Cipla churns lower-than-expected profit in Q4 but revenue growth meets estimates

Mumbai-based drugmaker Cipla posted mixed results for the quarter ended March 31, 2022, with net profit taking a hit as against expectations of a robust rise but the top line showing strong growth.

Cipla’s consolidated net profit declined 12.4% to Rs 362 crore from Rs 413 crore in the quarter ended March 31, 2021, including impact of impairment. Analysts were projecting the firm to post profit in the Rs 590-600 crore range.

The company, the third-largest drugmaker by market value behind Sun Pharma and Divi’s Labs, posted net sales of Rs 5,260 crore, up 14.2% from Rs 4,606 crore in the year-ago period. This was a tad higher than what brokerage houses were expecting from the drugmaker.

The firm’s share price was trading in the green, up over 1% in mid-day trades on Wednesday, in a weak Mumbai market. Despite the firm missing estimates, it saw buy calls by some research houses. Cipla had announced its numbers after trading stopped for the day on Tuesday.

Other key highlights

1) EBITDA declined 4.2% to Rs 763 crore for the quarter due to one-time Covid inventory and other charges

2) EBITDA margin slipped 279 basis points to 14.5%.

3) Revenue growth was led by India and North America with both markets clocking over 20% growth during Q4.

4) South Africa unit (excluding animal health) grew 9.6% while overall Africa and Cipla Global Access business rose 12.3%; other international markets grew at a modest pace of 7.5%.

5) API business was under huge pressure with the business unit shrinking by nearly 39% in Q4.

6) R&D investments was at Rs 322 crore, or 6.1% of sales. This was up 16% YoY driven by initiation of clinical trials on a respiratory asset.

Management Commentary

Umang Vohra, MD and Global CEO at Cipla, said the firm continued momentum across key markets despite adverse seasonality impacting overall business mix.

“Our One-India business continued the double-digit trajectory during the quarter. We crossed the $1 billion milestone in our domestic branded prescription business driven by the sustained growth across our acute and chronic portfolio,” he said.

“Our established respiratory franchise and contribution from peptide assets has strengthened our US run rate to $160 million. Adjusting for Covid-linked and other one-time charges, our core operating profitability continues to be strong underpinned by the strength of our business fundamentals,” Vohra said.

He also said the Cipla continues to respond to challenging input cost environment with cost optimization and mix management while maintaining high serviceability. “We are excited about the upcoming complex launches in H2FY23 which will further strengthen overall business and profitability trajectory,” he added.