Buy Cipla; target of Rs 1020: HDFC Securities

HDFC Securities' research report on Cipla

Cipla delivered yet another solid quarter, driven by healthy growth across businesses (India, CGA, Europe, API). EBITDA margin came ahead of expectation at 24% (+647bps YoY, +46bps QoQ), aided by tight control on costs. Cipla is tracking ahead of its initial cost saving guidance of Rs4-5bn for FY21 and expects to retain part of these benefits in the coming quarters. Its US business outlook remains strong as respiratory/ niche filings add longer-term growth visibility. Cipla expects to add USD300-500mn to its US revenue base of USD500mn+ by FY25. In India, while Covid sales contribution is likely to go down materially, recovery in ex-Covid business is expected to drive double-digit growth of ~10% CAGR over the next two years.

Outlook

We expect RoCE to expand by ~550bps over FY20-23e, driven by operating leverage benefits and cost optimisation efforts. Maintain BUY. Our revised TP is Rs 1,020/sh.

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