Cipla Expects To Sustain 24% Ebitda Margin, Says Management

Cipla Ltd.'s management has guided for 24% margin target for FY24 and expects it to sustain at the level in the following years.

This comes as the company recorded 26.46% margin in the third quarter of FY24.

"Q3 is the best quarter for us seasonally, hence, we reported higher margins. But 24% is a sustainable target for the following years," Global Chief Financial Officer Ashish Adukia told NDTV Profit.

This is despite different dynamics impacting costs. The company is looking to inch up investments in its field force in order to grow organically in India and in research and development, he said. However, for now, the management has guided for R&D in the range of 6-7%.

Freight costs are seeing some elevation due to the Red Sea crisis, but it's still not having a large impact on overall costs, the management said.

The company is looking to organically expand in India by increasing focus on chronic prescription. It plans to further penetrate into tier-2 to tier-6 cities.

For inorganic expansion, Cipla is making investments across prescription and consumer health segments in India, and targeting smaller acquisitions in trade generics.

The company is planning to take the inorganic growth path to attain market leadership in India prescription business, said Jasdeep Singh, chief strategy officer and chief of staff at Cipla.

It expect its acquisitions to turn margin-accretive after two years.

The company's generic products are priced slightly higher than competition as they still carry the brand name, the management said, referring to Cipla's leadership in the business in India. With the increasing acceptance of trade generics in India, Cipla still doesn't expect an impact on the margin.

Margin on "trade generics are almost comparable with regular prescription business", Adukia said.

Cipla expects gAdvair (medication for asthma and chronic obstructive pulmonary disease) to be launched by the last quarter of the current fiscal, Adukia said.

For gAbraxane, if the Goa plant is reinspected in six months, the launch could happen sooner, he said.

With regards to the U.S. FDA issues plaguing the company's sites, he said that Cipla has taken all necessary steps to resolve them. They have also looked at publicly available data of other site inspections to ensure regulatory compliance.

Cipla has vacated some of its tender markets in South Africa, where margin were lower. The company is now looking at only pockets of opportunity in tender business where there are good margins.

It has shifted to the private market, with new launches and increasing share of generics. In addition, they have identified over-the-counter as a big opportunity in SAGA (South Africa, Sub-Saharan Africa and Cipla Global Acces) and expects to deliver it through their acquisition of Actor Pharma. "Actor acquisition is expected to be margin-accretive," the management said.

In addition to this, the company has also identified five to 10 markets in Europe and the Middle East as its core markets. It aims to turn at least two of these into $100 billion markets and has a specific pipeline of products for Europe, Middle East and Africa.

Cipla expects to pioneer in the diagnosis space in the next three to five years and is investing towards that. They are focusing on three new therapy areas—obesity, mental health and oncology—that the company expects would grow over the next five to 10 years, Singh said.