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Cipla Q1FY23 Review: Ex-Covid core growth intact; US launches likely from H2FY23

ICICI Securities 01 Aug 2022

What's Buzzing

Cipla's Q1FY23 revenues were in-line with I-direct estimates while margins were better than expected as the company prepares for complex launches in US market.

Context

Revenues declined 2% YoY to Rs 5375 crore (ex-Covid grew 6% YoY) amid 8% YoY de-growth in domestic formulations to Rs 2483 crore while adjusted for Covid sales in Q1FY22, India business grew 9% YoY. US grew 15% YoY to Rs 1199 crore due to momentum in core formulation business led by contribution from respiratory and peptide assets. South Africa business posted de-growth of 10% YoY to Rs 568 crore while RoW market expanded 20% YoY to Rs 939 crore. API was down 55% YoY to Rs 135 crore on a higher Q1FY22 base due to one-time profit share on an API supply. EBITDA margins was down 318 bps YoY to 21.3% while EBITDA de-grew 14% YoY to Rs 1143 crore. Subsequently, adjusted profit declined 15% YoY to Rs 685 crore.

Our Perspective

One-India core portfolio (ex-Covid) momentum continues to be robust across branded prescription, trade generics and consumer health. US continues to witness consistent traction in respiratory, complex generics and peptide portfolio with likely complex launches (gRevlimid, gAdvair, gAbraxane and peptide assets) in H2FY23. South African private market was muted in this quarter with recovery expected from Q2FY23. EBITDA margins was within the full year guidance of 21-22% despite multiple cost headwinds. We continue to focus on the Cipla’s long-drawn strategy of targeting four verticals viz. One-India, South Africa & EMs, US generics & specialty and lung leadership. Cipla’s upcoming complex launches in H2FY23 will further strengthen overall business and profitability trajectory.

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