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Promising Pipeline, Maintain BUY

Est. Vs. Actual for Q1FY26: Revenue – INLINE; Abs. EBITDA – INLINE; PAT – BEAT

Changes in Estimates post Q1FY26.

FY26E/FY27E: Revenue: -1.0%/-0.2%; EBITDA Abs: -3.7%/-2.3% PAT: -2.9%/-1.5%

Recommendation Rationale

• The company’s US revenue stood at $226 Mn, reflecting a 9.6% YoY decline impacted by gRevlimid and a 2.3% increase QoQ on improved lanreotide sales.

• One India’s segment grew 6% YoY, driven by muted therapies such as Respiratory. Chronic products. These now contribute 61.5% of revenue, continuing to outperform IPM growth, while the Acute segment remains affected by seasonal headwinds.

• The South Africa business expanded 30% YoY, aided by robust growth in the private market and OTC market.

• Gross margins improved 156 bps YoY and 133 bps QoQ, largely due to product mix changes. EBITDA margin stood at 25.6%, an improvement of 270 bps QoQ but flat on a YoY basis.

• Reported PAT came in at Rs 1,292 Cr, registering a 28.7% YoY increase, driven by higher other income and lower depreciation cost.

Sector Outlook: Positive

Outlook & Valuation: Cipla remains confident about its growth trajectory in FY26, focusing on regaining and outperforming market momentum across key segments. The company aims to accelerate commercial execution and new product launches in North America, while expanding margins in South Africa. In the domestic market, Cipla plans to strengthen its branded prescription and trade generics businesses, leveraging new launches and a restructured sales force to drive growth. The Emerging Markets and PMEU segments will focus on deepening penetration while maintaining margin stability. Cipla has reiterated its FY26 EBITDA margin guidance between 23.5% and 24.5%, with specific margins for the full year to be finalised post-budget. Looking ahead, Cipla targets US revenues of approximately $1 Bn by FY27, driven by a robust pipeline including respiratory, oncology, peptide, and biosimilar launches, with the latter expected mainly through partnerships in the near term and internal biosimilar assets anticipated around 2029–30. Additionally, the company views GLP-1 therapies as a potential key domestic growth driver from FY27 onwards. Management remains cautiously optimistic, balancing near-term market dynamics with long-term strategic investments. Considering these factors, our target price remains unchanged at Rs 1,700/share. We maintain our BUY recommendation..

Current Valuation: PE 23x for FY27 earnings (Earlier Valuation:PE 23x FY27E)

Current TP: Rs 1,700/share (Earlier TP: Rs 1,700/share)

Recommendation: BUY

Financial Performance

Cipla’s Q1FY26 results were in line with expectations, with revenue increasing 4% YoY. This was driven by a 6% growth in the India business, a 33.9% increase in the South African region, and an 11% rise in international markets, while North America saw a 7% decline due to gRevlimid competition and price erosion. US revenue stood at $226 Mn. A recovery in sales is anticipated in H1FY26. Cipla has strengthened its position in Albuterol, reaching a market share of 21%.

The India business delivered a healthy performance with 8.5% YoY growth, led by momentum in both branded prescription sales and trade generics. The chronic therapies segment continues to be a strong growth driver, now constituting approximately 61% of India revenue and outperforming IPM growth rates. However, the acute therapies segment faced seasonal headwinds, which tempered growth in the quarter. Gross margins improved 156 bps YoY and 133 bps QoQ, largely due to product mix changes. EBITDA margin stood at 25.6%, an improvement of 270 bps QoQ but flat on a YoY basis. Reported PAT came in at Rs 1,292 Cr, registering a 28.7% YoY increase, driven by higher other income and lower depreciation cost.

Company Outlook & Recommendation

We expect Cipla to deliver solid growth across key markets. In North America, new launches like gAbraxane and gNilotinib are likely to support performance. Existing products such as gAlbuterol are scaling up well, with Cipla having supplied over 50 million inhaler units since launch. With increased capacity, the company is well-positioned to capture additional market share. Lanreotide has reached a 21.5% market share and is gradually progressing toward its target of 30–35%. gRevlimid is also expected to contribute meaningfully until its exclusivity ends in January 2026. Cipla’s upcoming pipeline remains strong, with multiple launches lined up for the second half of the year, including Symbicort in FY27 and other respiratory and inhalation products. The company is also expanding into biosimilars through a partnership and plans to invest $100 Mn in a joint venture, with benefits expected to accrue from FY29–30. In the Indian market, growth is expected to stay in line with the pharma industry average of around 8%. The South African business continues to perform well, driven by strong demand in the private and OTC segments. We remain positive on the stock with a BUY rating and arrive at a target price of Rs 1,700 per share.

Key Risks to Our Estimates and TP

• The USFDA inspection and issuing of WL/OAI or 483 observations may impact the revenue growth

• Entry of new players may increase pricing pressure in the injectable portfolio

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