Generic major Cipla reported stronger numbers due to a 430 basis point increase in operating profit margin owing to one-off Escitalopram revenues, continuing product rationalisation (lower sales of anti-retro virals) and forex boost at the operational level, Barclays said in a post earnings research note.
Though exports and domestic markets contributed equally to the company’s earnings, exports boost was largely due to an a forex gain of Rs 23 crore and one-off revenue from Escitalopram, it said.
A surprise 30 percent growth in domestic business compensated for a weak 10 percent (adjusting for the forex gain) exports growth, it said.
“After deploying significant capital towards furthering its formulation export initiatives (including the Rs 900 crore into SEZ at Indore), growth in the export business has yet to deliver on lines of expectations,” brokerage Avendus said.
The 440-bps on-year improvement in margins on earnings before interest, tax, depreciation and amortisation, was on account of 500bps contraction in material cost due to changes in product mix viz lower proportion of ARVs & higher contribution from Lexapro supplies coupled with increased realisations, Marwadi group said in a note. The company’s EBITDA grew 46 percent on year.
“Branded business posted strong growth on account of sales pick up in anti-asthma, antibiotics & cardiovascular therapy segments,” it said.
Avendus sees the momentum in India extending into the September quarter, and then withering down considerably. It expects more activity in the overseas investments as the company is ploughing cash from liquidated investments in China‐based Desano Holding into other investments, it said.
Marwadi group reports that margin increase can be also attributed to contraction in material cost. The report further reports that the company plans to penetrate further into therapy segments of oncology and CNS.
2012 saw some heated reshuffling of over seas investment. The China based Desano holding has been liquidated. on the other hand three fresh over seas investments have been added.
Barclays forecasts a strong first half in 2013 owing to continuing revenues form Escitalopram and depreciating rupee. Certain factors which could work in Cipla’s favour are approval of compulsory licenses on Raltegravir and Rilpivirine along with earlier than expected launch of respiratory inhalers in Europe.
The current share price is Rs 353 and it showed a yearly growth of 15.17 percent as against the Sensex benchmark which declined by 5.9 percent.