Buy Cipla; target of Rs 940: HDFC Securities

HDFC Securities' research report on Cipla

Cipla settles patent litigation with Celgene (Bristol Myers Squibb) in the US for gRevlimid (~USD7.6bn). As per the settlement terms, Cipla is licensed to sell volume-limited quantity after Mar 2022 and without volume-restriction after Jan 31, 2026 subject to product approval from the US FDA. While the details pertaining to launch date and market share are not disclosed, the opportunity can add an NPV of Rs40/share to our target price in a base case scenario (assuming 5-10% market share, 30-50% price erosion between FY23-26). We increase our target price to Rs940 to factor gRevlimid launch in FY23 and maintain our BUY rating. Key catalysts are ramp-up in Albuterol, progress on IV Tramadol, limited competition launches in the US.

Outlook

We maintain BUY rating and increase our TP to Rs940/sh based on 23x Sep 22 EPS, Rs29/sh for gAdvair and Rs40/sh for gRevlimid. We believe Cipla is in sweet spot with key businesses witnessing strong growth momentum.

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