Cipla in pink of health

Cipla announced a set of bumper numbers for Q1FY16, exceeding all expectations. But yet, the stock has tanked, figuring out amongst the top losers currently. The stock is down over 4% at Rs.711 but it seems to have recouped from its low point of Rs.703. Profit booking and worry over its cautious outlook led to the stock slipping into the red.

For Q1Fy16, Cipla posted a very healthy 42% (YoY) jump in consolidated net sales at Rs.3777 crore with operating profit rising by  whopping 92% at Rs.1039 crore and margins came in at a huge 27% v/s 19.9%. It ended the quarter with a net profit of Rs.651 crore , up 121%.

What added this bumper numbers was the beginning of the supply of Nexium, a drug used to treat acidity, to Teva Pharma for the US markets. This is an exclusive arrangement and in the coming quarters is expected to only add on more.

But the company has been cautious and maintained its earlier guidance of 20% growth in sales for FY16 and this caution is based on expectations of lower contribution from Nexium as competition will catch on later. Thus for remaining three quarters together, the company is estimating an increase of around 13% in sales. The market is obviously not happy with this caution and thus profit booking pushed down the sock price.