Cipla margins hit, revenue growth continues

News: 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 assets as well as contribution from peptide assets. South Africa business grew 10% YoY to Rs 664 crore while RoW market expanded by 9.5% YoY to Rs 1011 crore amid strong direct to market growth across geographies being partially offset by emerging market forex volatility. API was down 39% YoY to Rs 137 crore due to higher Q4FY21 base due to stock-up by customers and one-time profit share on an API supply. EBITDA margins was down 303 bps YoY to 14.3% while EBITDA de-grew 6% YoY to Rs 750 crore. Margins were impacted due to, 1) one-time 200 crore expense for Covid products related write-off, 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 was at 18% for this quarter Subsequently, PAT was flat YoY at Rs 410 crore. Delta vis-à-vis EBITDA was mainly due to lower interest expense and lower tax rate due to deferred tax assets in this quarter.

Views: Cipla’s Q4FY22 revenues was better than I-direct estimates while margins were a significant miss, as there was a one-time expense of Rs 200 crore in this quarter. Cipla’s one-India sales grew by 27% in FY22 (25% ex-Covid) due to 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, with overall 7.5% market share. Market share gain for Albuterol (17.2%) and Arformoterol (29.8%) along with ramp-up for first peptide asset, Lanreotide injection strengthened US quarterly run rate to US$160 million. 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.  

Impact: Neutral