Ways2Capital Reviews : Cipla Q4 FY18 Results No Reason To Reverse Stock Underperformance

In line with its peers, Cipla Ltd’s shares have underperformed the benchmark indices over the last one year. From the looks of it, the March quarter (Q4 FY18) results provide no major reason to reverse this trend. Revenues expanded by a lacklustre 5% and gross margin narrowed both from a year ago and from the preceding quarter.

Performance in the US business was not as strong as the management’s projections. Revenues from the US market stood at $105 million (up 8% year-on-year), not significantly higher than the $100 million revenue the company clocked in the December quarter. Product recall and supply issues impacted sales in the US (to the tune of $5 million). Also according to Purvi Shah, an analyst at Sharekhan Ltd, pricing pressure hurt performance. Revenues in the sub-Saharan Africa lagged and emerging markets remained flat.

On the positive side, the management guided for a double-digit growth in the India business in fiscal year 2019 (FY19). This business, which generates 39% of Cipla’s revenues, grew 6% in FY18. The drug maker expects the in-licensing deals with innovator companies, focus on certain therapeutic segments and sales force productivity optimization measures to aid growth in India.
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About Bhoomi Desai