Cipla extends fall post June quarter results

The stock was trading lower by 2.3% at Rs 688, extending its previous day's 5% decline on the NSE.

Cipla is trading lower by 2.3% at Rs 688, extending its previous day’s 5% decline on the NSE, despite reporting a strong set of earnings for first quarter ended June 30, 2015 (Q1FY16).

The stock opened at Rs 709 and touched a low of Rs 685 on the NSE. A combined 3.55 million shares changed hands on the counter on the BSE and NSE.

Cipla had reported a 121% year on year (YoY) jump in consolidated net profit at Rs 651 crore for the June quarter due to lower material cost and high revenue. The company had profit of Rs 295 crore in a year ago quarter.

Consolidated net sales rose 43% Y-o-Y to Rs 3,777 crore led by supply of Nexium API (active pharmaceutical ingredients) to Teva in the US.

Amey Chalke, analyst at Motilal Oswal Research, maintains ‘Neutral’ rating on the stock due to rich valuations.

“We believe Cipla is likely to have generated USD80-100 million sales from Nexium supplies to its partner Teva in the US. Post Mylan’s entry in August 2015, it is a three player’s market with 40-50% price erosion. We expect this exclusivity period to last for one more quarter as other players have indicated Dec’15 launch for their generic versions,” analyst said in a report dated August 14, 2015.

Praful Bohra, analyst at Religare Institutional Research maintains ‘Hold’ rating on the stock with target price of Rs 755,

“Factoring in higher contribution from Nexium supplies, Cipla upped its FY16 revenue guidance from mid-teen growth to 20%. This implies 14% revenue growth for 9MFY16 (July-March), which in context of a likely pick-up in domestic revenues to 15% plus for FY16 (vs. 8.4% growth in Q1FY16) appears weak,” said analyst.