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Launch Delays and Margin Pressure Support a Cautious View

We continue to maintain a cautious view on the company amid persistent headwinds, including delays in revenue contribution from key US product launches, the ongoing impact of Revlimid and higher opex. We expect the US business to remain under pressure in FY27E, weighing on overall revenue growth and resulting in margin contraction. In addition, we believe the company's earlier target of achieving USD 1 Bn in US revenue is likely to be deferred to FY28E, subject to the pace of product scale-up. Factoring in these headwinds, we revise our FY27E/FY28E earnings estimate down by 4.0%/2.2%. We continue to value the stock at 20x FY28E EPS, arriving at a TP of INR 1,330 and reiterate our ‘REDUCE’ rating. We will continue to closely monitor launch execution and the scale-up trajectory of the new product portfolio

Margin Weakness Overshadows Stable Revenue Performance

* Revenue grew 2.3% YoY / 8.8% QoQ to INR 71,193 Mn (vs. CIE estimate: INR 72,009 Mn).

* EBITDA declined 32.9% YoY and increased 19.6% QoQ to INR 11,923 Mn (vs. CIE estimate: INR 13,538 Mn); margin contracted 881 bps YoY and expanded 151 bps QoQ to 16.7% (vs. CIE estimate: 18.8%).

* PAT decreased 39.2% YoY and increased 42.3% QoQ to INR 7,891 Mn (vs. CIE estimate: INR 9,298 Mn).

Growth Outlook Moderates amid Near-term Headwinds

CIPLA continued to face pressure on profitability due to higher investments and we believe these transitory headwinds will persist in the near term. We expect revenue growth to be in low teens in FY27E, supported by the following regional growth drivers:

* India: We anticipate the company to continue outperforming the IPM, driven by the continued scale-up of recent launches, such as Yurpeak and Duolin, alongside sustained growth in chronic therapies and a steady performance in the trade generics business.

* North America: We estimate H2FY27E to be better than H1FY27E, supported by the scale-up of recent biosimilar launches. However, production issues relating to Lanreotide and the ongoing impact of Revlimid are projected to weigh on performance.

* Africa: We expect the private business to maintain its growth trajectory, although the loss of tender business is forecast to continue weighing on overall performance. We project growth to be in low-to-mid teens. 

Margin Outlook Remains Constrained amid Growth Investment

EBITDA margin is estimated to contract, driven by higher opex associated with recent capacity addition and an unfavourable product mix. The management expects FY27E EBITDA margin to be in the range of 18.5–20.0%

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