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Target: ₹1,180
CMP: ₹1,089.40
We met the management of CIPLA to understand its outlook on the business.
Cipla is expanding its product offerings (own and in-licensing). It is recalibrating the positioning of products into Prescription, Trade Generics, and Consumer Healthcare categories in India.
Product development and approvals remain on track for differentiated launches in US Generics, which will drive growth till FY25.
After clocking almost steady earnings (₹1,500 crore) over FY18-20 and scaling it up to ₹2,800 crore (on an adjusted basis) in FY22, we expect Cipla to deliver 18 per cent earnings CAGR over FY22-24 on the back of niche launches in the US and outperformance in the Branded Generics market.
The increased contribution to profitability from US Generics is expected to keep the overall valuation multiple under check, given that the Generics business trades at a much lower multiple as compared to Branded Generics.
The regulatory risk in US Generics remains high at the industry level, demanding a better risk-reward ratio.
We value Cipla at 23x 12-months forward earnings and add ₹40 (NPV related to g-Revlimid) to arrive at our TP of ₹1,180. We maintain our Neutral stance, given the limited upside from the current levels.
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