On Wednesday, Investec maintained a Buy rating on Cipla Ltd. (CIPLA:IN) but reduced the stock's price target from INR1,900.00 to INR1,800.00. The adjustment reflects a mix of both cautious and positive outlooks on the company's future performance.
The analyst expressed optimism about Cipla's second quarter of the fiscal year 2025, highlighting a strong performance despite weaker markets in India and the United States. Expectations are set for a seasonally strong second half in India.
Additionally, Cipla achieved a 35% market share in lanreotide in August 2024 and anticipates normal supplies of the drug to resume before the end of the third quarter of the fiscal year 2025.
Cipla's management has maintained its EBITDA margin guidance for the fiscal year 2025, which has been a positive signal to Investec, especially as the stock experienced a roughly 15% correction in the last three weeks. The market had braced for worse outcomes, but the guidance provides a more stable outlook.
The timeline for the launch of generic Abraxane has been shifted in Investec's estimates from fiscal year 2026 to 2027 due to pending clearance for Cipla's Goa facility by the FDA. The analyst notes that any clearance could lead to potential upgrades in the stock's outlook.
Investec points out that Cipla is trading at 22.5 times the fiscal year 2026 estimated earnings per share (EPS) and 23.4 times the fiscal year 2027 estimated EPS. This is despite over 50% of the company's EBITDA for those years being contributed by its India operations, which typically trade at multiples of 35 times or higher.
The firm believes that Cipla merits premium multiples due to its significant India business, which accounts for more than 75% of the current enterprise value, its strong balance sheet with $1 billion in cash offering M&A opportunities, and its rich portfolio in peptides and respiratory assets.
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