Shares of Cipla Ltd. declined on Monday as most analysts maintained 'hold' citing limited upside from current valuations following second-quarter results.
The drugmaker's net profit rose 11% year-on-year to Rs 789 crore in the quarter ended September, according to its exchange filing. That compares with the Rs 783-crore consensus estimate of analysts tracked by Bloomberg.
Cipla Q2 FY23 Highlights (YoY)
Revenue rose 6% to Rs 5,829 crore, against the estimated Rs 5,818 crore. It grew 12% on a Covid-adjusted base of last year, said the company in the filing.
Ebitda was up 6% to Rs 1,302 crore, compared with the Rs 1,273-crore forecast.
Ebitda margin stood at 22.3% against 22.2%. Analysts had estimated it at 21.9%.
Shares of Cipla were trading 1.23% lower as of 9:50 a.m., while the benchmark Nifty 50 gained 0.24% on the NSE. Of the 42 analysts tracking the company, 32 have a ‘buy' rating, seven suggest a ‘hold' and three recommend a ‘sell', according to Bloomberg data. The 12-month consensus price target implies an upside of 3.9%.
Here's what brokerages have to say about Cipla's Q2 FY23 performance:
Motilal Oswal
Maintains ‘neutral' with a target price of Rs 1,180 apiece, implying an upside of 3%.
Delivered beat Q2 earnings led by better traction in the U.S. portfolio and in the domestic formulation vertical [prescription category and trade generics].
Cipla remains on track to further extend its launch pipeline of niche products in the U.S. market and maintain its steady outperformance in the DF segment.
Outlook positive on:
a) complex products in the respiratory/peptide category of U.S. generics
b) an enriching brand franchise in the DF market through its One India strategy
c) cost minimization activities
Neutral stance on the stock given the limited upside from current valuations.
U.S. sales grew due to launches and market share expansion in existing products.
In Q2FY23, there was a one-time Covid-related write-off of Rs 87.4 crore. Adjusting for the same, gross margin expanded by 320 basis points year-on-year to 64.4%.
There was a one-time gain of $3 million due to a share repurchase agreement with Avenue Therapeutics.
Adjusting for the same, adjusted PAT grew 20% to Rs 850 crore.
The management indicated that $175-180 million will be the new quarterly base business sales run-rate in the U.S. from $ 150-155 million earlier.
The management is confident of launching g-Advair in H2FY23.
The opportunity remains attractive as it feels it has a superior cost position.
It expects the 505b2 approval for g-leuprolide acetate soon. Addressable market is $200 million, with gradual gains in market share after approval.
Jefferies
Maintains ‘buy' with a target price of Rs 1,319 [earlier Rs 1,286] apiece, implying an upside of 15%.
Q2FY23 numbers met brokerage's expectations
Although Ebidta was impacted by Covid inventory write-offs worth 150 basis points.
U.S. sales shot up 13% quarter-on-quarter on gRevlimid sales and Lanreotide while India growth was at 15% [ex-Covid].
U.S. remained the key growth driver during the quarter.
Cipla re-iterated gAdvair timelines at H2FY23 while gAbraxane will be in FY24.
Base U.S. portfolio saw 5% price erosion as per their estimate.
Expect Lanreotide [gRevlimid] to continue to scale up and is on path to achieve company guidance of 15% market share by Q4.
For Abraxane, management guided that if Goa plant is cleared the product will be launched in Q1FY24 and if it is site transferred then there will be 6 months delay in the launch.
The company is already working on the site transfer of gAbraxane as a measure of de-risking.
Cipla is working to build out its biosimilar business which will come into play during FY25-30.
Cipla is also investing in specialty business and currently working on one product in the segment.
R&D will increase going forward but not cross 7% of sales.
Brokerage believes Cipla has the best U.S. generic pipeline products for the next two years in their coverage universe.
Its U.S. pipeline is strong to drive medium term for the company.
Systematix
Maintains ‘hold' with a target price of Rs 1,212 apiece, implying an upside of 6%.
Revenue in-line with estimates.
Net earnings below estimates due to one-time Covid inventory write-off and Covid related impairment.
Expect Ebidta margins to move upward with the launch of gAdvair in the U.S. market in H2FY23.
The company's base business was flattish due to price erosion.
The quarterly run-rate in the U.S. business has now moved from $150-160 million to $175-180 million.
This should be the new base on which other launches [gAdvair, gAbraxane and Lutrate depot] should build on.
Lutrate Depot launch will be imminent and has a market size of around $200 million.
gAdvair launch is expected in early H2FY23, while gAbraxane could happen in latter H1CY23.
Cipla also expects to launch one peptide product in FY23, while two more peptide launches are expected in FY24.
With net cash Rs 3,992 crore, the company will have a large cash pile to deploy for inorganic and internal development opportunities.
R&D expenses were up 22% due to pick up in clinical trials of one respiratory asset and other development initiatives.
The company expects to maintain R&D expenses at 5.8-6% of sales.
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