Accumulate Cipla; target of Rs 1450: Prabhudas Lilladher

What happened

Prabhudas Lilladher maintained an Accumulate rating on Cipla with a target price of Rs 1,450. Cipla's Q2FY27 EBITDA of INR 13.8bn, with an 18.7% operating profit margin, missed estimates by 6%. Management reiterated margin guidance of 18.5-20% for the year.

Confirmed

Global impact / market context

Cipla's quarterly profit missed estimates, but management still expects full-year margins of 18.5-20%. The analyst keeps earnings forecasts broadly unchanged, so near-term weakness is treated as temporary. Cipla's over $1bn net cash, meaning cash after debt, gives room for acquisitions that could add future revenue.

Analyst inference

The analyst expects Cipla's US annual sales run-rate, meaning the yearly pace of sales, to reach USD 770mn in the current fiscal year and USD 965mn the following year. At the current market price, the stock trades at 22 times estimated earnings per share for that later year, a common measure of how expensive a stock is.

Analyst inference

What to watch

1. Timely approval of key respiratory and peptide products in the US, plus ramp up of gVentolin, are cited as key factors for Cipla. Confirmed
2. Whether Cipla's US sales run-rate reaches the expected USD 770mn this fiscal year and USD 965mn the next would shape revenue and support the target valuation. Analyst inference
3. The analyst values Cipla at 23 times estimated earnings per share for the year ending September of the following calendar year to arrive at the Rs 1,450 target price. Proposed

Evidence

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