Earnings Outlook
Domestic, Africa market sales to boost Cipla Oct-Dec
This story was originally published at 12:14 IST on 23 January 2025
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By Narayana Krishna
HYDERABAD - Growth in domestic sales and contribution from Africa operations are likely to aid Cipla Ltd.'s December quarter earnings, despite weak sales numbers in the US, analysts said. The pharmaceutical major is expected to report a 15.2% year-on-year growth in its consolidated net profit for Oct-Dec at INR 12.16 billion, while revenue is seen up 6% on year at INR 70 billion, according to an average of estimates from 12 brokerage houses.
In the year-ago quarter, the Mumbai-based company reported a net profit of INR 10.6 billion on revenue of INR 66.04 billion.
Sequentially, Cipla is expected to report a 7?ll in net profit and a 1?cline in revenue due to weak sales in the US on the back of disruption in supply of one of its key products. The company is facing supply constraints in its hormone drug generic Lanreotide due to capacity and regulatory issues at its Goa facility. For the September quarter, Cipla had reported a consolidated net profit of INR 13.02 billion on revenue of INR 70.51 billion.
Analysts' estimates for Cipla's net profit for the December quarter range from INR 11.7 billion, the lowest--by Emkay Global--to INR 13.3 billion, the highest--by Nirmal Bang Equities. The revenue estimates range from INR 68.07 billion, the lowest--by Nuvama Wealth--to INR 71.65 billion, the highest by Nirmal Bang. The company is scheduled to announce its Oct-Dec earnings on Tuesday.
Brokerages, including Kotak Institutional Equities, KR Choksey, and Motilal Oswal, expect Cipla's domestic sales to see healthy growth driven by demand in respiratory products, branded prescriptions, and trade generics, while the US sales are seen as weak, excluding the contribution from cancer drug generic Revlimid.
Given the supply disruptions in Lanreotide, Cipla's US sales are expected to slide to $218 million, compared to $230 million a year ago, marking a 5% year-on-year fall, brokerage Emkay Global said. Emkay Global expects 9% growth in the company's domestic sales, driven by prescription and secondary sales.
Kotak Institutional said it expects Cipla to report 8% year-on-year growth in domestic sales in the December quarter, led by 6% year-on-year growth in its organic business and contribution from Sanofi's central nervous system portfolio. Cipla had entered into a pact with Sanofi for distribution of some products of the latter. Kotak expects Cipla's US sales at $216 million, a 9% sequential decline owing to supply challenges for Lanreotide. Sales of Revlimid for the company are seen at $50 million for the quarter. Cipla is one of the eight competitors for the cancer drug Revlimid in the US.
Kotak Institutional expects Africa region sales to grow 27% on year, mainly led by South Africa, while Europe market sales growth is seen at 13% and rest of the world at 6% year-on-year.
MARGINS
While most analysts expect a fall in Cipla's Oct-Dec earnings before interest, tax, depreciation, and amortisation, or EBITDA, margins due to lower US sales, Nirmal Bang sees the company's margins remaining flat on year, mainly due to easing pricing pressure and lower raw material costs. Analysts' estimates for Cipla's December quarter EBITDA margins are seen in 24.9–26.8% range. The average of estimates from 11 brokerages for Cipla's EBITDA for Oct-Dec is pegged at INR 17.9 billion.
KEY MONITORABLES
Regulatory outlook for the company's Pithampur facility in Madhya Pradesh and improvement in the supply of Lanreotide are key issues that market participants will watch out for. Updates on the progress of inhalation and peptide products for the US and the GLP-1 portfolio for the Indian market are the other key aspects to watch for.
Following are the Oct-Dec earnings estimates for Cipla Ltd. based on reports from 12 brokerage firms in the descending order by the estimate of net profit:
|
Brokerage name |
Net Sales |
Net Profit |
EBITDA |
|
-------(In INR million)------- |
|||
|
Nirmal Bang Equities Pvt Ltd |
71,650.00 |
13,305.00 |
19,205.00 |
|
Systematix Shares and Stocks (India) Ltd |
70,689.00 |
12,632.00 |
18,317.00 |
|
KR Choksey Research |
71,518.00 |
12,525.00 |
18,718.00 |
|
JM Financial Institutional Securities Pvt Ltd |
70,318.00 |
12,252.00 |
18,023.00 |
|
Axis Securities Ltd |
69,520.00 |
12,170.00 |
17,900.00 |
|
Kotak Institutional Equities |
69,341.00 |
12,138.00 |
17,449.00 |
|
PhillipCapital (India) Pvt Ltd |
70,697.00 |
12,009.00 |
17,657.00 |
|
Prabhudas Lilladher Pvt Ltd |
69,203.00 |
11,976.00 |
17,371.00 |
|
Motilal Oswal Financial Services Ltd |
69,671.00 |
11,864.00 |
17,766.00 |
|
Nuvama Wealth Management Ltd |
68,068.00 |
11,703.00 |
17,222.00 |
|
Sharekhan Ltd |
70,100.00 |
11,680.00 |
---- |
|
Emkay Global Financial Services Ltd |
69,341.00 |
11,652.00 |
17,276.00 |
|
Average |
70,009.67 |
12,158.83 |
17,900.36 |
At 1205 IST, shares of Cipla traded at INR 1,453.90 on the National Stock Exchange, up 1% from the previous close. End
US$1 = INR 86.44
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Vandana Hingorani
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