Neutral Cipla; target of Rs 1180: Motilal Oswal

Motilal Oswal's research report on Cipla

CIPLA delivered a beat on 2QFY23 earnings, led by better traction in the US portfolio and in the Domestic Formulation (DF) vertical (Prescription category and Trade Generics), driving superior profitability. The company remains on track to further extend its launch pipeline of niche products in the US market and maintain its steady outperformance in the DF segment. We raise our FY23/FY24 EPS estimate by 7%/4.5% to factor in: a) enhanced prospects of limited competition products, b) outperformance in Branded Generics in the DF market, and c) increased operating leverage. We continue to value CIPLA at 23x 12M forward earnings and add NPV of INR40 related to g-Revlimid to arrive at our TP of INR1,180. While the outlook remains promising on the back of: a) complex products in the Respiratory/Peptide category of US Generics, b) an enriching brand franchise in the DF market through its One India strategy, and c) cost minimization activities, we maintain our Neutral stance on the stock given the limited upside from current valuations.

Outlook

We raise our EPS estimate by 7%/4.5% for FY23/FY24 factoring a) enhanced prospects of limited competition products, b) outperformance in branded generics DF market, increased operating leverage. We continue to value Cipla at 23x 12M forward earnings and add NPV of INR40 related to g-Revlimid to arrive at price target of INR1,180.