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Cipla revenues show strong traction in domestic formulations, US

ICICI Securities 03 Feb 2022

What’s Buzzing:

Cipla's revenues were in line with I-direct estimates driven by strong traction in One-India and US business while margin profile was better than anticipated mainly due to lower other expenditure.

Context:

 Revenues in Q3 grew 6% YoY to Rs 5478.9 crore (I-direct estimate: Rs 5349.9 crore) led by 12.9% YoY growth in domestic formulations to Rs 2518 crore (I-direct estimate: Rs 2409.5 crore) due to sustained volume traction across core and traction in flagship brands. US grew 8.8% YoY to Rs 1124 crore (I-direct estimate: Rs 1074.6 crore) owing to momentum in core products and traction for respiratory portfolio. South Africa business grew 7.8% YoY to Rs 623 crore (I-direct estimate: Rs 625.3 crore) while RoW market declined by 6.3% YoY to Rs 1008 crore (I-direct estimate: Rs 967.5 crore). API was down 25.4% YoY to Rs 150 crore (I-direct estimate: Rs 211 crore) amid momentary slowdown in orders from developed markets. EBITDA margins was down 135 bps YoY to 22.5% (I-direct estimate: 21.4%) while EBITDA was flat YoY at Rs 1231 crore (I-direct estimate: Rs 1145.6 crore).

 Our perspective:

 We continue to focus on the management’s long-drawn strategy of targeting four verticals viz. One-India, South Africa & EMs, US generics & specialty and lung leadership. FY21 launch of Albuterol sulphate (Proventil HFA) amid rise in demand for Albuterol products in the ongoing Covid-19 pandemic along with approval for first peptide asset, Lanreotide injection to strengthens Cipla’s complex generics presence. While US focus will be on specialty including hospitals, value accretive generics, India focus will be on branded (Rx), trade generics (TGx).

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