Cipla’s stock price run up looks likely to take a breather. The company’s margins seem to be under pressure, the domestic market seems to be facing a distinct slowdown (particularly the antibiotic market) and the company is unwilling to talk about the prospects of omeprazole exports to the USA.
After the Annual General Meeting held on Monday, Mr. Amar Lulla, Director, Cipla spoke to analysts about the prospects of the company in the forthcoming year. The company expects to report a turnover in the range of Rs 9250 m but does not expect margins to rise in the current year. This is despite the reduced share of antibiotics in the company’s product profile. (Last year antibiotics contributed around 38% to the company’s turnover as against over 45% three year’s ago.)
The antibiotic segment is likely to undergo a tough time in the foreseeable future with unbranded generics likely to undertake an increasing share. Mr. Lulla however denied that the company was selling an unbranded version of ‘Ciplox’ in the market.
As far as exports are concerned, Cipla is banking on the generic market in the USA for delivering major growth in the future. The company expects an export turnover of Rs 1800 m in the current year, which amounts to almost 20% of the company’s turnover. This is likely to increase to 40% over the next 5 years.
When asked about the prospects of the company’s exports of its AIDS drugs to South Africa, Mr. Lulla was hopeful that the South African government would put in place compulsory licensing. (This would allow Cipla to export its products to that country.)
The stock quotes at a price of Rs 825 which implies an earnings multiple of 31 times FY2001 earnings. Unless the company were to make a major announcement in the current year, the stock is unlikely to witness a run up in the foreseeable future.
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