Cipla Q1 Review: Analysts See Earnings Boost After Profit Surpasses Estimates
The drugmaker's net profit rose 45% year-on-year to Rs 996 crore in the quarter ended June.
Shares of Cipla Ltd. surged as much as 8% on Thursday after its first-quarter profit beat analyst estimates, prompting brokerages to raise earnings forecasts.
Brokerages, however, see a limited upside from the current market price.
The drugmaker's net profit rose 45% year-on-year to Rs 996 crore in the quarter ended June, according to its exchange filing. It beat the Rs 860-crore consensus estimate of analysts tracked by Bloomberg.
Cipla Q1 FY24 Highlights (Year-on-Year)
Revenue rose 18% to Rs 6,329 crore (Bloomberg estimate: Rs 6,199 crore).
Ebitda was up 31% to Rs 1,494 crore (Bloomberg estimate: Rs 1,390 crore).
Ebitda margin stood at 23.6% versus 21.3% (Bloomberg estimate: 22.4%).
Shares of Cipla rose 7.88% at 9:46 a.m. This compares to a 0.32% advance in the benchmark Sensex.
Of the 41 analysts tracking the stock, 29 maintain a 'buy' rating, eight suggested 'hold', while four recommended 'sell', according to Bloomberg data. The return potential implies an upside of 4.2% over the next 12 months.
Here’s what brokerages have to say about Cipla’s Q1 FY24 performance:
Jefferies
Upgrades to 'buy' from 'hold' with a target price of Rs 1,210 apiece, implying an upside of 15%.
Superior product mix (strong 9% quarter-on-quarter in the U.S.) amid steady 12% growth in India led margin beat.
U.S. growth was driven by base business and management commentary had positive takeaways for U.S. generics sector.
Cipla has increased its FY24 Ebidta margin guidance by 1% to 23%.
The company revised its U.S. sales run rate guidance from $200 million to $210-215 million.
Cipla also guided for year-end filing timeline for gSymbicort, Abraxane sales launch by year-end or early next year and FY25 launch for gAdvair.
The pharmaceutical company expects to launch 4-5 peptide products in the next 2 years.
In consumer healthcare, Cipla plans to enter new segments of mother and child and skincare, while current presence is in the space of pain, cough and cold and ORS.
Brokerage increased FY24-26 EPS by 12-20%.
Upgrade on the back of steady growth in India and ongoing momentum in the U.S.
Motilal Oswal Financial Services Ltd.
Maintains 'neutral' with a target price of Rs 1,130 apiece, implying an upside of 6%.
Company delivered better-than-expected Q1 FY24 performance.
It was led by superior executions in North America and domestic formulation segments.
It is on track to build a complex product pipeline in the peptide space and reduce compliance risk by incorporating alternate manufacturing sites.
Company raised its ebidta margin guidance to 23% from 22% earlier.
Cipla indicated an encouraging outlook in U.S. business, driven by reduced competition and subsequently, lesser extent of price erosion.
It indicated that it filed a new amendment with respect to g-Advair.
Raised earnings estimates by 6% each for FY24/FY25 to factor in:
a) Reduced competition in the US generics segment,
b) Better visibility for niche launches in North America, and
c) Better operating leverage.
There has been a healthy revival in outlook for North American markets in addition to better-than-industry performance in the branded generics segment (DF/South Africa).
However, reiterates 'neutral' rating on limited upside from current levels.
Systematix Corp.
Downgrades from 'buy' to 'hold' with a target price of Rs 1,150 apiece, implying a downside of 7%.
Earnings were above expectations, led by lower depreciation expense sequentially and higher-than-expected sales in North America, despite their core product — Albuterol MDI — witnessing volume decline during the quarter.
Revenue outperformance in North America was offset by subdued performance in South Africa.
Going forward, the key catalysts for the stock remain successful resolution of compliance issues at Pithampur and Goa facility.
This should enable an early launch of gAdvair and gAbraxane.
Cipla has also initiated site transfer of these products, which should allow an FY25 launch in case the compliance issues persist at impacted facilities.
FY25 forecasts do not build contribution from these launches.
Slightly tweaked earnings estimates as brokerage raised contribution from gRevlimid in numbers and lowered contribution from South Africa.
Lower rating considering the limited upside at current market price.
