Cipla is the 3rd largest pharmaceutical player in India and the leader in therapies such as respiratory and urology. It also ranks 2nd in the overall chronic business. The company persists to be the 3rd largest player in the South African private market with 7.5% market share, growing at about ~4.3% greater than market. It is the 2nd largest Indian exporter in emerging markets.
Cipla has posted an amazing fourth quarter results which have been supported by new product initiations in the US segment. The Indian segment is working normal, specifically the chronic division. Cipla is posing expenditure on its brands. The company’s margin suppression in the short-term is notable as employee and pre-COVID expenses will probably be on the rise. The US business might suffer a slower traction as USFDA inspections have blocked new drug initiations.
Quarterly Earnings Walkthrough
Cipla reported their consolidated net sales at Rs 5,739 crore in Q4FY23 as compared to Rs 5,260 crore in Q4FY22 which is a mere growth of 9.1% Year-on-Year (YoY).
The company’s consolidated net profit has surged to Rs 522 crore as compared to Rs 371 crore which is a massive surge of 40% YoY.
The consolidated EPS has risen to Rs 6.51 which is a growth of 45% YoY and a decline of -34% sequentially.
Segment wise Growth
The US segment majorly supported the sales growth which contributed for almost 30% of the total sales, it has grown by 27% on a constant currency basis.
The Indian segment which contributed for about 40% of the total sales has grown by 16% YoY which was supported by the chronic division.
The South African segment which contributed for 15% of the total sales stays feeble due to the consequences of heightened rivalry in the tender business.
Agenda
The USFDA had placed dire inspections in February 2023 for Cipla’s Pithampur plant which has unfortunately detained the launch of Advair which is an asthma drug. Additionally, Cipla is facing hindrance in the launch of the Abraxane due to conflicting resolutions in compliance affairs at their Goa plant. The company is attempting the production from another site which needs appropriate approval for the Abbreviated New Drug Application.
The management focusses on enhancing the US business into $190-195 million. The peptides division has five filings which is vital.
Considering the Indian segment, Cipla’s footprint in chronic therapies enlarges every quarter and it holds 8%. It has been supported by the growth in inhalation, cardiac, gastro, and diabetic therapies.
Additionally, Cipla is performing augmentation into brands which possess a licensing deal with Novartis for manufacturing of the diabetes drug named Galvus.
Finally, the momentum in consumer health provides plausible scope for growth in the medium term.
Cipla share price has fallen down to its 38.2% retracement level due to the severe inspections by USFDA in February. The weekly MFI is at 38 points and the price is very close the 200-day exponential moving average. Investors can accumulate the stock at the Rs 800 – Rs 900 price range as the price approaches closer to the moving average. The price had taken support at that level multiple times previously which can be seen on the chart.
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