On Wednesday, JPMorgan revised its price target for Cipla Ltd. (CIPLA:IN), a leading pharmaceutical company, reducing it to INR1,600 from the previous INR1,630. Despite this adjustment, the firm maintained its Overweight rating on the stock. JPMorgan's analysis acknowledged the short-term challenges faced by the company but noted that the current valuations remain attractive.
Cipla's second-quarter revenue aligned with consensus and JPMorgan's own expectations, with a notable increase in South Africa by 27% year-over-year, which helped to balance the more moderate growth of 5% in India.
The company's EBITDA margins surpassed expectations at 26.7%, which was 80 basis points above consensus and 120 basis points higher than JPMorgan's estimates, primarily driven by strong gross margins.
The muted trends in India were attributed to the underperformance of the acute segment, which is anticipated to recover in the third quarter with an uptick in the respiratory segment.
Meanwhile, U.S. revenues were slightly down at $235 million, a 5% decrease quarter-over-quarter, partly due to supply challenges with Lanreotide. These issues are expected to worsen in the third quarter but resolve by the fourth quarter of the fiscal year 2025.
Cipla's market share in Goa is projected to maintain at 35% in the third quarter numbers, but the classification status of the Goa plant remains pending. JPMorgan has factored in a status quo from the second half of the fiscal year 2026 and into 2027.
Excluding the potential launch of gAbraxane, contingent on the Goa plant's status, Cipla's product pipeline is robust, with several peptide launches planned for the second half of the fiscal year 2025 and early fiscal year 2026, as well as gAdvair expected in the first half of the fiscal year 2026, and filings for gOvar and gSymbicort set for fiscal year 2027.
JPMorgan's stance on Cipla remains positive, citing the company's significant branded market exposure, with India and South Africa accounting for approximately 60% of its revenues, and a healthy pipeline of differentiated products in the U.S. market.
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