Cipla - Classification Of Goa Inspection Remains Key: Motilal Oswal

Motilal Oswal Report

We assessed Form 483 issued by U.S. Food and Drug Administration after inspection at Cipla Ltd.’s Goa site.

Form 483 highlights issues largely related to testing methods, monitoring environmental conditions, cleaning/disinfections and root cause analysis.  Considering the observations, we await classification of the inspection to incorporate potential business from key products like g-Abraxane.  Nonetheless, Cipla remains on track to file complex products in respiratory, peptides and differentiated product category.

We estimate a 12% earnings computer annual growth rate backed by 12%/7% sales CAGRs in DF/US generics and a 120bp margin expansion over FY24-26.

Considering a healthy pipeline of niche products and superior execution in the branded generics segment, we value Cipla on SOTP basis (24 times 12 month forward earnings and net present value of Rs 30 for g-Revlimid) to arrive at our target price of Rs 1,700. We maintain Buy rating on the stock.

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