Cipla Q3 Review — Margins Surprises Positively; Systematix Maintains 'Buy' On The Stock, Revises Target Price

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Systematix Research Report

Cipla Ltd. Q3 FY25 revenues were in line but Ebitda and net income were significantly above our and consensus estimates led by higher gross margins and lower operational costs during the quarter. Ebitda margin for the quarter stood at 28%, as against the expectation of 26%. Better product mix led to the improvement in gross margins. Cipla believes the 28% margin is not sustainable and the current quarter’s performance was driven by a strong contribution of respiratory assets (seasonally strong). The US business declined by 4% QoQ (constant currency terms and in line with guidance) due to disruption in supplies of generic lanreotide which is expected to be restored by the end of Q4 FY25.

We maintain a Buy on Cipla with a revised price target of Rs 1,705 based on 25 times FY27E EPS.

We forecast revenue/Ebitda/ PAT CAGR of 6%/5%/10% respectively over FY24-FY27E. We estimate gRevlimid contribution at around 30% of earnings in the base which should be replaced by new launches (gAdvair, gSymbicort, gAbraxane).

With respect to generic Abraxane, Cipla has updated its launch guidance to late H2 FY26. The guidance assumes a six month lag in launch post U.S. Food and Drug Administration approval as company is yet to validate the commercial scale batches for gAbraxane.

We believe gAbraxane has material execution risk and we forecast risk adjusted sales of $50 million in FY27. Assuming gAbraxane launch does not come through, our FY27E EPS can correct by ~5%.

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