Cipla Shares Tank Despite Strong Earnings

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Cipla Shares Tank Despite Strong Earnings

Aug 6, 2021

Shares of Cipla fell 3.5% on the exchanges today even as the company posted robust results for the June 2021 quarter.

The company reported a 27% year on year (YoY) rise in income from operations at Rs 55 bn for the quarter, which was higher than analysts' expectations.

The sharp growth in the company's top line was aided by a robust quarter for the Indian operations, which is the biggest revenue generator for Cipla.

Sales in India grew 68% YoY to Rs. 27.1 bn as the company benefitted from a surge in demand for Covid-19 medicines due to the second wave of the pandemic.

The top-line was also aided by the US business where sales grew 2% YoY aided by the success of its respiratory drug Albuterol.

In the SAGA business (South Africa, Sub Saharan Africa, and Global Access) the company's revenue grew 10% YoY.

Business Wise Sales Performance

On the operating front, Cipla benefitted from strong top line growth and cost control measures.

The company's consolidated operating profit jumped 28% YoY to Rs. 13.5 bn while margins expanded 32 basis points to 24.5%.

As a result, the company's net profit for the quarter increased by 25% YoY.

For the quarter, the company spent Rs 2.6 bn on research and development. The company has also planned a capex of Rs 7-9 bn for the financial year 2022 for automation and digitization at its current facilities.

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India business gains traction on Covid-19 portfolio

Cipla's domestic business grew by 68% YoY on the back of strong volume traction in the core therapy and Covid-19 portfolio (Remdesivir, Actemra, Tocilizumab/Roche).

Excluding Covid-19 products, sales grew 47% YoY.

The branded prescription business continued its market-beating performance driven by volume growth in core therapies and support from the existing Covid-19 portfolio through the second wave.

Acute and respiratory nebulisation segments also recovered as well.

The company's trade generics business reported healthy order flow across regions as lockdowns disrupted doctor-patient contact.

The One-India strategy saw tailwinds, with Cofsils, Cipcal, and Omnigel showing strong YoY growth and new brands such as ORS and Cipladine seeing a strong uptick in sales.

Cipla India-Business Market Share & Growth

US and SAGA business gain market share

The US, which contributed about a fifth of the overall revenues, saw stable growth. The contributions from respiratory inhaler Albuterol continue to drive growth which has resulted in market share gains for the company.

Cipla has 74 ANDAs pending approval in the US currently. Furthermore, it has three peptide products in the US pipeline, two of which it has already filed in the financial year 2021.

2023 is expected to be an exciting year for Cipla, with potential approvals for Advair and Revlimid. Cipla is expected to respond to the USFDA's queries on Advair this month.

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Among others, the African (SAGA) business marked a 10% YoY growth in revenue and 13% YoY growth in dollar terms. The geography contributed about 15% to overall sales.

The company said that it saw double-digit growth and market share gain in the Antiretroviral and oncology private market. It also moved up three places to third, in systemic anti-infectives private market.

Moving forward, the extraordinary gains accrued by the Covid-19 portfolio may moderate.

Nevertheless, the strong chronic portfolio of the company and pick up in acute segment sales bode well for domestic sales growth.

Meanwhile, as India sales grow well, the developing respiratory portfolio in the US and regular rollout of products keeps outlook firm.

How the markets reacted to Cipla's June quarter results today...

Shares of the company opened the day lower at Rs 943 on the BSE and Rs 939 on the NSE today after the company reported its results for the June 2021 quarter.

The scrip then fell as much as 3.5% on the exchanges.

Over the last 30 days, the share price of Cipla is down by 5.9%.

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In the last year, the share price has moved up by 24.8% as against a 43% rise in the S&P BSE Sensex.

The share touched its 52-week high of Rs 997 and a 52-week low of Rs 701.5 on 30 June 2021 and 9 September 2020.

About Cipla

Cipla is one of the leading pharmaceutical companies in India. It was incorporated in the year 1935 with the name Chemical Industrial & Pharmaceutical Laboratories.

The company focuses on the development of new formulations and has a wide range of pharmaceutical products. Its strengths in the respiratory, anti-retroviral, urology, cardiology, anti-infective, and CNS segments are well-known.

The company has 46 manufacturing sites around the world that use cutting-edge technology to cater to over 80 markets.

Cipla is ranked as the 3rd largest pharma company in India and is among the major generic players in the US.

For more details about the company, you can have a look at Cipla's factsheet and quarterly results on our website.

You can also compare Cipla with its peers.

Cipla vs Sun Pharma

Cipla vs Dr Reddy's Lab

Cipla vs Lupin

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...

Ayesha Shetty

Ayesha Shetty is a financial writer with the StockSelect team at Equitymaster. An engineer by qualification, she uses her analytical skills to decode the latest developments in financial markets. This reflects in her well-researched and insightful articles. When she is not busy separating financial fact from fiction, she can be found reading about new trends in technology and international politics.

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