Cipla stuns with poor Q2

Cipla stunned everyone with a very disappointing set of earnings for Q2FY19. While the company has blamed it all the higher base of last year due to GST restocking and API sales which impacted sales, the market has chosen to punish it today.

The stock is among the top five losers on the BSE currently, going down over 5% to Rs.535.15. Its LC is at 10% at Rs.507.55.

The company reported a 11% (YoY) drop in consolidated net profit at Rs.377 crore on a 2% fall in total consolidated revenue at Rs.4012 crore.

Operating profit fell over 6% at Rs.753 crore while margins slumped from 19.7% to 18.8%.

Sales in India, which accounts for about 42% of Cipla's revenue, remained unchanged, while that in South Africa slumped 25%. North America reported a 12% rise in sales, aided by new launches.

The company has warned that it is likely to face "multiple headwinds" that could hurt its financial performance in the next six months. And the headwinds are – sanctions in certain parts of the world, capacity balancing at its plants which will have short term impact and pressure on tender businesses across markets. The company said that commodity & crude prices inflation and escalation in China sourced supplies will continue for the next 2 quarters.

The good news – its manufacturing plant at Goa, which had received a string of observations from FDA, is now close to being resolved as the latest inspection concluded with "minor procedural" observations. This plant accounts for one-fourth of Cipla’s ales in the U.S.