Global financial services firm UBS initiated coverage on Cipla Ltd. (CIPLA: IN), an Indian multinational pharmaceutical company, with a Buy rating.
The firm has set a price target for Cipla at INR2,060.00. The initiation by UBS comes with an optimistic outlook on the company's future performance, particularly in the United States market.
UBS predicts that Cipla's US revenue composition will undergo a significant shift, with respiratory and injectable products expected to constitute 55% of its US revenues, up from the current estimate of approximately 35%.
This projection is based on the company's planned high-value product launches in the US over the next two years.
The financial services firm anticipates that these new product launches, which include generic versions of well-known respiratory medications such as Advair, Symbicort, and QVAR, will substantially increase Cipla's profit margins.
The injectables pipeline, expected to be bolstered by a generic version of Abraxane, is also seen as a key driver for the company's growth.
UBS further notes that Cipla's financial position is robust, with a large cash reserve of Rs90 billion, which is about 7% of the company's market capitalization. Additionally, Cipla's annual free cash flow is strong, standing at Rs40 billion.
The price target set by UBS is based on a discounted cash flow (DCF) analysis and implies a forward price-to-earnings (PE) ratio of 28 times for the fiscal year ending in 2027.
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