Cipla surges 6% after stellar Q1 on healthy operating performance

Cipla was the largest gainer among Sensex and Nifty50 stocks at 11:01 am

Cipla surged 6% to Rs 575 on BSE after the company recorded EBITDA (earnings before interest, taxation, depreciation and amortization) margin expansion rose 160 bps to 18.3% in June quarter (Q1FY18), driven by strong focus on enhancing operational efficiency and control on spends.

“The company reported quarterly revenues of Rs 3,525 crore, with an EBITDA margin of around 18.3%, an increase of 6% on year-on-year (y-o-y) basis driven by significant gross margin improvement and controlled spends despite impact of Goods & Service Tax (GST) led disruption to the India business,” Cipla said in a press release.

The consolidated net profit of the company during quarter under review increased 21% to Rs 409 crore on y-o-y basis.

“Cipla has indicated a US launch of a niche/low competition ANDA every quarter over the next 2 years. This should give a strong fillip to the US geography which is projected to grow at a CAGR of 26% over FY17-19 anchoring overall revenue growth at 11%,” analyst at Emkay Global Financial Services said.

However, structurally the industry continues to remain extremely vulnerable to price erosion in base business with even niche opportunities likely to be commoditized rapidly, the brokerage firm said in result review with maintain ‘hold’ rating on the stock.

According to analyst at Antique Stock Broking, with a low US base complemented by 95+ pending ANDAs and imminent launch of limited competition products, a steady domestic portfolio and improving SA mix, Cipla remains least exposed to revenue shocks in the face of macro headwinds.

“With the GST impact behind the company and US expected to take off, margin pressures should ease and if the company sustains the operational improvement seen in the quarter, Cipla is unlikely to face de-rating that some of its peers are facing,” the brokerage firm said in a report.

At 11:01 am; Cipla was up 5% at Rs 571, the largest gainer among Sensex and Nifty50 stocks. The trading volumes on the counter nearly doubled with a combined 2.43 million shares changed hands on the BSE and NSE so far.