CLSA has adjusted its stance on Cipla Ltd. (CIPLA: IN), downgrading the pharmaceutical giant from 'Buy' to 'Hold', despite increasing the price target from INR 1,480 to INR 1,580.
The revision comes in the wake of Cipla's first-quarter financial results for the fiscal year 2025, which showed revenues meeting expectations, while earnings before interest, taxes, depreciation, and amortization (EBITDA) and profit after tax (PAT) slightly exceeded forecasts.
The company experienced strong growth in the United States, with sales rising by 14.5% year-over-year when measured in Indian rupee terms. However, the performance in the Indian market was less impressive, showing a modest increase of 4.5% year-over-year.
CLSA projects sales in the US and India to expand at a compound annual growth rate (CAGR) of 6% and 11% respectively, over the period from FY25 to FY27.
The rationale behind the raised price target is attributed to an uptick in the target price-to-earnings (PE) multiple from 27 times to 28 times, reflecting a sector rerating. Additionally, the valuation period has been rolled over from March FY26 to June FY27, aligning with the company's earnings lifecycle.
Despite the positive outlook on Cipla's growth prospects and the raised price target, CLSA has opted to downgrade the stock rating. The decision is based on the view that there is limited potential for further price appreciation, suggesting that the current stock price may be approaching the firm's assessment of Cipla's fair value.
InvestingPro Insights
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