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Cipla: Weak Quarter, Positive Triggers Ahead - Views on News from Equitymaster
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Cipla: Weak Quarter, Positive Triggers Ahead
Sep 19, 2016

Cipla has announced its results for the June quarter (1QFY17) results. The company has reported a decline of 6.9% YoY in sales while profits were down by 43.7% YoY. Here is our analysis of the results.

Performance summary
  • Net sales fell by 6.9% YoY. The performance was impacted due to one offs (generic Nexium under 180-days exclusivity in 1QFY16) and subdued performance in the other geographies. Sales in emerging markets were impacted due to currency volatility. It is also imperative to note, the sales included full quarter impact of Invagen's and Exelan's consolidation. The sales from acquistion for the quarter stood at US$ 55 m. Muted growth of 5% YoY in India formulations was on the back of pricing policy and FDC (ban of Fixed dose combination drugs). The impact is likely to continue for the 2QFY17. API exports were down by 30% YoY, the decline was due to seasonal factors and is expected to recover.
  • Owing to better product mix (generic Nexium) in 1QFY16, the margins for the current quarter declined to 17% versus 27.5% in June quarter last year. EBITDA margin normalized to 17% (as per guidance). However, this included one-off charge of Rs 290 m with respect to acquisition of product rights from Teva for the US market. R&D was higher (~6.6% vs 4.4% in 1QFY16).
  • Net profits too witnessed a sharp plunge of 43.7% YoY.

    Financial performance: A snapshot
    (Rs m) 1QFY16 1QFY17 Change
    Net sales 37,610 34,998 -6.9%
    Other operating income 775 939 21.3%
    Expenditure 27,839 29,828 7.1%
    Operating profit (EBDITA) 10,545 6,110 -42.1%
    EBDITA margin (%) 27.5% 17.0%
    Other income 505 252 -50.1%
    Interest (net) 639 313 -50.9%
    Depreciation 1,494 1,608 7.6%
    Minority interest 7 80
    Profit before tax 8,910 4,360 -51.1%
    Tax 2,418 708 -70.7%
    Profit after tax/(loss) 6,492 3,652 -43.7%
    Net profit margin (%) 16.9% 10.2%
    No. of shares (m) 803.4
    Diluted earnings per share (Rs) 12.0
    Price to earnings ratio (x)* 49.0

    *based on trailing 12 months earnings

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