Cipla Q3 Results Review - Strong Quarter; Key U.S. Launches Delayed: Prabhudas Lilladher

Prabhudas Lilladher Report

We increase Cipla Ltd.'s FY24-26E earnings per share estimates by 5-8% to factor in higher margins and downgrade to ‘Accumulate’ from Buy with revised target price of Rs 1,400/share (1350 earlier) based on 25 times FY26E earnings per share plus Rs25 for gRevlimid.

Cipla’s Q3 FY24 Ebitda (Rs 17.5 billion; 26.5% operating profit margin) came 10% above our estimates, aided by higher gross margins (65.9%) and India sales.

Due to delay in some key launches like gAdvair and gAbraxane (pushed by atleast two-three quarters), timely launch of five peptide (guided for FY25) will be a key.

We continue to remain positive on key segments growth including India and U.S. given-

1. strong traction in respiratory and other portfolios,

2. potential +10% growth in domestic formulations and

3. sustainability of current U.S. revenue.

We expect 11% EPS CAGR over FY24-26E. At current market price, stock is trading 25 times FY26E EPS adjusted for gRevlimid.

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