ADVERTISEMENT

Q1 Results: Brokerages Cut Cipla’s Target On Weak India Performance

This comes after the drugmaker’s weak domestic sales weighed on its revenue.



Metformin Bilayer, medicinal tablets manufactured by Sun Pharmaceuticals Industries Ltd., are photographed at company’s lab in Mumbai. (Photographer: Abhijit Bhatlekar/Bloomberg News)
Metformin Bilayer, medicinal tablets manufactured by Sun Pharmaceuticals Industries Ltd., are photographed at company’s lab in Mumbai. (Photographer: Abhijit Bhatlekar/Bloomberg News)

Most analysts have cut their target price on Cipla Ltd.’s while retaining their rating on the drugmaker.

This comes after the drugmaker’s weak domestic sales—after it realigned its distribution for trade generics and deferred its branded generics sales—weighed on its revenue.

However, weaker sales in India were offset by strength in the U.S. business led by Sensipar exclusivity which sustained longer than estimated.

The company’s management expects the trade generics business to gradually recover and normalise in the third quarter.

Here’s what brokerage have to say about Cipla’s first quarter results:

Q1 Results: Brokerages Cut Cipla’s Target On Weak India Performance

Citi

  • Cut FY20 EPS by 4 percent and FY21 by 5 percent to factor in lower trade generics in India.
  • Trade generics could take one more quarter to normalise as per management.

Edelweiss

  • Reported operationally weak first quarter on weak branded India business.
  • Steady U.S. offsets weak domestic and tender businesses.
  • Investments likely to rise, limiting margin expansion.
  • Current valuation seems to be pricing in the slowdown in branded business.

Goldman Sachs

  • Weak Q1 due to adjustment undertaken in the India trade generic business.
  • India business to remain subdued in the near term.
  • Lower our 2021-22 Ebitda estimates lower by up to 5 percent.

PhillipCapital

  • Strong margin performance is not sustainable.
  • See a broad-base growth concern across geographies.
  • Cut our FY20/21 earnings estimates by 13-15 percent.

CLSA

  • High earnings volatility does not justify premium multiples.
  • Cuts FY20-22 earnings per share estimate by 9-14 percent, factoring lower growth in India and emerging markets.

Bank Of America

  • India trade business resets amidst general slowdown.
  • Reset growth expectations in India.
  • Delayed launches and expiration of gSensipar limited competition to impact the U.S. business.

Credit Suisse

  • Trade generic changes could take time to normalize.
  • U.S. sales had significant amount of gSensipar stocking.