Buy Cipla; target of Rs 1592: KR Choksey

KR Choksey's research report on Cipla

Cipla clocked in 13.7% Y-o-Y (-1.1% Q-o-Q) rise in revenue (vs. our estimate of Rs. 65,055 Mn, a beat of 2.5%) It was driven by stronger than anticipated growth in North America revenue, which grew at 19.8% Y-o-Y (+1.5% Q-o-Q) to Rs. 19,160 Mn (vs. our estimate of Rs. 17,920 Mn, a beat of 7%), SAGA growing at 19.9% Y-o-Y (-17.9% Q-o-Q) to Rs. 8,150 Mn (vs. our estimate of Rs. 7,820 Mn, a beat of 4%), and India market recording 11.5% Y-o-Y (+1.5% Q-o-Q) growth in revenue to Rs. 28,590 (vs. our estimate of Rs. 28,193 Mn, in line, with a beat of 1%) • North America’s has seen 15th consecutive quarter of a growth on a Y-o-Y basis driven by peptide product like Lanreotide injection (under 505 (b)(2) filing, as an NDA) gaining market share, its existing respiratory assets performing and contribution from Lenalidomide’s sales. • The net income (reported) increased at 31.8% Y-o-Y (-6.6% Q-o-Q) to Rs. 10,559 (vs. our estimate of Rs. 10,521 Mn) while adjusted net income increased at 44.6% Y-o-Y (-1.0% Q-o-Q) to Rs. 11,580 Mn for Q3FY24 (a beat of 10.0%).

Outlook

Currently, the stock is trading at 41.7x/26.0x/23.6x/21.5x based on its FY23A/FY24EFY25E/FY26E EPS estimates, respectively. We envisage the company to grow its revenue and earnings at 9.8% CAGR over FY23-FY25E, and PAT to grow at 24.6% CAGR over FY23-26E. We introduce FY26E estimates and roll forward our valuation basis to FY26E while applying 25.0x (unchanged) multiple on FY26E EPS of Rs. 63.7 and arrive at a target price of Rs 1,592/share and retain our rating of BUY (upside: 16.2%).