Cipla Slumps As Q4 Profit Falls 69%: Five Things To Know

Cipla shares slumped over 7 per cent on Wednesday, underperforming the broader Nifty, which rose 2.4 per cent. Cipla was also the top Nifty50 loser today. 

Here are the reasons why Cipla came under selloff:

1) Cipla, India's fifth-largest drugmaker by sales, reported a 69 per cent fall in its quarterly profit. Cipla's profitability was hit due to inventory-related costs, higher R&D expenses and one-off costs related to its business in Europe and some emerging markets.

2) Cipla reported a Q4 net profit of Rs 81 crore, while analysts polled by Thomson Reuters expected Rs 379 crore.

3) Cipla's Q4 sale of Rs 3,207 crore was also below Street estimates. Sales growth was driven by the domestic formulations, which rose 16 per cent year-on-year. Exports grew by around 7 per cent.

4) Nirmal Bang Securities said Cipla came up with "dismal" performance in Q4. Cipla posted its lowest-ever EBITDA margin in the near past at 6.7 per cent, the brokerage said. Adjusting for one-off items, Cipla's adjusted EBITDA stood at 13.6 per cent, which was still below consensus estimate, it added.

5) Cipla is facing regulatory challenges, with the US Food and Drug Administration sending a notice last October about violations of manufacturing standards at the company's Indore plant. Cipla has sent its final response to the FDA's concerns, and is awaiting word from the agency, the company said.

Most big brokerages cut their earnings per share (EPS) estimates after Cipla's disappointing Q4. Morgan Stanley slashed its FY17 EPS estimate by 24 per cent, while Credit Suisse and Macquarie cut their FY17 EPS estimates by 14 per cent 18 per cent.

Both Nirmal Bang Securities and Angel Broking have put Cipla's rating under review. 

Cipla shares ended 4.91 per cent lower at Rs 469.80 as compared to 0.56 per cent gain in the healthcare sub-index on the Bombay Stock Exchange.