Q3 Results: Cipla’s U.S. Business Lifts Investor Confidence Despite Tepid Earnings
Cipla Ltd.'s shares rose for the second straight day on growth in its U.S. business, even as the drug maker reported quarterly revenue and profit that missed the analyst estimates.
The Mumbai-based company posted quarterly revenue of Rs 4,008 crore in the December-ended quarter, a rise of 2 percent as compared with the previous year, but below the analysts’ expectations of Rs 4,111 crore. The revenue missed estimates for the 13th straight quarter, according to data provided by Bloomberg.
Its profit dropped 17 percent to Rs 332 crore, falling short of the Rs 371-crore consensus estimate.
Cipla’s U.S. business grew 18 percent on a year-on-year basis and 10 percent on a sequential basis for the second straight quarter, led by product launches.
“The strategy is to enhance the number of launches in our direct-to-market segment in the U.S., where we have assets already in the market [and to] improve the share, its Global Chief Financial Officer Kedar Upadhye told BloombergQuint. “What you have seen in this quarter is the result of this strategy.”
While the company missed estimates on all key metrics, the analysts viewed growth in Cipla’s U.S. business as an important milestone.
Cipla reported a miss on the lower other income, Nirmal Bang’s Vishal Manchanda told BloombergQuint, adding that if the other income would have been at par with previous year’s figures, the results would have fared better. “The good part of the result is that its U.S. business has done well.”
The growth in the U.S. business was diversified and not dependent on a few launches, Upadhye said. “Cipla has no concentration risks as compared to other Indian players in the U.S. pharmaceutical market.”
The incremental growth driven by various new products in the U.S. also had a higher margin profile, he said, adding that he does see the margin growing further in the future.
Operating income, or earnings before interest, tax, depreciation, and amortisation, slipped 13 percent on a yearly basis to Rs 708 crore—the consensus estimate was Rs 754 crore. Operating margin shrunk to 17.6 percent from 20.9 percent in the preceding year—70 basis points below analysts’ expectations.
Shares of Cipla rose as much as 7 percent to Rs 545.25 apiece after the earnings yesterday. Cipla was up 4.5 percent to Rs 532.50 in morning trade on Thursday.
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