Buy Cipla; target of Rs 940: Dolat Capital Market

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26 Aug, 2025 12:21

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Dolat Capital Market's research report on Cipla

Cipla’s 4Q missed estimates as company took one-time shelf stock adjustment for Albuterol based on competitors’ entry. The impact was 2%, adjusting for which EBITDA margins are in line at 19-20%. While US sales at US$138mn were sequentially flattish, impacted by seasonality, price erosion in the base portfolio, Cipla’s profitability in the US is now equivalent to company’s level. Management remains confident of gaining further market share in Albuterol (has 87% TRx within Proventil market). Further, management guided that it has strong visibility of product launches in the US in FY22E to sustain growth. As proven in FY21 (savings of Rs5n+), it remains committed on cost savings driven by (1) leveraging digital technology in India branded formulations, (2) calibration of R&D – focussed products in inhalation. Basis this, management guided sustenance of margins at ~22% in the near term. Balance sheet continues to strengthen with net cash in FY21.

Outlook

We expect growth momentum to return in FY23E supported by inhalation assets and gRevlimid launch, notwithstanding concerns on muted earnings growth in FY22E arising from (1) moderation of COVID portfolio (~5% of FY21E sales) and (2) increase in promotional costs. At CMP, stock trades at 25x FY23 earnings of Rs36.

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