Cipla's strong US pipeline, steady Q4 earnings and hopes of easing regulatory snags drive bullishness
Cipla's strong US pipeline, steady Q4 earnings and hopes of easing regulatory snags drive bullishness
Drugmaker Cipla Ltd's healthy growth outlook, as it aims to diversify its complex offerings, coupled with hopes of easing regulatory struggles for the company have ushered optimism among brokerages.
Shares of Cipla also reacted positively to the company's solid growth prospects and the management's positive commentary. At 09.30 am, shares of Cipla were trading around 6 percent higher at Rs 1,413.20 on the NSE, topping the list of gainers in the Nifty 50.
Ensuring a smooth pipeline of drug launches to support its growth in the coming fiscals, the Cipla plans to launch around 12 assets in the peptides and complex generics space over FY25-27. Aside from these, the company also has a line-up of five respiratory assets as well. According to brokerage JPMorgan, this strong pipeline in the US will drive Cipla's growth visibility beyond FY26.
Meanwhile, the company has also completed remediation measures at its Goa site and awaits a re-inspection of the plant from the US Food and Drug Administration. This re-inspection, which is likely to take place over the next three months, will be the key trigger on investors' watchlist, brokerages Nuvama Institutional Equities and JPMorgan believe.
In addition, showcasing confidence over its growth potential, Cipla's management rolled out an EBITDA guidance of 24.5-25.5 percent for FY25. This guidance doesn't factor in USFDA compliance at the Goa site. Nuvama as well as JPMorgan called Cipla's margin guidance a positive surprise as it was ahead of their expectations.
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Buoyed by the drugmaker's steady quarterly earnings and strong growth prospects, JPMorgan raised its price target to Rs 1,540 while retaining its 'overweight' call on the stock. Nuvama too revised its target price for the stock slightly upwards to Rs 1,780 while maintaining its 'buy' rating.
Nuvama also believes Cipla’s US business would remain buoyant with peptide launches and market share gains in albuterol and lanreotide.
Going ahead, Motilal Oswal Financial Services forecasts a 12 percent earnings CAGR for Cipla over FY24-26. "This would be largely driven by the commercialisation of complex assets in the US and outperformance of chronic therapies in the DF segment, a transformed operating model in trade generics, and sustained growth in the consumer healthcare segment inspection," MOFSL stated.
MOFSL also reiterated its 'buy' rating for the stock with a price target of Rs 1,600.
Steady Q4 earnings
Cipla's net profit for the March quarter surged 79 percent on year to Rs 939 crore, beating Moneycontrol's estimate of Rs 891 crore. Its bottomline was impacted by one-time impairment charges worth Rs 182.42 crore in the year-ago period, giving it the benefit of a low base.
Revenue, however, slightly missed expectations despite growing 13 percent year-on-year to Rs 6,163 crore. Moneycontrol had estimated Cipla's revenue to come around Rs 6,224 crore for Q4. The divestment of Cipla's Uganda-based subsidiary QCIL (Quality Chemical Industries), which was done in the previous quarter, also impacted its on-year topline growth.
The drugmaker's US business delivered in-line growth of 11 percent at $226 million, while its India business suffered from soft seasonal demand for its consumer business and reported just 7 percent on-year growth, lower than analyst expectations of a low-double-digit increase.
On the operational front, the EBITDA margin also swelled up 54 basis points on year to 21.4 percent.
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