Brokerages Raise Target Price For Cipla As Sales Jump

Most brokerages raised their target price for Cipla Ltd. after the drugmaker’s quarterly profit surpassed analyst estimates as sales in India and the U.S. rose.

Net profit of the drugmaker jumped 25 percent year-on-year to Rs 471 crore in the quarter ended September, higher than the Rs 404-crore consensus estimate of analysts tracked by Bloomberg.

Here’s what analysts had to say on Cipla’s second-quarter earnings:

Edelweiss

• Raise target to Rs 560 from Rs 500; Maintain Buy.
• Strong show; Near-term triggers offer attractive upside.
• Clocked margins of 21 percent despite price erosion in gSensipar.
• Strong branded business offsets reduction in gSensipar.
• Launch of Albuterol and exclusivity in Atripta, Truvada & Viread key triggers.

Goldman Sachs

• Raise target to Rs 490 from Rs 460; Maintain Neutral.
• Q2 beat estimates as India business rebounds following the distribution in Q1.
• Raise 2020-22 EPS estimates by 5-8 percent after factoring in better top line trends.

Morgan Stanley

• Maintain Equal weight; Target Rs 578.
• Cipla continues to strengthen its base business to build a niche U.S. portfolio.
• GPM could marginally decline in Q3 due to further balance Cinacalcet erosion.
• Downside risk to growth and full valuation keep us equal weight.

Credit Suisse

• Maintain Neutral; Target Rs 445.
• Trade generic rebounded in India but Rx growth still weak.
• U.S. sales still include about $18 million of gSensipar sales

UBS

• Maintain Buy; Target Rs 550.
• Recovery in India trade generics and momentum in South Africa drives Q2.
• Strong bounce from Q1 due to India and South Africa business.
• Like Cipla’s U.S. specialty strategy; focusing in select niche segments could work well.
• Cost focus and portfolio pruning to aid margins.

Concall Highlights

• Normalised gross margin level of 65-66 percent going ahead.
• Expects launch of one complex generic per quarter from Q4.
• Repaid $110 million loan a year in advance on account of cash holdings.
• Marginal dip in revenue can be seen in Q3 for Sensipar.
• Expects steady growth in the domestic business in second half of the year.
• Albuterol is expected to come in Q1FY21.
• Stabilisation of distribution channel on the trade generic side.
• None of the 12 observations for Goa facility across 10 units are repeat or related to data integrity.
• No material pending ANDAs over the next 12-18 months from Goa site.