Cipla Q1 net profit beats estimate, rises 17%

Pharmaceutical major Cipla Ltd on Friday reported a better-than-expected consolidated net profit of ₹1,177.64 crore for the April-June quarter, up 17% year-on-year driven by a favourable product mix and other operational efficiencies.

Consolidated revenue for the quarter stood at ₹6,694 crore, a 7% increase from a year ago. Analysts polled by Bloomberg had forecast a revenue of ₹6,792 crore, and net profit of ₹1,122 crore.

Cipla's earnings before interest, taxes, depreciation, and amortization, or Ebitda, stood at ₹1,716 crore during the quarter ended 30 June, marking a 14% year-on-year (YoY) growth, with an operating margin of 25.6%. 

"I think the India market should hopefully continue to grow at 10%. We had an aggressive summer this time and I think because of that we didn't see as much growth in the acute category as possibly hoped for…We do think that the seasonal triggers are there, and we should have some uptick," Umang Vohra, managing director and global chief executive, Cipla, said in a conference call.

Vohra emphasized the company's focus on expanding its key markets, enhancing flagship brands, and investing in new therapeutic areas such as obesity and mental health. "We are primarily working around movement disorders, which include Parkinson's disease, neurological disorders, epilepsy, and migraines. We don’t have full-scale psychiatry now, that will follow later," he said, highlighting the company's plans to expand its portfolio in these areas.

“I believe the market for psychiatry is ₹3,000 crore in India, while the movement disorders market and the epilepsy market in the country is valued around ₹1,200 to ₹1,300 crore combined," he noted.

Cipla reported a net cash position of ₹8,449 crore as of 30 June, with a total debt at ₹547 crore. The company allocated ₹353 crore, an estimated 5.3% of sales, to research and development, driven by product filings and developmental efforts.

Vohra also said that Cipla is actively exploring acquisitions in India and other key markets like the US, South Africa, and Brazil, particularly in consumer wellness and branded markets.

“We always looking for acquisitions, but at the same time, we're very conscious of what value we pay,” he added.

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The One India business segment showed a healthy 10% growth across branded prescriptions, trade generics, and consumer health. 

However, this growth was partially offset by a decline in the trade generics business, attributed to a change in the distribution model. The branded prescription business, supported by chronic therapies like respiratory, cardiac, and orology, outpaced market growth, while the consumer health franchise grew 3% YoY. Key brands like Nicotex, Omnigel, and Cipladine achieved leadership positions in their segments.

Cipla also reported a successful transition of its India trade generics to a new distribution model, enhancing control and direct distributor engagement. The US business posted a record quarterly revenue of $250 million, and the South African market experienced a solid 19% YoY growth in local currency terms, led by the private market segment.

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Earlier in the day, HDFC Mutual Fund schemes marginally increased their holdings in Cipla by 0.2%, reaching a total of 5% through open market purchases, reflecting investor confidence in the company's growth trajectory and strategic initiatives.

Prathamesh Masdekar, research analyst at StoxBox, noted that Cipla continues to report strong financial results, underscoring its core business strengths in India, North America, and South Africa. 

He expects Cipla to focus on establishing a robust foundation for growth in the upcoming quarters, driven by continued leadership in chronic therapies within India's branded prescription business, an expanding differentiated pipeline in the US with plans to launch peptide products in FY25, strong demand in South Africa's private business, and sustained leadership in the pharmaceutical prescription market. 

Additionally, Cipla is investing in its future pipeline and addressing regulatory issues at its Goa plant, with a positive long-term growth outlook, he added.