CLSA downgrades Cipla to underperform post Q4; cuts target price to Rs 525

Employees and security staff work at the reception area of Cipla at its headquarters in Mumbai, India June 17, 2015. Cipla Ltd, India's fourth-largest drugmaker by sales, is planning to enter Latin America and Eastern Europe to tap into growing demand for generic drugs in emerging markets, Chief Executive Subhanu Saxena said. REUTERS/Danish Siddiqui - RTX1GUXV

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26 Aug, 2025 12:21

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Cipla Q4 net loss narrowed to Rs61.79 crore but muted EBITDA margins led to a downgrade by CLSA to underperform from outperform earlier. The Asia-focussed broker lowered its 12-month target price to Rs 525 from Rs660 earlier.

The company had posted a net loss of Rs 92.83 crore for the corresponding period of the previous fiscal, Cipla said in a BSE filing.

The results for the quarter include one-off charges related to the impairment of a part of intangibles from our US acquisition and a provision for loss on certain assets of our subsidiary Cipla BioTec Pvt Ltd, Cipla said.

Consolidated total income of the company rose to Rs 3,604.79 crore for the quarter under consideration as against Rs 3,373.91 crore for the same period a year ago.

“The key disappointment in Cipla’s 4QFY17 results was its Ebitda margins, which came 4 percent below our estimates. This reverses the margin improvement trend displayed in 9MFY17,” said the CLSA note.

“We believe cost-led margin expansion has played out and next leg of margin improvement must be led by double-digit revenue growth,” it said.

However, such growth is expected to be back-ended in FY18 and relies on timely approval of certain limited competition products in the US.

Slower-than-expected margin improvement drives 20 percent EPS cut for FY18-19CL. CLSA reduced its target price to Rs525 from Rs660 and downgrade the stock to underperform from outperform.

For the fiscal year ended March 31 this year, the net profit of the company stood at Rs 1,006.39 crore. It was Rs 1,359.99 crore for the year-ago period.

For FY17, Cipla filed 32 products with the US FDA and launched 18 new products. Cipla expects to launch one limited competition product starting 2HFY18. It expects to file over 20 products in FY18.

Unlike its peers, Cipla’s management is upbeat about its US business for FY18. For FY17, Cipla’s US business grew 25 percent to Rs26bn (US$400m) driven by the Invagen acquisition, said the CLSA note.

At 09:25 hrs Cipla was quoting at Rs 487.00, down Rs 17.10, or 3.39 percent. It touched an intraday high of Rs 491.60 and an intraday low of Rs 479.00.