Cipla Q4 Profit Rises 30%, but Shares Dip up to 2% on Margin Concerns

Cipla Ltd. saw a 30% year-on-year increase in net profit for the March quarter, but the stock registered muted upside during caution on forward margin guidance.

The pharmaceutical giant posted a profit of ₹1,222 crore for Q4 FY25 with the help of reduced taxes and increased other income.

Revenue increased more than 9% to ₹6,729.7 crore, spurred by consistent performance in all but a few geographies. 

Stock Reaction Dull Despite Profit Beat

After the announcement of results on May 13, Cipla Ltd. shares saw volatility in trades on May 14. The stock dipped more than 2% intraday before recovering to close marginally higher at ₹ 1,520, up 0.6%.

As of 12:25 PM, the stock was trading at ₹1500.50, at a decline of 1.29%. Despite the bottom-line performance surpassing expectations, investors continued to be conservative in the light of the company's weaker profit guidance for the next couple of fiscal years. Management noted expected compression of margins in FY26 and FY27.

Margin Headwinds and Product Transition

One of the pressure points is the planned loss of exclusivity for Revlimid by Q4 FY26, a product that is presently a significant contributor to Cipla's US business.

Management has stated that new products will not completely compensate for the effect of the phasing out of Revlimid.

The margins potentially squeezed as much as 300 basis points in FY27. The company is also embarking on a capital-cost phase, expanding biosimilar, R&D, and manufacturing capacity investments, which may further bear down on near-term profits.

Regional Performance Mixed

Geographic performance was mixed. India operations were flat, while North America and South Africa fell short of expectations. On the other hand, Europe, emerging markets, and the global API segment posted better performances.

US Policy Perceived as Limited Risk

Cipla responded to concerns regarding the US government's executive order on pricing, making it clear that the action is directed largely at branded medications and will not significantly impact Indian generics.

Management indicated any impact would be insignificant and largely on a voluntary basis, alleviating concerns of general pricing pressure on exports to the US market.

Disclaimer: This news is solely for educational purposes. The securities/investments quoted here are not recommendatory.

To read the RA disclaimer, please click here.