• JULY 26, 2000

Cipla: Omeprazole exports hold the key

A 20.7% growth in the topline for Cipla has led to an identical growth in the bottomline. While the result is quite creditable the fact remains that the operating margins are under pressure having come down by 1.7%.

(Rs m) 1QFY00 1QFY01 Change
Sales 2,004 2,418 20.7%
Other Income 51 76 48.6%
Expenditure 1,565 1,929 23.3%
Operating Profit (EBDIT) 439 489 11.4%
Operating Profit Margin (%) 21.9% 20.2%  
Interest 3 4  
Depreciation 35 38 7.1%
Profit before Tax 452 523 15.8%
Other Adjustments      
Tax 130 135  
Profit after Tax/(Loss) 322 388 20.7%
Net profit margin (%) 16.0% 16.0%  
No. of Shares (m) (eoy) 20.0 60.0  
Diluted no. of shares (m) 60.0 60.0  
Diluted Earnings per share* 21.4 25.9  

The growth in the profits has been maintained by other income which is almost 20% of the pre–tax profits as against 15% in the previous year and by a lower effective tax rate of 25.8% as against 28.7% in the first quarter of last year.

What is critical to sustain Cipla's growth in the future is omeprazole exports to the USA which are dependent on whether Astra Zeneca which holds the patent for 'Prilosec' gets a patent extension due to 'Nexia' its new generation anti–ulcer drug.

Also the fate of exports of its anti–AIDS formulation to South Africa still hangs in the balance as compulsory licensing is unlikely to be introduced since international patent holders such as Glaxo and Boehringer Mannheim are planning to offer discounts on their patented treatments.

The stock quotes at Rs 712 which implies an earning multiple of 27.5 times of the FY2001 annualised earnings.

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