Cipla Q3 Results Review - Core Markets, Operating Leverage Drive Earnings Growth: Motilal Oswal

Motilal Oswal Report

Cipla Ltd.'s beat our earnings estimates in Q3 FY24, aided by an outperformance in the domestic formulation /North America segments and better operating leverage. These factors were offset to some extent by a muted performance of emerging markets and the Active Pharmaceutical Ingredient segment.

The company is making efforts to minimize the timeline for potential approvals (g-Advair/g Abraxane) in the NA market.

We raise our earning per share estimates by 12%/9%/7% for FY24/FY25/FY26 to factor in

1. peptide-based niche approvals,

2. industry-beating growth in core chronic therapies in the DF segment, and

3. continued efforts for brand building in consumer healthcare.

We CIPLA at 25 times 12 million forward earnings and add Rs 30 (g-Revlimid NPV) to arrive at a target price of Rs 1,600.

We remain positive on CIPLA on the back of

1. respiratory/peptide asset build-up for the NA market,

2. robust brand franchise in DF, and

3. scope for inorganic growth given surplus cash of Rs 75 billion as of Q3-end. Retain 'Buy'.

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