Amidst the bustling market of pharmaceuticals, Cipla’s stocks surged vigorously by more than 6% during the initial trading hours on Monday, propelled by the company’s staggering 79% augmentation in net profit during the fourth quarter of FY24. Witnessing an upward climb of 6.44%, the stock soared to attain an intra-day pinnacle of Rs 1,425.95 per share on the National Stock Exchange (NSE).
The pharmaceutical titan, Cipla, proclaimed a net profit of Rs 939 crore for the quarter concluding in March 2024, marking a noteworthy surge of 79% from the preceding fiscal year’s Rs 525 crore. Furthermore, revenue from operational activities also witnessed a commendable 7% year-on-year escalation, soaring to Rs 6,163 crore during the March quarter. In line with this prosperous performance, the company’s board proposed a final dividend of Rs 13 per equity share for the fiscal year ending March 2024. Noteworthy was the EBITDA for the quarter, which experienced a commendable 13% year-on-year escalation, amounting to Rs 1,316 crore, in contrast to the previous fiscal year’s Rs 1,166 crore.
In the indigenous market domain, Cipla’s One-India business segment demonstrated a commendable 7% year-on-year growth, fueled by branded prescription and trade generics, outshining market growth by a margin of 100 basis points. Concurrently, revenue from North America ascended to $226 million, marking an 11% year-on-year increase, bolstered by sustained growth in pivotal differentiated assets and the company’s expansive portfolio.
Similarly, South Africa witnessed a significant surge, with revenue escalating by 26% in local currency terms, thus elevating Cipla to the pinnacle of the prescription market hierarchy within the region. Noteworthy was the substantial increase in research and development investments during the fourth quarter, amounting to Rs 444 crore, constituting 7.2% of sales and marking a commendable 19% year-on-year augmentation, propelled by product filings and developmental endeavors.
Maintaining a robust net cash position of Rs 7,708 crore as of March 2024, Cipla’s debt primarily comprises lease liabilities and working capital requirements.
Evaluating Cipla: Motilal Oswal maintains its earnings estimates for FY25/FY26 and assesses Cipla utilizing a sum-of-the-parts (SOTP) methodology. The valuation encompasses a 25x multiple on 12-month forward earnings for the base business, alongside a net present value (NPV) of NR30 for gRevlimid, culminating in a target price of Rs 1,600.
Motilal Oswal’s recent report on Cipla unveils a marginal earnings deviation for the fourth quarter of FY24, predominantly ascribed to escalated operating expenses. However, despite this, Cipla concluded FY24 on a commendable note, showcasing an impressive year-on-year growth of 13% in sales, 23% in EBITDA, and 39% in PAT, totaling Rs 257 billion, Rs 63 billion, and Rs 42 billion, respectively.
This remarkable growth was underpinned by a robust performance in the US generics market and efficient execution in the branded generics segment within domestic formulations (DF) and South Africa. While g-Revlimid significantly contributed to FY24 earnings, Motilal Oswal anticipates a 12% earnings compound annual growth rate (CAGR) over FY24-26, driven by the commercialization of complex assets in the US, robust performance of chronic therapies in the DF segment, enhancements in the operating model for trade generics, and sustained growth in the consumer healthcare segment. In alignment with these projections, Motilal Oswal reiterates its BUY rating on Cipla.
Prabhudas Lilladhar evaluates Cipla: At the prevailing market price (CMP), the stock trades at 24x FY26E EPS adjusted for gRevlimid. Prabhudas Lilladhar reaffirms its ‘Accumulate’ rating with a target price (TP) of Rs 1,405 per share. However, it underscores the risk associated with any further FDA escalation concerning the Indore unit and potential erosion in key US products as plausible challenges to their assessment.
According to Prabhudas Lilladhar’s analysis on Cipla, the FY25/26E EPS estimates have witnessed a 3% surge. Cipla’s Q4FY24 EBITDA of Rs 13.2 billion, accompanied by a 21.4% operating profit margin (OPM), aligns with expectations, bolstered by heightened gross margins (66.3%).
Nonetheless, the delay in crucial launches such as gAdvair and gAbraxane, postponed by a minimum of 2-3 quarters, underscores the significance of the timely launch of five peptides slated for FY25.
The report maintains a sanguine outlook on Cipla’s growth prospects across key segments, encompassing India and the US, attributing it to robust traction in respiratory and other portfolios, potential over 10% growth in domestic formulations, and the sustainability of prevailing US revenues. It envisages a 10% EPS compound annual growth rate (CAGR) over FY24-26E.
