Cipla raises margin guidance for FY24 to 23%

Global pharma major Cipla has raised its margin guidance for FY24 to 23% from the previously projected 22%. The company has also set aside a substantial capital expenditure budget of Rs 10,000-15,000 crore for the fiscal year.

The company said that the investment will be channelled into various growth initiatives ranging from enhancing manufacturing capabilities, expanding research and development facilities to invigorating its presence in key markets.

Cipla's mergers and acquisitions (M&A) strategy for FY24, the management said, will also focus on bolstering its market share and improving rankings in India and South Africa. The company also said that it may assess opportunities in the US market that offer niche capabilities to complement its existing portfolio.

Brokerage firm ICICI Securities, on Thursday, recommended maintaining a BUY rating on Cipla shares. The firm said that in India, Cipla is expected to achieve 10% growth over FY23-FY25E, driven by additions in branded generics, trade generics, and consumer health.

The success was driven by strong volume growth in the base portfolio, particularly with the gRevlimid product in the US. The company plans to launch gAbraxane and gAdvair in FY25, with the possibility of an earlier launch for gAdvair if the Indore facility status remains positive.

The management has increased its margin guidance for FY24 by 100 basis points to 23%. Based on these positive developments, the target price for Cipla's stock is raised to INR 1,300, valuing the company at 23 times FY25E earnings, ICICI Securities said.

"We are excited to continue working towards establishing a strong foundation for growth in upcoming quarters, where we look forward to continuing the leadership in chronic therapies in branded prescription business in India, further expanding our differentiated pipeline in the US and targeting to be the biggest prescription business in South Africa," said Umang Vohra, MD, and Global CEO, Cipla Ltd.

Cipla announced its financial results for the first quarter ended June 30th, 2023, on Wednesday. The company recorded an 18% growth in revenue, reaching Rs 6,329 Crores. The core profitability of the company also witnessed a substantial boost with EBITDA growth of 31%.

The One-India Franchise of Cipla reported significant 12% year-on-year growth across various segments, including branded prescription, trade generics, and consumer health. The branded prescription business showed momentum, outpacing the Indian Pharmaceutical Market (IPM) growth by 2%, with an 11% YoY increase. Meanwhile, the trade generic business continues to lead the market with an 8% YoY growth. The Cipla Health franchise also made strides, achieving 16% growth with margins reaching the mid-teens for the quarter.

Cipla's private market business in South Africa witnessed 13% year-on-year growth in local currency terms, driven by double-digit growth in both prescription and over-the-counter segments. This success has led Cipla to become the second-largest player in the prescription market, achieving a four-year CAGR of 8.6%, surpassing the market's growth of 3.6%. Meanwhile, in the US market, Cipla has reported its highest-ever revenue of $222 million, experiencing an exceptional 43% year-on-year growth. The focus on differentiated portfolio offerings, particularly the key asset Lanreotide, has contributed significantly to capturing an 18% market share. 

"In Q1 FY24, we recorded growth of 18% over last year with EBITDA of INR 1,494 Cr driven by mix and other operational efficiencies. Our One-India business continued the double-digit trajectory growing at 12% during the quarter led by branded prescription with sustained growth across chronic therapies," said Vohra.

"Our continued focus on the differentiated portfolio has strengthened our US business, which once again posted the highest-ever quarterly revenue at $ 222 million. South Africa Private Market bounced back from the lows of last year to post double-digit growth. Our core operating profitability continues to be strong at 23.6%, expanding by 230 bps over last year," he said.

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