On Wednesday, Citi has revised its price target for Cipla Ltd (CIPLA:IN), a leading pharmaceutical company, to INR 1,830 from INR 1,870. Despite the reduction, the firm continues to recommend a Buy rating for the stock.
The adjustment follows Cipla's second-quarter financial results which, according to the analyst, surpassed expectations with a 6% beat on EBITDA, the company's earnings before interest, taxes, depreciation, and amortization.
The report highlighted mixed underlying trends influencing the revised target. A notable concern was the subdued performance in the Indian market, which saw a 5% year-over-year decline, attributed to a weak season.
However, the analyst pointed out several positive aspects, including the company's continued expansion in gross margins and solid trends in Africa and Emerging Markets. Some of this strength is attributed to tenders, which may be inconsistent.
Cipla's US business saw a quarter-over-quarter decline of approximately 5% in the second quarter, which aligned with market expectations. The company also anticipates a 5-7% decline in the third quarter due to disruptions in Lanreotide, a medication used in the treatment of certain types of cancer. These projections are considered to be within anticipated ranges.
In light of these factors, Citi has slightly reduced its growth expectations for Cipla's Indian operations for the fiscal year 2025. Additionally, the firm has incorporated certain assets in the US into its forecasts.
Despite these changes, the anticipated expansion in gross margins and the company's performance in markets outside India and the US have limited the cut to Cipla's earnings per share estimates for fiscal years 2025 to 2027 to a range of 0-4%.
The analyst concluded with a reiteration of the Buy rating, albeit with a new price target of INR 1,830, a slight decrease from the previous target of INR 1,870.
InvestingPro Insights
Complementing Citi's analysis, InvestingPro data reveals that Cipla's market capitalization stands at $13.56 billion, with a P/E ratio of 25.64. The company's revenue for the last twelve months as of Q2 2025 was $3.14 billion, showing a growth of 7.9% over the same period. This aligns with Citi's observation of Cipla's performance exceeding expectations.
InvestingPro Tips highlight Cipla's strengths in line with the analyst's positive outlook. The company is noted as a "Prominent player in the Pharmaceuticals industry," which supports its competitive position in markets like Africa and Emerging Markets, as mentioned in the report. Additionally, Cipla "has maintained dividend payments for 24 consecutive years," indicating financial stability that could appeal to long-term investors.
Another relevant InvestingPro Tip states that Cipla "operates with a moderate level of debt," which could contribute to its ability to expand gross margins, a positive trend noted by Citi. This financial prudence may provide Cipla with flexibility to navigate challenges in certain markets, such as the reported decline in Indian operations.
For investors seeking a more comprehensive analysis, InvestingPro offers 8 additional tips that could provide deeper insights into Cipla's financial health and market position.
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