Pharmaceutical major Cipla Ltd. saw its shares surge by 11% over two trading sessions, reaching Rs 1432, even as the company reported a significant 54% decline in its fourth-quarter (Q4) net profit. The Mumbai-headquartered firm posted a Q4 profit of Rs 554.64 crore, a stark contrast to Rs 1,221.84 crore in the year-ago period. This profit drop was partly attributed to an impairment of Rs 42.02 crore related to associates, reflecting changes in business conditions and market dynamics.
Management Optimism Fuels Cipla Shares Rally
Despite the profit downturn and a 2.80% dip in Q4 revenue from operations to Rs 6,541.20 crore, investor sentiment around Cipla shares remained robust. The rally was primarily driven by positive commentary from the company's management regarding future growth prospects. Key factors include:
- India Business Growth: Cipla projects a double-digit year-on-year revenue growth for its India business, a trend expected to continue into FY27.
- US Market Recovery: The company anticipates an improvement in its US sales run-rate, targeting $250 million per quarter by the end of FY27, up from the current $155 million (Q4FY26). This projection excludes the potential revival of Lanreotide sales and is supported by several potential product launches, each with annual business prospects of approximately $100 million.
- EBITDA Margin Guidance: Management has guided for an 18-20% EBITDA margin in FY27, with the second half of the fiscal year expected to outperform the first.
Brokerage Upgrades and Market Performance
The positive outlook has also influenced brokerage firms. JM Financial, for instance, upgraded Cipla's stock to 'BUY' from 'ADD', setting a price target of Rs 1,546. The brokerage firm noted that the worst quarter for Cipla is likely behind it, with improving visibility on US product launches expected to boost earnings momentum from the second half of FY27. They project an 11% revenue CAGR, 11% EBITDA CAGR, and 18% adjusted PAT CAGR over FY26–28.
Cipla's market capitalization rose to Rs 1.14 lakh crore following the surge. The company's domestic formulation, trade generics, and consumer wellness segments all reported strong double-digit year-on-year growth during the quarter. Furthermore, the African business, encompassing private markets, tender business, and North Africa, also recorded a healthy 14% year-on-year growth in constant currency terms.