Pharmaceutical giant Cipla is set to witness a surge in profitability driven by its robust growth in the complex respiratory portfolio, said a report from brokerage firm Sharekhan. The report highlighted the key factors contributing to Cipla's upward trajectory, emphasizing the company's strategic focus on complex products and the resultant impact on margins.
The report reiterated a 'Buy' call for Cipla, accompanied by a higher Price Target (PT), citing several positive indicators in the company's performance. These include significant buoyancy in the US market, where price erosion pressures are easing, volume growth due to drug shortages, and a concentrated effort on complex products.
The report said that Cipla's recent growth figures highlight its strong position in the market. In February 2024, the company recorded 8.1% growth in the Indian Pharmaceutical Market (IPM), outpacing the overall IPM growth of 6.7%. On a Moving Annual Total (MAT) basis, Cipla's growth stood at 9.9%, further reflecting its sustained momentum.
Sharekhan anticipates a significant rise in Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) margins, projecting a climb to 26% by FY26E. This optimistic outlook is attributed to several strategic initiatives by Cipla, including an increased share in chronic products domestically, new launches of complex generics in the US market, and the finalization of the Actor Pharma acquisition in South Africa.
The report also looked at Cipla's financial indicators, noting that the stock is currently trading at a Price-to-Earnings (P/E) ratio of 25x/21.2x its FY2025E/FY2026E Earnings Per Share (EPS). Sharekhan's analysis suggested a PT revision to Rs. 1,700, up from the earlier Rs. 1,600, reflecting the positive market sentiment and growth prospects for Cipla.
Cipla's success in the US market is highlighted as a major driver of its growth momentum, said the report. The company's sales in the US continue to thrive, propelled by new product launches, seasonal factors, and a strong market position in key assets such as Albuterol, Brovana, and Lanreotide. Particularly, the easing of price erosion pressure in the base portfolio further contributes to Cipla's robust performance in the US, the report further said.
In addition to its US operations, Cipla's India business has reported substantial traction, with a 60% contribution from the chronics portfolio. The company's strategic focus on expanding its flagship brands and its success in key therapeutic segments position Cipla as a frontrunner in the Indian pharmaceutical landscape, the report said.
Looking ahead, Cipla's growth trajectory is expected to continue, driven by sustained momentum in key markets, a strong pipeline of new products, and strategic acquisitions. Sharekhan's report pointed out at Cipla's potential for further profitability and market leadership, making it an attractive investment opportunity in the pharmaceutical sector.