Cipla Falls 5% Despite Strong Q1

Cipla shares reversed early gains to fall nearly 5 per cent on Monday. The pharma company on Friday post market hours announced its quarterly earnings, which were above the Street's expectations.

Analysts attributed the fall in share prices to profit-taking.

Cipla's net profit more than doubled in the June quarter to Rs 650.6 crore, led by a strong jump in its operating income.

Cipla's EBITDA or operating income rose to Rs 963 crore, from Rs 469 crore a year earlier.

The pharma company's revenues rose 42 per cent to Rs 3,852 crore, led by supply of Nexium API (active pharmaceutical ingredients) to Teva in the US. Earlier this year, the US FDA had approved the first generic version of AstraZeneca's blockbuster drug digestive disorder medicine Nexium. It had given approval to Teva Pharmaceuticals to market the generic version of Nexium. Recently, Mylan also has launched the generic version of Nexium in the US.

According to Nirmal Bang's estimates, Nexium contributed around $76 million to Cipla's topline for the quarter. Led by supply of Nexium API, Cipla's export formulations business posted a growth of 79 per cent at Rs 2,170 crore during the quarter,

Excluding the impact of Nexium, Cipla's export formulations grew 38 per cent year-on-year but remained muted sequentially, the brokerage added.

For FY2016, Cipla expects a 20 per cent topline growth. The stock has gained over 60 per cent in the past one year as compared to nearly 9 per cent rise in benchmark index Nifty.

Religare Capital Markets in a note said, "We raise our FY16/FY17 earnings per share by 16%/8% on higher Nexium sales as well as the Pulmicort launch." It has a hold recommendation on the stock with a target price of Rs 755.