Cipla reported a weak Q4 due to muted growth across markets and impact of one-off expenses (~200bps impact on gross margin). Adjusting for one-offs, EBITDA margin comes to 19.3%, still below our expectation (vs. 22% margin for FY21).

We expect margin to bounce back to 22%+ level, going forward, driven by better pricing and product mix, new launches in the US, ramp-up in COVID portfolio in India (Remdesivir, Roche's antibody cocktail, Tocilizumab), and recovery in India business (ex-COVID). The outlook for the US business remains good as respiratory pipeline (gAbraxane, gAdvair, gDulera) adds medium-term growth visibility. We factor in 16% earnings CAGR over FY21-23e and trim our estimates by 6%/3% in FY22/23 to factor in lower US sales assumption.

Weak quarter: Revenue at INR46bn (+5% YoY, -11% QoQ) was impacted by subdued performance in India (+4% YoY, -19% QoQ, seasonality), US (-2% QoQ, weak season, lack of new launches), CGA (-17% YoY) and APIs (-9% YoY). EBITDA margin declined substantially to 17.3% (+281bps YoY, - 653bps QoQ) due to impact of one-off expenses (~200bps), unfavorable product mix (weak respiratory sales), and negative operating leverage (lower topline).

US pipeline holds promise, timely launches key to drive growth: We forecast 7% sales CAGR over FY21-23e, driven by ramp-up in Albuterol (headroom to gain market share exists) and new launches such as gFosrenol and gAbraxane (FY22). Cipla expects FY23 to be a significant year in terms of launches (gAdvair, gRevlimid).

Key call takeaways: (a) gAdvair - responding to query (non clinic related), expect 24-30 month timeline for approval post filing (May 20); gFosrenol and gAbraxane - launch expected in FY22; gAlbuterol - 16.5% Gx share and 13.2% share (including brands); tie-up for five peptides products - one expected in FY22; (b) inhalation pipeline - partnered asset (completed clinical trials), other two assets - likely to enter clinic in FY22; (c) India - COVID portfolio contributed ~4-5% of sales (<3% in Q4), Trade Gx - less than 20% of India revenues; (d) EBITDA margin guidance - 22%+ for FY22.