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Analysts Cut Cipla 2017 Estimate After Weak Q4 Show

Cipla’s January-to-March quarter results were below the market expectation due to inventory write-offs or reductions, rationalisation of unviable geographies, higher research and development spends and regulatory costs

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Analysts tracking pharmaceuticals sector have cut estimates on drug maker Cipla for the financial year 2017 after its weak performance in the fourth quarter of financial year 2016.

Cipla’s January-to-March (2016) quarter results were below the market expectation due to inventory write-offs or reductions, rationalisation of unviable geographies, higher research and development (R&D) spends and regulatory costs.

Brokerage firm Religare Capital Markets Ltd said in Wednesday report that Cipla’s Marche quarter profit (EBITDA) of Rs 219 crore was at least 65 per cent below its estimate and the company’s net margin of 13.6 per cent was down about 500 basis points as compared the brokerage’s consensus.

“We slash our financial year 2017-18 estimates by 12 per cent to 10 per cent, while retaining a 'hold' on the stock,” the brokerage wrote in its report.

YK Hamied-led drug maker had on Tuesday (24 May) posted 68.9 per cent drop in net profit to Rs. 81 crore during the March quarter from the year ago-quarter’s Rs 260 crore. Its sales grew 5.6 per cent to Rs 3267 crore for the fourth quarter. While its operational profit declined 56.9 per cent to Rs. 219 crore.

Cipla’s domestic business contributed about 40 per cent of overall company sales. Ranked 3rd in the Indian drug market, with a share of about 5.3 per cent, Cipla’s domestic sales grew 15.9 per cent to Rs. 1,258 crore during the fourth quarter.

Cipla, which is currently going through a growth transformation as it wants to consolidate its global footprint through acquisitions, partnerships, joint ventures and strategic alliances among others,however had said that current year figures include the relevant results of Cipla’s subsidiaries from the date they became a subsidiary of the company and therefore some of the corresponding figures for the previous period are not comparable.


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