Buy Cipla; target of Rs 1600: Motilal Oswal

Motilal Oswal's research report on Cipla

CIPLA beat our earnings estimates in 3QFY24, aided by an outperformance in the domestic formulation (DF)/North America (NA) segments and better operating leverage. These factors were offset to some extent by a muted performance of emerging markets and the API segment. The company is making efforts to minimize the timeline for potential approvals (g-Advair/gAbraxane) in the NA market. We raise our EPS estimates by 12%/9%/7% for FY24/FY25/FY26 to factor in a) peptide-based niche approvals, b) industry-beating growth in core chronic therapies in the DF segment, and c) continued efforts for brand building in consumer healthcare.

Outlook

We value CIPLA at 25x 12M forward earnings and add INR30 (g-Revlimid NPV) to arrive at a TP of INR1,600. We remain positive on CIPLA on the back of a) respiratory/peptide asset build-up for the NA market, b) robust brand franchise in DF, and c) scope for inorganic growth given surplus cash of INR75b as of 3Q-end. Retain BUY.