Cipla is a leading pharmaceutical from India with presence across the world. Company was founded in 1935 under the name Chemical Industrial & Pharmaceutical Laboratories Ltd, and in 1984 it adopted its present name. It is a global pharma company with over 1,500+ products in 65 therapeutic categories, with over 50 dosage forms. Sp, Cipla results Q1FY23 as follows:

Cipla specializes in developing medications to treat a variety of illnesses, including arthritis, diabetes, depression, cardiovascular disease, respiratory diseases, and many others. In order to make healthcare more accessible worldwide, Cipla is present in more than 80 nations, including South Africa, India, and the United States, among others.

Cipla announced their Q1FY23 results on 29^th July 2022. They reported they reported a marginal single-digit decline in their YoY profits and revenue. In spite of reporting such YoY de-growth, analysts believed that margins were better than expected. As company prepare for complex launches in US market. On the stock exchanges Cipla has gained almost 6% post announcement of Q1FY23 results. It is currently trading approximately 5% less than its 52-week high. So, let’s now have a deeper look over their Q1FY23 performance to understand the future direction of Cipla Ltd.

Key highlights of Cipla Q1FY23 results:

• Sales for Q1FY23 fell 2.3% YoY to Rs 5375, while it went up slightly by 2.1% QoQ in Q1FY23
• Cipla saw a 3.96% YoY drop in consolidated net profit at Rs 686.40 crore in Q1FY23, while it rose 90% QoQ
• Cipla drives around 46% of their revenue from India while rest 54% from rest of the world, with North America as second highest contributor followed by SAGA (South Africa, Sub-Saharan Africa, and Cipla Global Access) and international markets.
• Cipla saw a around 9% YoY growth in One-India which is ex-covid, while it saw a robust 10% YoY growth in North America due to Steady momentum in core formulation business led by contribution from respiratory and peptide products.
• SAGA saw a negative growth of 8% in Q1 with recovery expected in Q2FY23. International markets grew highest 18% led by Strong DTM2 growth across geographies
• API saw 57% YoY de-growth in Q1FY23 which can be attributed to higher Q1FY22 base due to one-time profit share on an API supply.
• EBITDA fell 15% YoY to Rs 1143 crores, while on a sequential basis it grew 52%
• Margin % came out as 21% in Q1FY23 as compared to 24% in Q1FY22 and 14% in Q1FY23.

Cipla results Q1FY23: Both revenue & PAT fell YoY while they grew QoQ in Q1FY23

Cipla saw a 3.96% YoY drop in consolidated net profit at Rs 686.40 crore in Q1FY23 compared with Rs 714.72 crore in Q1FY22. However, the profit figure managed to beat Rs 601 crore figure anticipated by analysts in renowned brokerages. While Sales for Q1FY23 fell 2.3% YoY to Rs 5375 compared with Rs 5504 crore in Q1FY22.

While on a sequential basis, both sales and revenue saw decent growth. PAT increased by almost 90% QoQ to Rs 686 crores in Q1FY23 from Rs 362 crores in Q4FY22, supported by 2.1% QoQ rise in revenue from Rs 5260 crores in Q4FY22 to Rs 5375 crores in Q1FY23.

This was against Rs 57.50 crore in exceptional items in Q4FY22 and Rs 124.6 crore in Q1FY22.

Other income for Q1FY23 rose to Rs 103.43 crore compared with Rs 64.02 crore in Q4FY22 and Rs 64.93 crore in Q1FY22. Cipla drives around 46% of their revenue from India while rest 54% from rest of the world, with North America as second highest contributor followed by SAGA (South Africa, Sub-Saharan Africa, and Cipla Global Access) and international markets.

Cipla saw a around 9% YoY growth in One-India which is ex-covid, while it saw a robust 10% YoY growth in North America due to Steady momentum in core formulation business led by contribution from respiratory and peptide products. While SAGA saw a negative growth of 8% but recovery is expected in Q2FY23. International markets grew highest 18% led by Strong DTM2 growth across geographies and offset emerging market forex volatility and muted B2B demand in Europe. Whereas API saw 57% YoY de-growth in Q1FY23 which can be attributed to higher Q1FY22 base due to one-time profit share on an API supply.

EBITDA fell 15% YoY while margins% remained robust

EBITDA fell 15% YoY to Rs 1143 crores in Q1FY23 from Rs 1346 crores in Q1FY22. While on a sequential basis it grew 52% to Rs 1143 crores from Rs 750 crores in Q4FY22. Whereas core margin trajectory remained intact, despite sharp normalisation in covid portfolio contribution compared to Q1FY22. Margin % came out as 21% in Q1FY23 as compared to 24% in Q1FY22 and 14% in Q1FY23.

In Q1FY23 there was 170 bps adverse impact on margins due to high procurement cost, freight cost and negative forex impact which was partly offset by price hike and decline in sale of low margin Covid products. Adjusting for above, EBITDA margins grew by 12% YoY to 23%.

Further, R&D cost is expected to go up in following quarters with guidance for 5.5- 6% of revenues in FY23. Amid declining freight and other cost trends, management has not increased EBITDA margins guidance of 22-23%.

Strategic product deals and investments in Q1FY23

Acquisition of 21.05% for Rs 25 Crores in Achira Labs, engaged in development and commercialization of point of care (PoC) medical test kits in India. Cipla’s entry in the PoC diagnostics and AMR space through the design, development, and manufacturing of microfluidics-based technologies; increasing patient access to innovative, affordable, and quality diagnostic solutions.

Secondly acquisition of Endura Mass, a renowned nutritional supplement brand in the category of weight gain from Medinn Belle Herbal Care Private Limited. This is done to expand Cipla’s wellness portfolio by foraying into new category nutritional supplements for weight gain.

Including Endura Mass, Domestic Consumer Business under Cipla Health expected to achieve annualized revenue of INR 600+ Cr

The third is the acquisition of an additional stake for Rs 25.9 crores in GoApptiv Private Limited. Cipla’s total stake increases to 22.02% on a fully diluted basis post investment. This will enable Cipla to further widen its patient reach to affordable and quality drugs with end-to-end brand marketing and channel engagement across tier 2- 6 towns in India.

Technical analysis of Cipla share price:

Cipla share had hit a 52-week high of Rs 1,083 on 15 March 2022. Since then the stock has failed to hold on to its momentum. Whereas after the announcement of Q1FY23 results, the stock has again made an up move. It is currently trading close to 52 weeks high. The 50 EMA is well above 100 and 200 EMA, indicating bullishness in the Cipla Share price. Further, it is taking immediate support at Rs 970. Investors can therefore wait for the stock to cross 1083 levels with higher volumes before making a fresh entry.

Our View:

Cipla anticipates outpacing industry growth in domestic markets, supported by robust expansion in both acute and chronic medicines. To further accelerate the trajectory of their Global Consumer Wellness franchise in India and South Africa, advancement on novel consumer-centric products across emerging channels is being made.

Furthermore, Cipla hopes to increase its market share through wise and strategic acquisitions. Making it a worthwhile investment bet for long-term investors in this sector.

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