Active Stocks
Tue Mar 19 2024 13:01:07
  1. Tata Consultancy Services share price
  2. 4,020.00 -3.01%
  1. Tata Steel share price
  2. 149.90 0.20%
  1. Bharti Airtel share price
  2. 1,230.20 0.42%
  1. Power Grid Corporation Of India share price
  2. 259.90 -1.92%
  1. ITC share price
  2. 410.00 -1.77%
Business News/ Markets / Mark To Market/  Cipla finally delivers growth in the March quarter, all eyes on FY20 now
BackBack

Cipla finally delivers growth in the March quarter, all eyes on FY20 now

The beat was driven by its US business, where revenues jumped 41% from a year ago, due to new product launches
  • What’s more, margins hit a multi-quarter high as limited competition drug launches in the US boosted profitability
  •  (Vipul Sharma/Mint)Premium
    (Vipul Sharma/Mint)

    Cipla Ltd has exited FY19 on a positive note, after hitting unexpected bumps in the earlier part of the year. Revenues in the March quarter grew 19%, ahead of the Street’s estimates. The beat was driven by its US business, where revenues jumped 41% from a year ago, as the company benefited from new product launches. Cipla derives only one-fifth of its revenues from the US. Overall growth was supported by a return to growth for the India business.

    Revenues in India grew by a respectable 11%, after decelerating for two consecutive quarters. Around 38% of its revenues are derived from India. So even as business in South Africa and emerging markets lagged the strong performance in India and the US, Cipla comfortably beat analysts’ estimates.

    What’s more, margins hit a multi-quarter high as limited competition drug launches in the US boosted profitability.

    Despite the positive news, the Cipla stock ended about 1% lower on Wednesday. “The stock had already priced in a positive set of numbers," said an analyst. Year till date, it has risen 6.5%, compared to a 4% drop in the Nifty Pharma index. Note that Cipla’s results come on the back of a below-par performance by larger peers Lupin Ltd and Dr Reddy’s Laboratories Ltd in the key markets of US and India. As such, the outperformance in the Cipla stock looks justified.

    The company is fairly confident about sustaining the growth momentum in FY20. In India, it expects to grow faster than the 8-10% market growth. Scale-up of new products and a healthy product pipeline is expected to result in another year of double-digit revenue growth in the US. On the flip side, the company continues to face challenges in the tender and Middle East businesses.

    Of course, for a stock trading at about 22 times one-year forward earnings, it will also be crucial to see how strong and profitable this growth is going to be. “For a company with a strong footing in the domestic market, just beating industry growth is not a big feat," said an analyst at a domestic broking firm.

    The last two years have been difficult for Indian pharma due to changes in tax policy (goods and services tax) and weak demand. While inventories in the prescription drug business are showing signs of stabilization, the generic drug business continues to see destocking. Whether a sustainable growth rate emerges in FY20 remains to be seen.

    Second, even though the company has a healthy product pipeline for the US, it is seeing competition from innovator and generic firms. Cipla has the cost advantage, but how well the competition reacts to its pricing will also determine earnings benefits.

    Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

    Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
    More Less
    Published: 22 May 2019, 10:49 PM IST
    Next Story footLogo
    Recommended For You
    GENIE RECOMMENDS

    Get the best recommendations on Stocks, Mutual Funds and more based on your Risk profile!

    Let’s get started
    Switch to the Mint app for fast and personalized news - Get App

    Chat with MintGenie