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Target: ₹1,200
CMP: ₹1,048.40
We initiate coverage on Cipla with a Buy rating and a target price of ₹1,200 (PE 24x for FY24E EPS), implying an upside of 15.5 per cent from the current levels.
Cipla continuous to focus on the demand levers in the chronic and acute therapies and complex products in its existing as well as pipeline portfolio (for the branded and generic markets of India and South Africa). The company’s active advancement of innovative consumer-centric products is expected to accelerate the augmentation of the global consumer wellness franchise across both India and South Africa.
India Rx business comprises a 55 per cent Chronic portfolio (Respiratory, Urology and Cardiac). The launch of oncology and diabetic complex products is expected to help the company outpace the industry growth.
Furthermore, it continues to lead and grow respiratory categories such as gAlbuterol and gAfrometrol and other complex products in the pipeline as the US generic market may offer a stable revenue growth trajectory over FY21-24. In Q3-FY22, CIPLA unlocked one major peptide asset in the US with the approval of Lanreotide.
The buildout of the respiratory portfolio would drive strong operating leverage for Cipla in the US business. This coupled with a sustained high single-digit growth in the India business along with further cost optimisation measures undertaken would aid the company in expanding its RoIC by about 200 bps over FY21-FY24 to about 18 per cent.
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