Buy Cipla; target of Rs 655: HDFC Securities

HDFC Securities' research report on Cipla

Cipla's Q4 revenues came in line, however, margins missed estimates on account of Covid led disruption and remediation cost for Goa plant. The outlook for key businesses remains strong with US likely to see improved traction on account of ramp up in gProventil and limited competition launches. India growth trajectory has improved (double digit growth in last 3 quarters) and with enhanced focus (implementation of One-India strategy), domestic growth should outperform the market. Cipla's balance sheet further improved with reduction in net debt (Rs8bn) and improvement in working capital days. We believe with healthy earnings growth (~22% CAGR) and core ROCE expansion (~350bps) over FY20-22e, valuations are likely to re rate.

Outlook

We maintain Buy rating and increase our TP to Rs655 based on 22x FY22 EPS.