Cipla fundamental analysis is an important topic to discuss today. The reason behind this is the trends observed in the Nifty Pharma Index. A headline was published in ‘The Economic Times’ that says, ‘Bloodbath on D-Street! IT stocks drag Sensex over 650 points lower, Nifty below 19,800’, a silver lining emerged in the pharmaceutical sector. Despite the broader market indices experiencing a bearish run, pharma stocks showed a positive start to their earnings season, with the Nifty Pharma Index displaying promising signs.
The Index was up by 3% on July 27, 2023 trading session. Nearly all stocks gained momentum with Cipla rising more than 10%. However, the question that arises from this short-term trend is whether Cipla’s recent performance makes it a viable long-term investment option? And that’s what we are here to discuss that while the immediate positive growth is promising, it is essential to look deeper into the company’s financial health and overall sustainability.
CIPLA Headlines
CIPLA’s Plans for future growth
A headline published in The Financial Express.com says that “Cipla plans to grow higher than industry growth rate in FY24.” For the fourth quarter and full year that ended March 31, 2023, the company announced its statement wherein with the other financial reports, the company informed about its future plans.
Cipla’s Business crossed Rs.730 Mn+ revenue for the first time as well as highest ever quarterly sales of $ 204 Mn. The company also informed that three differentiated products are undergoing clinical trails, with filings targeted in FY24. Moreover, filings on the complex generics including peptide injectables are on track. The pharma major also recorded healthy ranks and market position in key therapy areas of Asthma and COPD, Anti-biotics, Cough and Cold and Probiotics. In API, the company reported a consistent growth in emerging markets and the European markets is also picking up.
Umang Vohra, CEO, Cipla told Financial Express.com: “We are looking for more opportunities for buying product and brands in India which are strategic areas of interest for us,” he said. Along with launching new products, Cipla is also planning to generics for the drugs that will become off-patent this year. Certainly there’ll be lots of launches in diabetes, we are also hoping to launch drugs in the categories of respiratory medicine where we’re coming up with the combination drugs which will happen in quarter 3 and quarter 4.”
Financial Express.com
Cipla manufactures drugs commonly used in households on a regular basis. The company is future oriented and is positively looking for growth in the upcoming quarters, and hopefully in the coming years too. What distinguishes the firm from the competitors is their ability to recognise their significant potentials in taking new opportunities to outperform the competition.
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About The Company- cipla fundamental analysis| SWOT Analysis
Cipla Ltd. engages in the manufacture and distribution of healthcare products and bulk drugs. The company is the 3rd largest pharmaceutical player in India and leader in therapies such as respiratory and urology and. It also ranks 2nd in the overall chronic business.
The company has produced 200+ generics and complex APIs that are supplied to 62 countries worldwide. Cipla continues to be a preferred partner to many large generic pharmaceutical companies. It continues to focus on creating depth in antidiabetics and the oncology therapy building on existing and new partnerships with global multinational corporations.
cipla fundamental analysis- Essentials & Financials
In all my post, I research about the financials of the company in details and try to gather the important factors to consider a stock at one place. I believe my readers should get familiar with the latest performance of the company all at once. I go through a lot of websites but cannot find all the ratios and metrics at one place. So this is what you can say is different here. Here we go:
Operating revenue: Cipla has an operating revenue of Rs. 23,706.82 Cr. on a trailing 12-month basis. An annual revenue growth of 5% is not great.
Company’s Financial Health: Cipla have an average ROE of 12.85 % and ROCE of 18.2%. For hospitals and healthcare companies, ROE holds particular significance as it reflects their ability to grow and expand rapidly.
P/E Ratio: Cipla’s Price to Earnings Ratio (PE) stands at 30.6, which is lower than its sector’s PE ratio of 40.8. This lower PE ratio is viewed positively as a healthy indicator.
Earnings per Share: The company maintains a positive and growing Trailing Twelve Months (TTM) Earnings per Share of Rs. 38.49, showing an impressive YoY increase of +23.39%.
Debt-to-Equity: Cipla has a Debt to Equity ratio of 0.02 , which is a strong indication for the company. It implies that its assets are financed mainly through equity which enhances the company’s financial strength and stability.
Operating Profit Margin: Cipla has OPM of 21.93 % which is a good sign for profitability. This signifies that Cipla’s core business is robust and profitable, which is a positive sign for its overall financial health and sustainability.
Dividend: Company has been maintaining a healthy dividend payout of 19.1% and a dividend yield of 0.72%.
Shareholding Pattern
The above metrics gives an overview of the recent performance of the stock, offering valuable insights into key financial indicators. Though they are essential data, they may not be sufficient to draw a definitive conclusion. For that we need to dive further into the record book of the company.
In the quarter ending June 2023, the promoters of Cipla reduced their holdings slightly from 33.55% to 33.47%. During the same period, Foreign Institutional Investors (FII/FPI) also decreased their holdings, going from 27.42% to 25.49%. On the other hand, Mutual Funds increased their holdings from 15.00% to 15.35%.
Interestingly, the number of Mutual Fund schemes holding shares in Cipla decreased from 37 to 35 during the June 2023 quarter. However, Institutional Investors took a different approach and increased their holdings from 49.51% to 49.82%.
These changes in ownership patterns indicate shifts in the confidence and interest of various investor groups in Cipla’s stock during the specified quarter.
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Evaluating CIPLA Financial Statements
Profit & Loss | Income Statements
After analysing the 5 years data, that is March 2019 to March 2023, from the given table, we will be able to know how the company has performed so far and what can be the future prospects of Cipla.
Revenue from Sales: Over the course of five years, from March 2019 to March 2023, the revenues from sales have shown a steady and gradual increase. Back in March 2019, the revenue stood at 16,362 crores, and by March 2023, it had grown to 22,753 crores. The growth rate of revenues from March 2019 to March 2023 is approximately 38.78%. This signifies a substantial and positive upswing in revenue over the mentioned timeframe.
Net Profit: In the course of 5 years, Net profit has also increased gradually from 1,492 crores in March 2019 to 2,833 crores in March 2023. The growth rate of net profit from March 2019 to March 2023 is approximately 89.78%. This indicates a substantial increase in net profit over the specified five-year period, reflecting positive financial performance for the company.
Earnings Per share: There is an upward trend in the EPS of Cipla over the course of 5 years. In March 2019, the EPS for Cipla was at 18.96 Rs per share, and by March 2023, it had risen significantly to 34.71 Rs per share. EPS is an important indicator which tells about the company’s profitability and growth potential. In case of Cipla, it is positive and growing which is a good sign as the positive EPS growth is a favorable indication, reflecting the company’s financial strength and attractiveness as an investment option.
Dividend payout: This metric has also recorded a growing trend over a period of 5 years.
The company has shown decent growth in its Income statements in the last 5 years. Looking at the upcoming projects, the company promises steady growth in the future as well.
Cash Flows Statements
Cash flow statements are essential financial documents that provide important details about company’s financial health and performance. It shows two vital aspects: Liquidity Assessment and Investment Decision Making.
Cash Flows from operating activities: Over the past 5 years, that is, from March 2019 to March 2023, it has improved substantially from 1,691 crores to 3,326 crores indicating that the company is able to generate more cash from its core business operations which is a healthy sign.
Net cash flow: It represents the difference between the total cash inflows and outflows during a specific period, typically a quarter or a year. Net cash flow helps assess a company’s liquidity position. A positive net cash flow indicates that the company has more cash inflows than outflows, suggesting it can meet its short-term financial obligations and operational expenses and vice versa for the negative net cash flows. In case of Cipla, it is negative for the last two consecutive years.
Negative cash flows can occur for various reasons and are not necessarily an indication of poor financial health. Temporary negative cash flows can be a part of a company’s growth strategy, while sustained negative cash flows without valid reasons may indicate underlying financial issues that need attention.
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PEER Comparison
Limitations Of CIPLA
Sales growth: Over the past five years, the company has experienced lackluster sales growth, with a mere 8.47% increase. This modest growth rate may raise concerns among investors as it indicates a slow expansion of the company’s revenue over an extended period.
Low ROE: Furthermore, the company’s Return on Equity over the last three years has been relatively low at 13.2%. A lower ROE in this case indicates that the company is not generating substantial returns on the investments made by its shareholders. This could be a matter of concern for investors as it might indicate challenges in the company’s overall performance.
The decline in promoter holding over the previous three years, which accounts for -3.21%, is another important factor that should be noted. A decline in promoter ownership may raise concerns about their belief in the company’s future prospects or point to a change in its strategic direction.
The results above collectively show that the firm has struggled to raise its revenues significantly, and its profitability, as measured by ROE, has not been strong in recent years.
Important Highlights Of Company’s Past Year Performances
Over the past five years, CIPLA has recorded a commendable profit growth, with a CAGR of 16.0%. In the trailing twelve months (TTM), the company has shown exceptional performance, achieving a remarkable profit growth of 28%.
Over the last three years, the share price of Cipla has surged by 21%, and in the trailing twelve months, it has experienced a notable increase of 22%.
The company’s Return on Equity has stayed steady at 13% over the last three years, showing a sound and effective use of shareholders’ money. Additionally, the ROE sustained at 13% itself in the most recent year.
Stocks like Cipla are the players of the long run. Slow growth rate in the present day may cause impatience but a wise financial decision lies in being patient.
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Highlights Of Earning And Revenue For CIPLA Ltd- Annual/Quarterly
We are almost in the finals of Cipla fundamental analysis and surely we would want to know the highlights of the article. Hold on, we will take care of it.
In the last year, the annual revenue of Cipla witnessed a growth of 5.4%, reaching Rs 23,228.6 Crores. Simultaneously, the annual net profit increased by 12.6% to Rs 2,832.9 Crores during the same period. However, the stock price showed a rise of 21.7%, yet it underperformed its sector by 4.6% in the past year.
In Cipla fundamental analysis, when looking at the quarterly figures, Cipla’s revenue for the most recent quarter rose by an impressive 17.7% YoY, amounting to Rs 6,465.2 Crores. Moreover, the quarterly net profit surged significantly by 45.1% YoY, totaling Rs 995.7 Crores.
Earnings
CIPLA earnings for the last quarter are 12.33 INR whereas the estimation was 10.86 INR which accounts for 13.59% surprise. Company revenue for the same period amounts to 64.65B INR despite the estimated figure of 61.55B INR.
Estimated earnings for the next quarter are 12.59 INR, and revenue is expected to reach 65.33B INR.
BOTTOM LINE
In conclusion to Cipla fundamental analysis, the company’s annual revenue and net profit have increased positively during the last year. Even though the stock price increased, it still narrowly underperformed its industry. However, the company’s strong quarterly sales and net profit rise was heartening. There seems to be an opportunity in Cipla. I have tried very very much to cover the stock from all angles and tried to present an unbiased analysis.
Hope you get some insights from here. That’s all for today’s post.
Thank You!
Happy Reading!
Disclaimer
The blog is meant for informational purposes and serves the general analysis of the stocks. Contents provided here are based on careful research and analysis utilizing the fundamental and technical indicators over a period of time. The post does not consist any direct recommendation about Investing or trading in the securities market. Thorough research and careful consideration are necessary for individuals to fulfill their personal responsibility in making financial decisions. Seeking professional advice before making any financial decisions is always advisable.
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