Cipla Shares 12% After Strong Q1 Results; Is This Pharma Stock Attractive To Buy?

Pharma-giant, Cipla traded in high spirits on Thursday with the stock price skyrocketing by nearly 12% on BSE. The latest bull run also led Cipla to touch a new 52-week high. Cipla reported double-digit growth across verticals in the first quarter of FY24. Brokerage Kotak Institutional Equities raised its target price on Cipla and recommended buying owing to the company's sharpened focus on domestic Rx, US generics and strong delivery of cost efficiencies.

On BSE, Cipla's share price ended at Rs 1171.55 apiece, up by Rs 102.85 or 9.62%. The stock hit a new 52-week high of Rs 1194.55 apiece, taking the overall upside in the day to the tune of 11.77%.

At the current market price, the company's market value is at Rs 94,572.09 crore.

In Q1 of FY24, the company's PAT stood at Rs 996 crore rising by 45.1% YoY, while core profitability expanded by 230 bps with EBITDA growth of 39.7% YoY to Rs 1,494 crore. Revenue from operations climbed by 17.7% YoY to Rs 6,329 crore driven by performance in India, the US & South Africa.

Cipla's One India business grew 12% YoY across branded prescription, trade generics and consumer health. The company reported the highest-ever revenue in the US of $222 million and 43% YoY growth driven by robust momentum in its differentiated portfolio.

In the South African market, the company's t business grew at 13% YoY in local currency terms backed by double-digit growth in both prescription and OTC business. Cipla is also now the second-largest player in prescription market# by market share.

Meanwhile, Cipla's R&D investments stood at Rs 349 crore or 5.5% of sales, rising by 27% YoY driven by the continued progress of clinical trials on key pipeline assets and other developmental efforts.

Also, on Wednesday, Cipla announced that its associate company, GoApptiv has incorporated a wholly-owned subsidiary Pactiv Healthcare. The new subsidiary will handle manufacturing, development, production, purchase, and sale of pharmaceutical, healthcare and wellness products to significantly benefit the Rural markets.

In a year, Cipla's stock price gained by over 21% on the exchange. In the financial year FY23, the company paid a dividend of 425% aggregating to Rs 8.5 per share.

Is Cipla stock still attractive to buy?

In its research note, Kotak Institutional Equities said, "Cipla delivered a 9% EBITDA beat in 1QFY24, driven by strength across the US and India. While resonating buoyancy on near-term generics pricing in the US, Cipla has hiked its US sales and EBITDA margin guidance for FY2024. The launch timelines of the key US molecules remain unchanged."

Apart from the US, the outlook in India and the SA private market stays upbeat.

Further, Kotak's note said, "we
bake in higher price erosion after FY2024. We maintain launch timelines for key US products, including gAbraxane (2QFY25) and gAdvair (3QFY25), as we factor in an OAI for the Pithampur facility. For gRevlimid, we factor in $113/$119 mn sales in FY2024/25E."

It added, "Despite regulatory holdups, aided by a better pricing environment and a steady pace of ramp-up across peptides and gRevlimid as well as launches of gAdvair and gAbraxane in FY2025, we expect Cipla's US sales to deliver a healthy 10% CAGR over FY2023-26E. As Cipla completes its
MR hiring by 2QFY24, we expect improved field force productivity, growing consumer health franchise and a further increase in chronic contribution to deliver a robust 11% domestic sales CAGR over FY2023-26E."

On the valuation, the brokerage's note said, "We continue to like Cipla's sharpened focus on domestic Rx, US generics and strong delivery of cost efficiencies. We raise FY2024-25E EPS by 5-8% on higher US sales and margins. We increase Cipla's target multiple a notch to 22X EPS on higher implied domestic valuations and roll forward to June 2025E to derive a FV of Rs1,230 (Rs1,100 earlier)."

Disclaimer

The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns. in advises users to consult with certified experts before making any investment decision.