Moneycontrol Bureau
Shares of Cipla fell more than 5 percent intraday Monday on fears that sales of Esomeprazole (Nexium) may slowdown from Q2FY16 onwards. Its earnings in Q1 were boosted by one-time contribution from sales of Esomeprazole in US (through partner Teva).
Revenue in Q1 jumped 41.6 percent year-on-year to Rs 3,852.8 crore and profit rose 120.8 percent to Rs 650.60 crore.
Higher profitability was a result of overall topline growth and leverage on cost base, said Subhanu Saxena, MD & CEO in an interview with CNBC-TV18. However, Esomeprazole sales impact will taper off in balance of this fiscal, he added.
Esomeprazole is a generic of Nexium, which is used in the treatment for gastro-esophageal reflux disease. Nexium was launched by AstraZeneca in Europe in 2000 and the US in 2001.
Saxena said Cipla's research & development expenses will increase by more than 100 basis points in FY16 as it is seeking to reinvest windfall from Nexium. He expects 20 percent revenue growth and 150 basis points expansion in EBITDA margin in FY16 (against earlier guidance of 15 percent revenue growth and 150 basis points margin expansion).
Brokerage CLSA has maintained sell rating on the stock with a target price of Rs 683 apiece. It retained FY17 & FY18 estimates post first quarter earnings.
However, Kotak expects Cipla's growth to improve significantly from FY17. It has buy rating with increased target price of Rs 790 from Rs 730.
Bank of America Merrill Lynch raised FY16 earnings per share by 40 percent and expects the stock to hit Rs 750 apiece.
At 11:03 hours IST, the scrip of Cipla was quoting at Rs 712.50, down Rs 28.00, or 3.78 percent on the BSE.Posted by Sunil Shankar Matkar
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