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Cipla Ltd

Stock Rating

Industry Rank:
11
Relative Strength Rating:
77
Strong
Acceleration in Earning Rating
56
Positive
Technical Rating
83
Very Strong
Pharmaceuticals & Drugs - Global
CMP: Rs 639.35
Up
No change
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Company details

Market cap:
51518.69
52-week high/low:
Rs. 632.65 / 355.30
NSE volume: (No of shares)
5,432,821.00
BSE code:
CIPLA
NSE code:
500087

Shareholding

(in %)
31-Mar
Promoter
36.68
Public
63.32
Others
0.0
Total
100

Indexed Stock Performance

Cipla Ltd Sensex
Cipla Ltd
One Year Performance

Price performance

Return (%)
1m
3m
12m
36m
Absolute
8.84
48.50
15.33
14.00
Sensex
-2.25
-24.01
-21.57
0.33

+91 22 6639 3000

research@stockaxis.com

Cipla Ltd

Faster than expected approvals

Established in 1935, Cipla is a global pharmaceutical company focused on agile and sustainable growth. The company specialises in complex generics. Cipla’s strengths lies in the respiratory, anti-retroviral, urology, cardiology, anti-infective and central nervous system (CNS) segments. Cipla has 46 manufacturing sites around the world to produce 50+ dosage forms and 1,500+ products using cutting-edge technology platforms to cater to 80+ markets. Cipla is the 3rd largest pharma company in India, the 3rd largest in the pharma private market in South Africa, and is among the most dispensed generic players in the U.S. A responsible corporate citizen, Cipla’s humanitarian approach to healthcare in pursuit of its purpose of ‘Caring for Life’ and deep-rooted community links wherever it is present make it a partner of choice to global health bodies, peers and all stakeholders.

Investment Thesis

Cipla receives final approval for generic version of Proventil® HFA Inhalation Aerosol
Cipla’s Albuterol Sulfate Inhalation Aerosol 90mcg (base)/actuation, is the first AB-rated generic therapeutic equivalent version of Merck Sharp & Dohme Corp’s Proventil® HFA Inhalation Aerosol. It is used for treatment of acute episodes of bronchospasm or prevention of asthmatic symptoms. Proventil® HFA Inhalation Aerosol and its authorized generic equivalent had US sales of approximately $153 million for the 12-month period ending February 2020. The entire Albuterol Sulfate HFA Inhalation Aerosol market had US sales of approximately $2.8 billion for the 12-month period ending February 2020. At present there is no competitor in the generic space.

Successful completion of Phase-3 clinical study for generic version of GSK’s Advair Diskus®
Cipla has successfully completed Phase-3 clinical end-point study for fluticasone propionate and salmeterol inhalation powder. The product is indicated to treat asthma in patients aged 4 years and older as a twice-daily prescription medicine and in the long term to treat chronic obstructive pulmonary disease (COPD), including chronic bronchitis, emphysema, or both, for better breathing and fewer flare-ups. According to IQVIA (IMS Health), Advair Diskus® and its generic equivalents had US sales of approximately US$2.9 billion for the 12-month period ending February 2020.

Cipla receives final approval for generic version of AstraZeneca Pharmaceutical’s Nexium®
Cipla has received final approval for its Abbreviated New Drug Application (ANDA) for Esomeprazole for Oral Suspension 10mg, 20mg and 40mg from the United States Food and Drug Administration (US FDA). Cipla is the first company to file for the 10mg strength. Cipla’s Esomeprazole for Oral Suspension 10mg, 20mg and 40mg is AB-rated generic therapeutic equivalent version of AstraZeneca Pharmaceutical’s Nexium®. According to IQVIA (IMS Health), Nexium® and its generic equivalents had US sales of approximately $70 million for the 12-month period ending November 2019.

Cipla One-India Strategy to boost domestic business:  Cipla operates under 3 segments in India i.e. Branded, Trade generics and Consumer business. Cipla recently launched its “One-India Strategy” where Cipla is bringing together the might of 3 business together and looking India as a one growth driver. Cipla has recently restructured its India business and have shifted some products from trade generics to its Consumer division which will help to drive profitability. We believe this strategy will bring good portfolio synergies and one distribution will deepen channel engagement, strategic partnerships and smart analytics.

Covid-19 impact

COVID -19 has affected many industries due to various issues like supply chain disruption, labour shortage and logistic issues. The pharmaceutical sector being an essential service provider is exempt from many of these restrictions, but the indirect impact cannot be completely ruled out. In anticipation of Chinese New Year, majority of Pharma companies had stocked up most of their raw materials. Hence, we expect negligible impact in Q4FY2020. However, the company can face short term issues like non-availability of labour or supply related issues. The company has a strong balance sheet to deal with any short term disruption.

 

Key Risks

Currency Risk: Company is exposed to foreign currency risks as company's major sales are through exports

Adverse impact of regulations: Regulations have been a biggest setback for the sector. Regulatory challenges include USFDA observations, Product approvals etc.

Financial Highlights

(Rs Crores)

DescriptionMar 18Mar 19Mar 20Mar 21 EMar 22 E
Net Sales15219.2616362.4117131.9917825.4019409.73
Net Sales Growth %4.02%7.51%4.70%4.05%8.89%
Expenditure
COGS5438.425784.495991.446060.646502.26
Gross Profit9717.2910577.9211140.5511764.7612907.47
GP %63.85%64.65%65.03%66.00%66.50%
Power & Fuel Cost298.82335.11356.51388.19
Employee Cost2690.102856.533027.013119.453299.65
R&D spent1126.231145.371212.131358.68
Gen & Admin exp.1096.871236.074907.571426.031552.78
S&D. exp.1082.901281.291247.781358.68
Miscellaneous Exp.968.98855.40891.27970.49
Total Expenditure12702.3213494.2613926.0214313.8015430.73
EBITDA2826.413170.853205.973511.603978.99
EBITDA Growth %-0.90%16.91%1.11%9.53%13.31%
EBITDA Margin %18.57%19.38%18.71%19.70%20.50%
Depreciation949.831097.151174.651293.621353.12
EBIT1876.582073.702031.322217.982625.87
EBIT Margin %12.28%13.74%11.86%12.44%13.53%
Interest114.23168.43197.36188.73151.23
Other Income357.65476.57344.20344.20344.20
PBT before excp.1746.982079.142178.162373.452818.84
Excep. Inc/exp-77.520.000.000.000.00
Profit Before Tax1746.982079.142178.162373.452818.84
Provision Tax250.11569.53631.20593.36704.71
Tax Rate %14.98%27.39%28.98%25.00%25.00%
PAT1413.311509.611546.961780.092114.13
PAT Growth %39.46%9.31%2.47%15.07%18.77%
PAT Margin %9.33%9.44%9.03%9.99%10.89%
EPS17.5318.9719.1622.0826.22
Source: Stockaxis Research, Company Data

Valuation

Cipla dominates and enjoys leadership position in the respiratory therapy. We believe company’ efforts and focus to unlock opportunities in the respiratory therapy is well placed for future growth of company. Surprise approval of Albuterol and early completion of Phase III clinical trial of Advair diskus (Fluticasone) will be next growth drivers for the company. Cipla’s domestic business is on track after disruption in trade generic business. We remain positive on Cipla limited.