Q3FY23 Review: Cipla: Key US launches slightly delayed

27 Jan 2023 , 01:08 AM

Cipla’s base business (ex-Revlimid) performance in Q3 was marginally ahead of IIFL Capital Services estimates, as seasonal flu-related uptick in the US business and lower share of SAGA/tender sales aided GMs by ~110bps QoQ. However, management guidance of 21-22% Ebitda margins for FY23 (vs 23% in M9FY23) implies that Q4 margins will moderate to 19% led by seasonal decline expected in Cipla’s India acute business. While analysts at IIFL Capital Services like Cipla’s diversified US pipeline of respiratory/complex injectables and company’s consistent 11- 12% (ex-Covid) growth in the domestic market, they believe valuations at ~29/23x FY24/25 PER (ex-Revlimid) leaves limited scope of upside in the near-term.

The seasonal benefit will normalize, ramp-up in Revlimid will enable Cipla to maintain its quarterly US sales at USD190-195mn till new launches kickin. Analysts at IIFL Capital Services estimate Revlimid contributed ~9% to Cipla’s Ebitda over the past two quarters and its contribution will increase to ~16-17% in FY24/25. They expect Cipla’s US sales to increase from current annualized run-rate of USD780mn to USD970mn in FY25, driven by USD100/60/30mn incremental sales from Revlimid/Advair/Abraxane.

Sustained momentum across chronic therapies, large Rx brands and trade generics business has enabled Cipla to drive consistent lowdouble-digit growth in its ex-Covid India portfolio. With the high base of India business now behind in FY23, we expect Cipla’s India business growth to revert to ~10-11% on a reported basis from FY24.

Analysts at IIFL Capital Services maintain Buy with target price of Rs 1110.