Cipla tanks 4% post Q4 results; higher tax expenses weigh

NEW DELHI: Cipla Ltd slipped over 4 per cent in afternoon trade on Thursday, a day after the pharma major reported 8.3 per cent YoY drop in net profit to Rs 268 crore, weighed down by higher interest expenses.

At 02:00 p.m.; Cipla was trading 4 per cent lower at Rs 385.35. It ha hit a low of Rs 384.80 and a high of Rs 403 in trade today.

Tracking the momentum, Ashwani Gujral of ashwanigujral.com recommended investors to sell the stock for a target of Rs 375, keeping a strict stoploss at Rs 392.

For the quarter ended March 2013, Cipla posted a net profit number which was below analyst and street estimates. The pharma major posted a growth in net sales by 5.1 per cent to Rs 1,906 crore.

The operating profit margins came in at 18.3 per cent, down by 80 bps over the corresponding period of last year. This, along with the 684 per cent rise in the interest expenses, caused the net profit to dip by 8.3 per cent YoY to Rs 268 cr, added the Angel Broking report.

Revenue growth at 10 per cent was below expectation. This was due to a fall in domestic generic revenues and postponement of $20mn tenders to FY14.

“Gross margins in the quarter improved 350 bps YoY and were 280 bps ahead of street expectation led by better mix,” Jefferies said in a report.

“Operating margins though declined 50 bps due to lower operating leverage and investment in setting up US and EU front-end,” the report added.

According to Jefferies, higher tax rate and lower other income led to reported PAT which came below estimates. The brokerage firm has a buy rating on the stock with a target price of Rs 460.