Cipla shares fall as margin worries prompt downgrades

MUMBAI (Reuters) - Cipla Ltd shares fell on Thursday to their lowest in a month, as worries about high costs on the drugmaker's profit margins triggered a stock rating downgrade by some brokerages.

The company, which on Wednesday reported a 16.5 percent fall in its third-quarter profit due to higher research-and-development and staff costs, will see pressure on its margins in the near term, the brokerages said.

Cipla, which made headlines in 2001 by making anti-retroviral drugs to treat AIDS in Africa for under $1 per day, will also see earnings pressured as gains from its product pipeline will take longer to materialise, brokerage CIMB said in a note.

 

CIMB downgraded the stock to "hold" from "add".

HSBC downgraded the stock to "neutral" from "overweight", while Religare cut it to "sell" from "hold".

"Continued R&D investments as well as front-end establishment costs in key markets would weigh on profitability over the medium-term without commensurate sales," Religare said in its research report.

Shares in Cipla ended down 3.5 percent, at 260.40 rupees.

(Reporting by Abhishek Vishnoi; Writing by Sumeet Chatterjee; Editing by Prateek Chatterjee)