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Cipla Q4FY22 Review: Revenue momentum continues but one-offs, macros hurt margins

ICICI Securities 12 May 2022

What’s Buzzing

Cipla’s Q4FY22 revenues were better than I-direct estimates while margins were a significant miss as there was a one-time expense of Rs 200 crore in this past quarter.

Context

Revenues grew 14% YoY to Rs 5260 crore led by 21% YoY growth in domestic formulations to Rs 2183 crore due to traction across branded prescription, trade generics and consumer health. US grew 21% YoY to Rs 1209 crore owing to strong traction in respiratory portfolio as well as contribution from peptide assets. EBITDA margins was down 303 bps YoY to 14.3% while EBITDA de-grew 6% YoY to Rs 750 crore. Subsequently, PAT was flat YoY at Rs 410 crore.

Our Perspective

Margins were impacted in Q4FY22 due to, 1) one-time Rs 200 crore write-off for Covid inventory, 2) higher R&D expenditure (up 16% YoY), 3) elevated freight cost and 4) seasonality mix in sales. Adjusted for one-time Rs 200 crore expense, margins were at 18%. Going ahead, margins are expected to fall back to the 21-22% range. Operationally, Cipla’s One-India has witnessed strong execution across portfolio and distribution synergies across branded prescription, trade generics and consumer health. In South Africa continues to maintain leadership positions in key therapy areas and in US market share gain for respiratory drugs along with ramp-up for first peptide asset bodes well, considering expected complex launches for US in H2FY23 will further strengthen overall business and profitability trajectory.

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