Buy Cipla; target of Rs 1070: Prabhudas Lilladher

Prabhudas Lilladher's research report on Cipla

We cut our FY24E and FY25E EPS estimates by ~8% each, given Cipla’s key facilities (Goa and Indore) stuck in FDA issues leading to delay in new launches like gAdvair in US. FDA recently highlighted eight observations in the 483 letters issued to Cipla’s Pithampur (Indore) unit. Few observations raised are critical in nature and time consuming to resolve. However, these issues are unlikely to escalate import alert and thereby have limited impact on existing business. Despite earnings cut, we believe Cipla’s risk-reward is favorable at current levels.

Outlook

We expect 14% EPS CAGR over FY23-25E given the recent correction in stock price. At CMP, stock is trading at 18x FY25E EPS. Recommend ‘BUY’ with revised TP of Rs 1,070/share (1280 earlier), based on 22x FY25E EPS.