Experts laud Cipla Q1 results; doubt Sun Pharma guidance

Two pharmaceutical major Sun Pharmaceutical Industries and Cipla on Friday reported their April-June earnings. While Cipla outperformed market expectation, Sun Pharma was also not far behind.

Sun Pharma today reported a consolidated net loss of Rs 1,276.1 crore in April-June as the company wrote-off Rs 2,517 crore on settlement of patent litigation with US-based Pfizer Inc. Adjusted net profit of Rs 1241 crore was better than market expectation of Rs 1035 cr. Revenue too grew strongly at 31.8 percent to Rs 3502.7 crore.

Cipla on the other hand surprised the street with 10 percent increase in consolidated net profit at Rs 485 crore as against the market expectation of fall of 17 percent.

Vivek Kumar Pharma Analyst SBI Cap Securities and Praful Bohra Senior Research Analyst  Pharma, Nirmal Bang Institutional Equities share their views on the results of both the companies.  

Below is the verbatim transcript of the discussion

Q: What is the guidance as far as Sun Pharma's performance goes in FY14? What are the analysts feeling?

Kumar: They have shared to grow their revenues by 18-20 percent. Management may like to have to relook at this number. I have my own doubts given the scenario that we are still at the initial phase of FY14. So, may be somewhere in middle of the year management would like to take a call on the overall guidance in terms of revising upwards or not. However at the initial stage it does look like that there should be some revision in the sales as well as some revision in the margins profile.

Q: What do you make of Cipla's Q1 numbers? What is your reaction?

Bohra: Cipla numbers on the face of it I think these are pretty strong numbers. They are atleast 10-15 percent above what we were estimating and I think even above the street estimates. So, on the face of it, the operating margin at 26 percent is pretty high considering the fact that last year they had Lexapro exclusivity and because of which the margins were high. Excluding the Lexapro exclusivity if they are able to report a 26 percent, we will have to see how much of that is sustainable.

Q: What did you make of the guidance as far as Cipla's performance in FY14 goes?

Kumar: We see this result as a very strong result. We did not expect the kind of margins that they have reported. There would be something which has gone in the results. There has been a strong growth which has come up in the domestic formulation space which has never been the scenario earlier.

Q: What is your take as far as Sun Pharma's performance goes?

Bohra: This year they should be comfortably achieving a 20 percent kind of a growth. We are expecting 21 percent growth in this year. They are pretty much on track to achieve that number given the fact that even in the first quarter they have reported a very strong number on the revenue front at least.