Cipla Q3 profit falls 2.6% but tops market estimates

Pharmaceutical major Cipla Ltd, which advanced for the second straight session, reported a marginal decline in consolidated net profit for the three months ended December 2021 but managed to beat Street estimates supported by better-than-expected growth in its core business.

Mumbai-headquartered Cipla reported a net profit at Rs 728.60 crore for the December quarter, down 2.61% from the corresponding period last year. The company beat analysts’ expectations for a net profit of Rs 710 crore.

Cipla had reported a profit of Rs 748.15 crore for the quarter ended December 2020.

Its consolidated revenue from operations stood at Rs 5,442.86 crore, up 5.6% from the corresponding quarter last year on the back of robust momentum in its core business in the US as well as strong traction in its respiratory portfolio. North America business reported revenue of $150 million, up 9% from a year earlier.

The stock has gained nearly 5% in the previous two sessions after Swiss securities and investment banking firm Credit Suisse upgraded it on Monday to ‘outperform’ from ‘neutral’ and raised the target price to Rs 1,150 per share from Rs 910 earlier.

Credit Suisse analysts said the market is underestimating two things – strength of Cipla’s consumer wellness franchise and the increasing sales mix of injectables and respiratory products in the US. These two verticals will grow at 60% by fiscal 2026.

Other key highlights

1) Operating income stood at Rs 1,243 crore, down 3% year on year.

2) Overall business grew by 13% led by sustained momentum across core therapies and traction in flagship brands.

3) Respiratory and urology businesses continue to lead with a market share of 22.6% and 14.4%, respectively.

4) South Africa private business grew 16% year on year.

5) R&D investments stand at Rs 262 crore.

6) Active pharmaceutical ingredients (API) vertical sees 26% decline to Rs 150 crore.

Management Commentary 

Cipla continued to see strong launch and commercial momentum across its core markets.

“Our portfolio execution in branded markets of India & South Africa and strong respiratory traction driving our US generic franchise to a multi-quarter high quarter were key drivers,” said Umang Vohra, managing director and global chief executive officer, Cipla.

Cipla said the unlocking of its first 505(b)(2) peptide asset, lanreotide injection, is an important step to strengthen its complex generics engine, thereby increasing its US footprint.

“Our EBITDA margins for the quarter came in at 22.7% and given the year-to-date traction, we are well placed to close the year in-line with our guidance of 22%. We continue our efforts to improve patient access for therapies including covid products and ensuring adequate supply across all our markets,” Vohra said.