Buy Cipla; target of Rs 1540: Motilal Oswal

Motilal Oswal's research report on Cipla

A robust ANDA pipeline to overcome price erosion and deliver growth After exhibiting a moderate 7% YoY earnings growth in FY23, we expect Cipla to end FY24 on a strong note with a 26% YoY earnings growth. Cipla has executed efforts to improve its growth outlook beyond FY24. On the India business front, in particular, Cipla is working to not only enhance its prescription base but also strengthen its trade generics and consumer healthcare businesses. Even in the US generics segment, Cipla is developing a pipeline of difficult-tomanufacture products, including respiratory and peptide products, to sustain its growth momentum.

Outlook

Hence, we model a 13% earnings CAGR over FY24-26. We value Cipla at 25x 12- month forward earnings and add an NPV of INR30 for g-Revlimid to arrive at our TP of INR1,540. Cipla remains our top-pick in the large-cap pharma space, given: a) its threepronged growth levers in India, b) a robust ANDA pipeline to overcome price erosion and deliver growth, and c) a de-risked regulatory factor through filings from the alternate sites. We maintain our BUY rating on the stock.