Cipla Q1 results: Lower Covid-19 drug sales to hamper revenue growth

Cipla reported a net profit of Rs. 686.40 crores foe the quarter ended June 2022, slipped by 3.96% YoY from Rs. 714.72 crores. However, the net profit jumped sequentially from Rs. 362 crores, up by 89.6%. Consolidated revenues for the company stood at Rs. 5,375 crore, fell by 2% YoY compared to Rs. 5,504 crores . The fall in revenue was due to normalisation in the share of Covid-19 drugs in the branded prescription business. On a sequential basis, the revenue is higher by 2.2% from Rs 5,260 crores in the previous quarter.

There were no exceptional items for the June quarter under review. However, there were exceptional items of Rs. 57.50 crores in the previous quarter and Rs. 124.6 crores in the year-ago quarter.

Other income increased to Rs.103.43 crores as compared to Rs.64.02 crore in March and Rs. 64.93 crore in the same quarter last year.

Continued core portfolio momentum across businesses.

The Indian business grew by 9% driven by core brands, wellness portfolio, and growth in trade generics in the tier-2 to tier 6 cities,after excluding the covid drugs.

Cipla’s revenues from its North American business rose by 10% to $155 million, led by respiratory and peptide assets.

Overall  South Africa region declined by 10% on a YoY basis in USD terms. Strong demand continues with South Africa private business continuing to outperform market.

Strong Direct to Market (DTM)  growth across geographies; offset by forex volatility in emerging markets and muted B2B demand in Europe.

R&D investments stands at Rs. 274 crores or 5.1 % of sales; Higher 4% YoY driven by ongoing clinical trials on a respiratory asset and other developmental efforts.

EBITDA (earnings before interest, tax, depreciation and amortization) for the quarter fell by 15% YoY to Rs 1,143 crores while on a sequential basis, it improved by 50%. However, the previous quarter EBITDA included a one-time COVID inventory and other charges.

Cipla reported operating profitability of 21.3% which is well within its full year guidance of 21-22 percent range but on a YoY basis, the margins are down 318 bps.

The net margins however, were down 22 bps on year to 12.8% led by higher other income and lower tax expenses. The company’s cost rigor and calibrated pricing actions have helped offset inflationary cost elements, insulate margins while maintaining high serviceability.

On  01th August 2022, the stock is trading at Rs. 1003.15 as compared to the previous close of Rs. 977.40, up by 27.60 points or by 2.82. The stock opened at Rs. 990. The market cap of the company is Rs. 81,102 crores.

Valuations:

The debt to equity ratio (D/E) for the quarter ended June 2022, stood at 0.05. The total debt increased from RS. 1056 crores in the March quarter to Rs. 1084 crores in the June quarter. The return on equity (ROE) and return on assets is 13.9% and 10.3% respectively. The price to earning (P/E) ratio stood at 32.2  . The price to book value of Cipla Ltd is 3.84. There is a growth in free cash flow generation led  by prudent working capital management and optimised capex drive. Net cash positive position continues this quarter reflects strong capital structure. The cash balance of June quarter is Rs. 5211 crores from Rs. 4965 crores in the previous quarter.