Cipla share price: Sharekhan says that Cipla Limited reported strong numbers for Q4FY2021 yoy, though it missed estimates. Results reflect a one time adjustments in gross margins to the tune of 200 bps on account of inventory adjustment for gAlbuterol and charge on material cost inventories. Revenue, at Rs 4606.5 cr, grew by 5% yoy, driven by a 17% rise in US revenues; sales from emerging markets and India grew by 4% yoy each. Operating Margins, meanwhile, rose by 280 bps yoy to 17.3% driven by savings in other expenses and cost-control measures. Consequently, PAT stood at Rs 413 cr as against Rs 246 cr in the corresponding quarter previous year. Sharekhan maintains Buy recommendation on Cipla with price target of Rs 1100.

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Sharekhan highlights that Cipla’s domestic business is poised to grow strongly going ahead. Cipla’s One-India strategy has played out well and would drive growth momentum. A sustained traction in Chronics segment and market leadership position in the respiratory, inhalation therapies bode well for Cipla. In addition, the company is looking to expand its COVID-19 portfolio through collaborations and expects to launch new products in the India markets, which could also add to domestic revenues. A ramp-up in sales of gAlbuterol, a strong new product pipeline including complex generics and respiratory products, would drive US sales.

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Sharekhan expects Cipla’s topline and PAT to report a CAGR of 11.9% and 23.8%, respectively, over FY2021-FY2023E. Given the surge in the COVID-19 cases, the management expects a strong demand for COVID-19 drugs, which in turn would drive the performance in Q1FY22 for the domestic business.

Key positives of Cipla:

US sales grew strongly by 17% y-o-y backed by ramp up in gAlbuterol market and growth in the institutional business
Positive commentary suggests a strong traction from the COVID portfolio, which could drive India business’ growth.

Key negatives for Cipla:

The API segment’s sales declined by 10% yoy
Gross margins reflect a one-time impact of 200 bps due to charge on material cost inventories and inventory adjustment for Albutero

Key risks of Cipla:

1)      Currency fluctuations
2)      Delay in key product approvals/faster approvals for competitors’ products
3)      any regulatory changes in India, South Africa, or the US could affect busine