Cipla shares fall 4% post Q4 earnings; what should investors do?

Shares of Cipla Ltd fell 4 % today after the pharma firm announced Q4 earnings that failed to estimates. Cipla stock slipped 3.98% to Rs 897.7 against the previous close of Rs 934.90 on BSE. The large cap share has lost 1.38 % in one year and fallen 13.34% since the beginning of this year. Total 0.82 lakh shares of Cipla changed hands amounting to a turnover of Rs 7.50 crore. Market cap of the firm fell to Rs 74,258 crore. The stock hit 52-week high of Rs 1185.2 on November 1, 2022 and a 52-week low of Rs 852 on March 22, 2023.

Cipla share trades higher than the 20 day and 50 day moving averages but lower than the 5 day, 100 day and 200 day moving averages.

The pharma major reported a 45% rise in consolidated net profit to Rs 526 crore in Q4 compared with Rs 362 crore in the year-ago period. Brokerage ICICI Direct expected adjusted PAT to double YoY to Rs 813 crore."

Revenue from operations in Q4 rose 9% year-on-year to Rs 5,739 crore.

The company's EBITDA (earnings before interest, tax, depreciation, and amortisation) rose 54% to Rs 1,174 crore, while margins improved significantly by 596 bps to 20.5%. EBITDA was expected to grow 77.3% YoY to Rs 1,329 crore, according to ICICIDirect.

The Indian business logged a robust growth across branded prescription, trade generics, and consumer health over the last year period. Adjusted for Covid, the business rose 16% YoY.

The Board recommended the payment of a final dividend of Rs 8.50 per equity share for the financial year ended March 2023.

The dividend, if approved by the shareholders, will be paid within 30 days from the date of AGM.

Param Desai - Senior Research Analyst at Prabhudas Lilladher has assigned a Buy call with a target price of Rs 1,070.

"We continue to remain positive on growth across key segments including India and US given 1) strong traction in respiratory and other portfolio, 2) potential growth of +10% in domestic formulations and 3) sustainability of current US revs, backed by prospective key launches over FY25. Despite recent FDA issues, we expect 14% EPS CAGR over FY23-25E. Maintain 'Buy' rating and estimates with unchanged target of Rs 1,070 based on 22x FY25E EPS. Any further FDA escalation to Indore unit and erosion in key products in US will be key risk to our call," said Desai.

Centrum Broking has assigned a target price of Rs 1050 on the Cipla stock.

"Considering increased R&D (5.5% to 6% of sales), given key assets in the future pipeline, along with consistent cost optimization, we expect better earnings trajectory. As gAdvair launch being delayed with regulatory overhang, however, if Pithampur facility is cleared approval can be faster. Considering the regulatory challenges and approvals delayed we cut our revenue/PAT estimates by 8%/15% in FY24E and 7%/13% in FY25E respectively. Maintain ADD with a revised target price of Rs 1,050 (23x FY25E EPS). At CMP of Rs 935, the stock trades at 23x FY24E EPS of Rs40 and 21x FY25E EPS of Rs 45," the brokerage said.

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