Founded in 1935 by Khwaja Abdul Hamied, Cipla has established itself as a reliable and reputable pharmaceutical company in the home markets of India, South Africa and North America. Cipla's product portfolio spans complex generics as well as drugs in the respiratory, anti-retroviral, urology, cardiology, anti-infective, CNS, and various other key therapeutic segments. Its products are distributed in more than 80 countries worldwide. Cipla is the third-largest pharma company in the domestic formulations market, which contributes ~40% of its total revenue. Cipla is developing a comprehensive portfolio of respiratory products across varied dosage forms (MDI, DPI and nasal sprays) for the regulated markets of EU and the US.
US growth driven by Cipla’s DTM business: Cipla’s US business has grown at 10% cc CAGR over FY18-21, as launches of complex generics and respiratory products enabled it to ramp-up its DTM (own front-end) business, from ~USD80m in FY18 (20% of US sales) to ~USD305m in FY21 (56% of US sales). Cipla’s respiratory portfolio (Albuterol, Budesonide) has crossed the USD100m sales-mark, accounting for 18% of its overall US business. Although most Indian peers saw significant QoQ decline in US sales during 1QFY22, market-share ramp-up in Albuterol has allowed Cipla to maintain steady US sales.
Outlook & Valuation:
Cipla has defined 10 Strategic Business Objectives in its FY21 AR, with the company maintaining focus on superior execution across its branded home markets of India & SA and portfolio expansion in the US respiratory & complex generics space. While Albuterol market-share ramp-up has allowed Cipla to maintain steady US sales as against the sharp erosion witnessed by peers, the recent Brovana launch along with upcoming launches (Qvar, Abraxane & Advair) will drive further traction in the US business over the next 2-3 years. Factoring of trade receivables has driven significant reduction in WCap intensity, thereby enabling Cipla to generate USD680m cumulative FCF during FY20 & FY21. We expect the strong US product launch momentum to drive cumulative FCF of USD1.3bn over FY22-24ii and RoIC to improve to 20/26% in FY23/24ii. Cipla remains our top-pick among large-cap pharma and we initiate a Buy with a TP of Rs1,127.
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