Cipla Q3 Net Profit Rises On Strong Revenue

Mumbai-based drug maker Cipla’s share price came off one-month low to end at Rs 442.40 on NSE after reporting a 6% increase in net profit to Rs 351 crore during the fiscal third quarter to December 2019.
On a consolidated basis, Cipla’s net profit gained 5.66% to Rs 351.03 crore in as against Rs 332.20 crore a year ago.

Cipla’s net sales advanced 8.40% on year to Rs 4,234.55 crore in Q3 FY20.

Profit before Tax jumped 12.81% to Rs 506.40 crore in Q3 FY20 as compared to Rs 448.88 crore posted in Q3 FY19. Total tax expenses, for the quarter, jumped 21.59% to Rs 152.82 crore YoY

EBITDA grew 5.27% to Rs 758 crore in Q3 FY20 from Rs 720 crore in Q3 FY19. The EBITDA margin stood at 17.3% in Q3 FY20 as against 18% in Q3 FY19. The profit margin was at 8% in Q3 FY20 as compared to 8.3% in Q3 FY19.

In the Indian business segment, the company saw strong growth across both prescription and trade generic businesses.

The overall business revenues grew 13% on the year, revenues from prescription business improved by 14% on the year while the revenues from trade generics business recorded growth of 7%.

US business revenues jumped 13% to $133 million on year. The investments in Research & Development (R&D) stood at Rs 308 crore (or 7% of sales) during the quarter.

India business continued its momentum with strong double-digit growth in the prescription business; growth coming back in the trade generics business, South Africa’s private market franchise continued to outperform the market significantly and the US generics business retained a healthy share in key assets despite multiple competitive entries.

The drugmaker, under One India vision, has integrated its formidable prescription & trade generics franchise along with the progressive wellness portfolio of Cipla Health.

Cipla is a global pharmaceutical company focused on agile and sustainable growth, complex generics, and deepening portfolio in our home markets of India, South Africa, North America, and key regulated and emerging markets

Formulation exports constitute 55% of FY19 revenues. The company is focusing on front-end model, especially for the US along with a gradual shift from loss-making HIV and other tenders to more lucrative respiratory and other opportunities in the US and EU

With 5% market share, Cipla is the third-largest player in the domestic formulations market.

The acute, chronic and sub-chronic revenues for the company are at 36%, 60% and 4%, respectively. Domestic formulations comprise around 38% of the total FY19 revenue.

Absence of any limited competition new launches in the US and concurrent erosion in cinacalcet prices led to a disproportionate adverse impact on gross margin during the quarter

Going forward, R&D spend will trend downwards and hence the earnings should get a boost. During the quarter, R&D spend stood at Rs310 crs (7.2% of sales and 34% of US sales). The R&D spend as % of US sales remains the highest in the industry and is hence leading to depressed performance

Net net we believe that going ahead CIPLA should do well ahead over the medium to long term.

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