Call & Research Report by ICICI Direct Research
Report Date: 9 August 2021
CMP Rs. 921, Target Rs. 1204
Target Period : Not Mentioned
About the stock: Cipla is a global pharma company with over 1,500+ products in
65 therapeutic categories, with over 50 dosage forms. Cipla supplies branded and
generic medicines to over 170 countries globally.
Indian branded formulations business accounts for ~40% of revenues and
enjoys leadership in therapies like respiratory, anti-infective, cardiac,
gynaecology & gastro-intestinal
Cipla derives 21% of its export revenues from the US followed by 12% from
South Africa, 5% from Europe and 16% from RoW markets.
Q1FY22 Results: Cipla reported robust Q1FY22 results.
Sales were up 26.6% YoY to | 5504 crore
EBITDA in Q1FY22 was at | 1345.9 crore, up 28% YoY with margins at 24%
Consequent adjusted PAT was at | 803.8 crore (up 39.1% YoY)
What should investors do? Cipla’s share price has grown by ~1.7x over the past
five years (from ~| 527 in July 2016 to ~| 920 levels in July 2021).
We maintain BUY as we continue to focus on its core strength of following
a calibrated approach of focusing more on branded products and core
therapies across the world
Target Price and Valuation: We value Cipla at | 1205 i.e. 28x P/E on FY23E EPS +
| 41 NPV for gRevlimid.
Key triggers for future price performance:
The company is focusing at front-end model, especially for the US, along
with a gradual shift from loss making HIV and other tenders to more
lucrative respiratory and other opportunities in the US and EU
Management’s long-drawn strategy of targeting four verticals viz. One-India,
South Africa & EMs, US generics & specialty and lung leadership
Across the board transformation from tenderised model to private model in
exports market and more focus towards consumerisation of important TGx,
Rx products in Indian branded formulations
Alternate Stock Idea: Apart from Cipla, in healthcare coverage we like Sun Pharma.
Higher contribution from specialty and strong domestic franchise is likely to
change the product mix towards more remunerative businesses by FY23