Cipla: All's not well overseas

The drug firm’s export performance in the March quarter has been disappointing, given the huge depreciation of the rupee.

Lower than expected foreign exchange losses and higher technology licence fees have boosted Cipla’s net profits for the March 2009 quarter. After a strong growth in the top line in previous quarters, net sales were up just over 14 per cent at Rs 1,235 crore. While the growth in domestic formulations of close to 16 per cent was better than the industry’s performance, the drug major’s exports were rather disappointing given that the rupee has depreciated by over 20 per cent during the quarter.

Export formulations grew at just over 17 per cent way below the 36 per cent clocked in the nine months to December 2008. Thus, while Cipla was widely expected to grow its net profits in 2008-09 by about 12-14 per cent, theyhave risen just under 10 per cent to Rs 768 crore.

The management is understood to have indicated that revenues and profits would grow by about 10 per cent in the current year on a constant currency basis. That is somewhat conservative given that the home market is growing at a fairly brisk pace. At Rs 240, the stock trades at around 18 times estimated earnings for 2009-10, which, analysts say is somewhat expensive given the subdued earnings growth outlook.