Buy Cipla; target of Rs 1365: ICICI Securities

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ICICI Securities research report on Cipla

Cipla continues to surprise us positively. Q2FY24 growth was led by core markets of India (up 10% YoY), US (~4% QoQ) and South Africa (15% YoY). Price hikes in key markets and softer RM cost aided 243bps YoY rise in gross margin to 65.4%. Operating leverage further lifted EBITDA margin by 362bps YoY to a record 26%. We expect Cipla’s US business to clock 24% CAGR over FY23-25E aided by the launch of gAbraxane, gAdvair, peptide and complex generics. In India, MR addition in branded generics and strong position in trade generics may drive 10% CAGR over FY23-25E. Management has again raised FY24 margin guidance by 50bps to 23-23.5%. We raise our FY24E/25E EPS by 4.9% and 5.6%, respectively.

Outlook

We maintain BUY rating on the stock but raise target price to INR 1,365, valuing the company at 23x FY25E earnings.

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Cipla - 30 - 10-2023 - icici