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Last Updated : Aug 08, 2019 10:30 AM IST

Cipla falls 3% on muted Q1 results; CLSA downgrades to sell, slashes target price

The results did not meet analyst estimates. An analysts’ poll of Reuters estimated the net profit at Rs 492.9 crore and revenues at Rs.4461.6 crore.

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Shares of Cipla fell 3 percent intraday on August 8, a day after the pharma major reported muted numbers for the June quarter as revenues declined in India and South Africa, which account for nearly half of the company's sales.

The company’s net profit grew 0.4 percent at Rs 447.2 crore in Q1FY20 against Rs 445.6 crore in the year-ago period.

Revenue declined 1 percent to Rs 4,067.39 crore in Q1, compared to Rs 4,109.10 in June 2018.

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The results did not meet analyst estimates. An analysts’ poll of Reuters estimated the net profit at Rs 492.9 crore and revenues at Rs 4461.6 crore.

The Indian business, which accounts for one-third of Cipla's sales, declined 12.2 percent year on year (YoY) to Rs 1,355 crore due to the realignment of distributors in the trade generics, a company report has said.

Revenues from South Africa, Sub-Saharan Africa and Global Access (SAGA) declined 17 percent YoY to Rs 691 crore on the softness of tender business. However, sales from the private market in South Africa continued to grow.

Post Q1 results, the global brokerage firm CLSA downgraded the stock from Outperform to Sell on dismal Indian sales, slashing the target price to Rs 460 from Rs 600.

CLSA also cut EPS (earning per share) estimates over FY20-22 by 9-14 percent, citing absence of a near-term catalyst.

"No big launches in the US in the near-term should keep growth outlook muted," the brokerage said.

Financial services company Citi also cut the target price to Rs 580 from Rs 600, maintaining a neutral call on India's fourth-largest drugmaker.

According to Citi, the company has beaten expectations on EBITDA and net income.

"Moving parts make it difficult to gauge underlying strength of numbers. The company believes trade generics could take one more quarter to normalise. Other businesses should be back to normal from Q2," said Citi.

The brokerage revised FY20-21 EPS estimates by 4-5 percent, citing uncertainty over the pace of recovery in the trade generics business.

 

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First Published on Aug 8, 2019 10:30 am
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