Cipla Q1 revenue may be muted on high base, low Covid drug sales: Analysts

Cipla Q1 results preview: Analysts attribute the likely dull performance due to the high base of last year, and the reduction in revenue contribution from Covid-19 therapies in the recent quarter.

Mumbai-based pharma giant Cipla Ltd is set to release its June quarter earnings on Friday, July 29. Analysts expect the company to post a muted rise in revenues on a yearly basis to Rs 5,670.5 crore due to weakness in domestic sales.

Four out of five brokerages project the company’s revenue to increase by 3-6 per cent year-on-year (YoY), while the fifth, ICICI Securities, estimates a 1.2 per cent decline for the same. The adjusted profit after tax is also likely to decline by up to 25 per cent YoY to Rs 608 crore.

Analysts attribute the likely dull performance due to the high base of last year, and the reduction in revenue contribution from Covid-19 therapies in the recent quarter.  

They add that the US segment is expected to have grown modestly led by sales of its respiratory inhaler Albuterol. Given this, commentary on the market share trajectory of Albuterol and Arformoterol Tartrate in the US is a key monitorable. 

Here’s what brokerages expect from the company in Q1FY23 :

ICICI Securities: The brokerage expects the company's revenues to fall to Rs 5,439.3 crore, mainly due to a 10.5 per cent yearly decline in domestic formulations to Rs 2,426 crore. This would be partially offset by US business, which may have grown 18.9 per cent YoY to Rs 1,234.5 crore. Rest of the world (RoW) and South African markets are likely to report 20 per cent and 2 per cent yearly growth to Rs 940.8 crore and Rs 646.7 crore, respectively. 

Operationally, Ebitda (earnings before interest, tax, depreciation, and amortization) may fall 19.4 per cent YoY to Rs 1,085.1 crore, and consequently, Ebitda margins are likely to decline 450 bps to 20 per cent. 

Centrum Broking: It expects the company's Ebitda to sink 21 per cent over last year to Rs 1,064 crores. Better US sales are likely to be offset by flattish India business due to reduced contribution from Covid drugs and lower sales in other therapies. Margins will contract on a yearly basis due to increased overhead expenses.

KR Choksey: Analysts foresee revenue to grow at a slower pace of 5.6 per cent YoY and 10.5 per cent sequentially due to likely slower domestic growth on high base effect and muted offtake of respiratory and anti-infectives during the quarter. The US market will continue to grow driven by increased sales of Albuterol, Arformoterol, and Lanreotide injectable. Ebitda may decline 1.4 per cent YoY to Rs 1,327 crores, and Ebitda margins will likely contract on a yearly basis due to increased raw material costs but may improve from Q4FY22. 

Prabhudas Lilladher: This brokerage also sees the company's domestic formulation business declining in Q1FY23 given the Covid-19 base last year. It expects YoY growth of 12 per cent in US sales to $158 million aided by a ramp-up in new launches. Ebitda is projected to decline by 18.4 per cent YoY to Rs 1,346 crores.

Sharekhan: Sharekhan also foresees revenues to be flat on a YoY basis due to lower contribution of Covid sales, while the US segment is expected to sustain the growth trajectory. Margins may contract sequentially due to reduced Covid opportunities and increasing other expenses and pricing pressures in the US, it said.