Mumbai-based pharma major Cipla beat street estimates on the revenue front in the quarter ended June. However, net profit performance was disappointing, largely on account of forex losses of Rs 74.66 crore.
Revenues grew by a robust 33% year-on-year to Rs 1,170.8 crore, excluding technology know-how fees and other non-operating income. The quarter saw a 49.7% increase in exports, which contributed 50.7% of the revenues.
Within exports, revenues from bulk drugs and chemicals (active pharmaceutical ingredients) more than doubled (up 117.4%). Revenues from the domestic business grew by 15.9%, which is higher than the market growth rate of 12-14%.
Net profit declined by 16.9% over the same period last year to Rs 140.04 crore.
Operating margins (excluding forex gain loss and technical know-how fees) improved by 416 basis points to 19.96%. One reason for the improvement in margins may be the decline in raw material costs as a percentage of sales to 48.13% (51.03%) due to better product mix and increase in export realisations on account of a weak rupee.
Staff costs rose 31% due to the addition of manpower at the company’s new unit in Sikkim and annual bonus increments. The facility has already commenced production.
Other expenditure rose 27% due to an overall increase in power and fuel costs, manufacturing expenses, processing charges and sales promotion expenses.
Going forward, Cipla could find it difficult to sustain the high growth rates in exports. Operating margins, too, might be hard to sustain, considering the performance last quarter was aided by rupee depreciation whereas the rupee has since appreciated by 0.9%. Further, the company will set up four new plants in Indore.
At Rs 237.25, the stock trades at 22.3 times its estimated earnings for 2009. Most analysts are neutral on it.
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