Pharmaceutical major Cipla Ltd. witnessed a significant rally in its share price, climbing 11% over two trading sessions, despite reporting a substantial 54% year-on-year decline in its fourth-quarter profit. The stock surged from Rs 1292 on May 12 to Rs 1432 in the recent trading session, pushing the company's market capitalization to Rs 1.14 lakh crore.
Q4 Performance Overview
For the fourth quarter, Cipla posted a net profit of Rs 554.64 crore, a stark contrast to Rs 1,221.84 crore recorded in the same period last year. Revenue from operations also saw a slight dip of 2.80%, settling at Rs 6,541.20 crore compared to Rs 6,729.69 crore in the previous year. The company's EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) fell by 38% to Rs 955 crore from Rs 1,537.6 crore, with the margin contracting to 14.6% from 22.80%.
An impairment charge of Rs 42.02 crore was also recorded in relation to associates, attributed to shifts in business conditions and market dynamics.
Management Optimism Fuels Cipla Shares Rally
Despite the challenging Q4 figures, investor sentiment was buoyed by optimistic commentary from Cipla's management regarding future growth prospects. Key factors driving the rally include:
- India Business Growth: The management projects the India business to achieve double-digit year-on-year revenue growth, a trend expected to continue into FY27. This segment, encompassing Domestic Formulations, trade generics, and consumer wellness, already reported broad-based double-digit growth during the quarter.
- US Market Revival: Cipla anticipates a significant improvement in its US sales run-rate, forecasting an increase from the current $155 million (Q4 FY26) to $250 million per quarter by the end of FY27. This projection excludes the potential revival of Lanreotide sales and is supported by several potential new product launches, each with an annualized business prospect of $100 million.
- EBITDA Margin Guidance: The company has guided for an 18-20% EBITDA margin for FY27, with the second half of the fiscal year expected to deliver stronger margins compared to the first half.
- African Business Performance: Cipla's African operations, covering private markets, tender business, and North Africa, also demonstrated robust growth, clocking a healthy 14% year-on-year increase in constant currency terms for the quarter.
The positive outlook provided by the management has clearly reassured investors, overshadowing the immediate impact of the fourth-quarter profit decline and driving the recent Cipla shares rally.