Buy Cipla; target of Rs 1730: Prabhudas Lilladher

Prabhudas Lilladher's research report on Cipla

CIPLA’s Q3FY25 EBITDA (Rs20bn; 28.1% OPM) was 14% above our estimates. While Q3 was expected to be soft for the US given supply issues in gLanreotide, decline was mere 5% QoQ. Further India sales and higher margin also aided healthy performance. Despite delay in some key launches like gAdvair and gAbraxane, steady gRevlimid sales, market share increase in gAlbuterol and new launches like Lanreotide supported US sales. Looking forward, FY26E and FY27E will see several high-value niche launches in the US along with the normalization of gLanreotide supply. Unlike some of its peers, which will see sharp decline in FY27E profitability vs FY26E given higher gRevlimid contribution, we see negligible decline in case of Cipla. Further, Cipla’s strong net cash position of +$1bn provides flexibility to pursue strategic M&A opportunities.

Outlook

Our FY26E/27E EPS stands marginally increased by 1-3%. At CMP, stock is trading 22x FY26E EPS. We maintain our ‘BUY’ with TP of Rs1,730/share. Timely launch of critical high-value products in the US in FY26E/27E will be key.