Accumulate Cipla Ltd For Target Rs.1,400 by Prabhudas Liladhar Capital Ltd
Weak US revenues, timely launches will be key
CIPLA’s Q4FY26 EBITDA (INR 9.5bn; 15% OPM) missed our estimates by 7% on account of lower US revenues. Management guided FY27E margin at 18.5-20% with exclusion of Lanreotide recovery; alternate US manufacturing site being pursued owing to temporary supply disruptions. Our FY27E/28E EPS stands cut by 5-10% as we factor in lower margins. We expect Cipla US annual sales run-rate at USD 800/950mn in FY27/28E. Timely key respiratory approvals and normalization of Lanreotide by H2FY27 will be key. Cipla’s strong net cash position of +$1.2bn provides flexibility to pursue strategic M&A opportunities. At CMP, stock is trading 22x FY28E EPS. Given high FY25/26 base led by gRevlimid and gLanreotide; we see flat EPS in FY27. We maintain our Accumulate rating with revised TP of INR 1,400/share, valuing at 23x on FY28E EPS. Timely launch of critical high-value products in the US in FY27E will be key.
Muted US sales:
CIPLA’s Q4FY26 revenues declined 3% YoY to INR 65.4bn, below our estimates. Domestic formulation reported strong growth of 15% YoY. Key therapies such as Respiratory, Urology, Anti diabetic and Cardiac outpaced the market. US sales declined to USD 155 mn, down 7% QoQ. Such decline was on account of lower contribution from gRevlimid and supply issues in gLanreotide. One Africa business reported growth of 21% YoY; whereas EM + EU markets were down 8% YoY.
Healthy GMs, EBITDA miss:
GMs stood at 66%, down 185bps YoY but up 280bps QoQ. CIPLA reported EBITDA of INR 9.5bn; down 38% YoY; 7% below our estimates. OPM stood at 15%, down 825bps YoY. R&D expenses stood higher at INR 5bn, 8% of revenue, up 19% YoY and 3% QoQ. Ex R&D cost other expenses were up 6% YoY. Resultant PAT stood at INR 5.5bn; down 55% YoY. EPS of INR 6.8/share in Q4FY26
FY27 Guidance:
US sales exit run-rate at USD 250mn by Q4FY27 end which does not factor in recovery in gLanreotide sales. Expect niche launches like gAdvair, Symbicort to be launched in H1FY27. R&D spend is expected to remain at ~7% of sales. Domestic formulation growth to be in double digit and likely to beat IPM. Overall expect OPM to be in range of 18.5-20%.
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SEBI Registration No. INH000000271Accumulate Paradeep Phosphates Ltd For Target Rs.141 by Prabhudas Liladhar Capital Ltd
