Buy Cipla; target of Rs 1695: Geojit Financial Services

Geojit Financial Services research report on Cipla

Cipla Ltd is a holding company that operates as a pharmaceutical company. Its strategic business units comprise Active Pharmaceutical Ingredients (APIs), Respiratory, and Cipla Global Access. Geographically, the company operates in India, the US, South Africa and the Rest of the World. In Q2FY25, Cipla's consolidated revenue grew 5.6% YoY to Rs. 7,051cr, driven by a 28.9% YoY growth in South Africa to Rs. 799cr and a 19.1% YoY growth in emerging markets and Europe to Rs. 806cr. Revenue from Indian operations grew a marginal 4.7% YoY to Rs. 2,948cr, driven by strong chronic therapy sales and 21% YoY growth in consumer health franchise. However, seasonality impacted the Acute category growth, but the business is expected to recover in the coming quarters. Cipla's North America business rose 5.2% YoY to Rs. 1,986cr, driven by its differentiated portfolio, but was impacted by lower sales of Lanreotide due to a partner's manufacturing plant expansion, with sales expected to rebound in Q4FY25. EBITDA increased 8.8% YoY to Rs. 1,886cr and EBITDA margin expanded 70 bps to 26.7%, primarily driven by a favourable product mix.

Outlook

The recent clearance of the Goa facility paves the way for Abraxane’s launch. However, concerns persist about the delayed launch of gAdvair due to the pending US FDA compliance of its Indore plant. Despite these concerns, we remain positive, and reiterate our BUY rating on the stock with a revised target price of Rs. 1,695, based on 26x FY26E adjusted EPS.