Stock Fundamentals

How Cipla has performed

Maulik Madhu | Updated on January 30, 2021

Consumerisation of unbranded generics should stand in good stead

Keeping up with its impressive performance since the June 2020 quarter, Cipla, a leading player in respiratory therapies, delivered wellin the December 2020 quarter too.

Cipla grew its consolidated revenue from operations to ₹5,169 crore in the December 2020 quarter, up 18 per cent, year-on-year. Net profit more than doubled to ₹748 crore in the December 2020 quarter from year ago. A healthy growth in revenue – 22 per cent from the Indian market and 51 per cent (in rupee terms) from the Emerging Market business – bumped up the company’s revenue in the latest quarter. Growing market share of the company’s generic albuterol sulfate inhaler in the US too helped.

Good traction in demand in respiratory and other acute therapies in India (Cipla’s largest market), along with cost efficiencies thanks to continued reliance on digital marketing initiatives, boosted the company’s profit in the latest quarter.

The stock of Cipla has gained 119 per cent since its March low. At ₹825.6, the stock trades at a price-to-earnings (P/E) multiple of 30 times its trailing twelve-month earnings, roughly in line with its 3-year average P/E of 31 times.

Company business

Cipla, among the largest pharmaceutical companies in India, is present across several therapeutic segments such as respiratory, anti-retroviral, urology, anti-infectives and dermatology, among others. A leading player in respiratory and urology, Cipla held a market share of 25.4 per cent and 14.4 per cent, respectively, in these segments in the December 2020 quarter. The Indian business, which accounts for 39 per cent of the company’s revenue comprises three segments – branded prescription, trade or unbranded generics and consumer health products.

The US market contributes 23 per cent to Cipla’s revenue. The increase in sales of the company’s USFDA- approved albuterol sulfate inhaler, a generic Proventil inhaler equivalent has been a positive. As per the latest data, Cipla enjoys 14 per cent market share in the overall market for Albuterol, used for prevention and treatment of asthmatic symptoms.

What worked this year

For the nine months ended December 2020, Cipla posted a 14 per cent (year-on-year) increase in revenue from operations to ₹14,553 crore. This was driven largely by higher sales in India, South Africa and Sub Saharan region and Emerging Markets. In India, a portfolio of Covid-related products helped sales in the June and September quarters. Later, increasing hospital visits (other than Covid-related) boosted sales of other products.

This along with cost rationalisation, some of which is expected to continue into the coming quarters, helped the company grow its operating profit (EBITDA) by 34.4 per cent (y-o-y) to ₹3,456 crore and net profit by 53 per cent (y-o-y) to ₹1,992 crore during the nine month period ended December 2020.

The better performance in FY21 (year-to-date) is also reflected in the company’s improved operating profit margins. Cipla’s EBITDA margin expanded from 17.3 per cent in December 2019 to almost 24 per cent in December 2020.

Growth drivers

In India, the company’s strategy of consumerisation of brands – transferring certain products from its trade generics portfolio to its consumer health segment – aimed at earning some pricing premium should hold it in good stead.

In the US, ramp up in sales of Albuterol and new product launches can be the growth drivers. Cipla’s ANDA (generic drug filing with the USFDA) for the generic version of GSK’s Advair Diskus is currently under review. For the year ending March 2020, generic equivalents of Advair had sales of USD 2.9 billion in the US market.

Published on January 30, 2021

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