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Cipla Ltd reported a strong and better-than-expected performance in the June quarter (Q1FY22). This was led by a strong 68.5% growth in domestic sales that contributed almost half of its overall sales. While the company benefitted from strong sales of covid-related products, good volumes in the core therapy portfolio also helped. The acute and respiratory segments also saw a recovery.

The US region that contributes about one-fifth of its overall revenue saw stable performance. The contribution from respiratory inhaler Albuterol generics launched last year continues to drive growth with regular market share gains. The firm attributed the 5% year-on-year (y-o-y) growth in US revenues to the continued expansion in market share of Albuterol.

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The South Africa market, where Cipla has its front end, remains a key geography. Sales in the South Africa, Sub-Saharan Africa and Global Access (SAGA) region marked 13% y-o-y growth in dollar terms. The region contributed about 15% to overall revenues. The firm said it saw double-digit growth and market share gain in the Antiretroviral and oncology private market. It also moved up three places to third in the systemic anti-infectives private market.

Cipla’s overall revenue grew 27% y-o-y to 5,453 crore, higher than the 4,606.5 crore in the previous quarter. Ebitda at 1,346 crore also saw 28% y-o-y growth, while net profit grew 24% y-o-y. Analysts at Kotak Institutional Equities said Q1FY22 sales and Ebitda exceeded their estimates by 7% and 9%, respectively, led by higher-than-expected domestic sales amid strong traction in the covid portfolio.

Going forward, though, the extraordinary gains accrued by the covid portfolio may moderate. Nevertheless, the firm’s strong chronic portfolio and pick-up in acute segment sales bode well for domestic growth.

“We expect the covid portfolio to moderate over the near-term, though continued roll-out of respiratory franchisee in the US and strong execution of One India strategy will help drive earnings growth over FY23-24," said analysts at Kotak Institutional Equities.

Analysts at Motilal Oswal Financial Services Ltd have raised their EPS estimate by 6% and 4% for FY22 and FY23, factoring in strong traction in prescription and trade generics in the domestic formulations segment, extended benefits of cost savings and lower research and development spend.

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