The South Africa business declined 8 per cent but that was due to lower tender business, which is expected to see a recovery in Q2. The non-tender business continues to outpace the market and grew over 2 times the industry value at 7.3 per cent. Also, the acquired portfolio of Mirren in the OTC (over-the-counter) space grew by over 10 per cent.
On the whole, with the domestic and Africa sales down, it is not surprising that Cipla’s revenues grew by just 1.3 per cent year-on-year in Q1. The US business driving gross margins, though, meant that operating profit margin improved 426 bps year-on-year to 22.7 per cent.
received an EIR (Establishment Inspection Report) for its Kurkumbh plant, which was inspected by the US FDA during March, indicating a regulatory clearance for this key facility. While Form 483 for its Bengaluru active pharma ingredient (API) plant with seven observations still needs to be resolved, it is not a significant risk.
Given the temporary nature of the hit in India and Africa business and overall jump in profitability, it is not surprising that Cipla’s shares surged nearly four per cent on Wednesday. However, some tweaking of FY20 estimates by analysts isn’t ruled out.
Analysts such as Krishnanath Munde at Reliance Securities continue to have buy rating on the stock, even as he will revisit his estimates. However, since the stock has corrected significantly since May highs, the overall view of the Street is also likely to remain positive.