's Goa and Pithampur facilities. The company expects to launch key niche products such as Abraxane and Advair only towards the second half of 2025, and has said the process of transferring these products to other sites is on track. Today, shares of Cipla closed 0.2% lower at 1,500.05 rupees on the National Stock Exchange.
Following are the Apr-Jun earnings estimates for Cipla from 10 brokerage houses, in million rupees:
| Brokerage | Net Sales | Net Profit | EBITDA |
| Axis Securities Ltd | 67,780.00 | 10,790.00 | 15,910.00 |
| Incred Research Services Pvt Ltd | 67,490.00 | 11,354.00 | 16,581.00 |
| Kotak Institutional Equities | 67,712.00 | 10,605.00 | 15,591.00 |
| KR Choksey Research | 69,125.00 | 12,058.00 | 17,730.00 |
| Motilal Oswal Financial Services Ltd | 67,600.00 | 11,300.00 | 17,400.00 |
| Nirmal Bang Equities Pvt Ltd | 68,692.00 | 11,504.00 | 16,958.00 |
| Nomura Equity Research | 65,953.00 | 10,991.00 | 15,860.00 |
| Nuvama Wealth Management Ltd | 66,866.00 | 9,846.00 | 15,401.00 |
| Prabhudas Lilladher Pvt Ltd | 67,336.00 | 11,650.00 | 16,656.00 |
| Sharekhan Ltd | 67,760.00 | 11,660.00 | |
| Average | 67,631.40 | 11,175.80 | 16,454.11 |
End
US$1 = 83.70 rupees
Edited by Rajeev Pai
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