Cipla Ltd - Research Report

Private Client Research




Pharmaceuticals & Drugs - Global


Cipla Ltd

Pharmaceuticals & Drugs - Global

July 13, 2020

Sensex: 36693.69

CNX Nifty: 10802.70


BSE: 500087

Reco Price
Rs. 642
Price Target (1 Year)
Rs. 815


July 13, 2020



CNX Nifty








Stock Data

CMP (Rs)
Face value (Rs)
52 Week Range (Rs)
692.50 - 355.30
Market cap (Rs Crores)
Price To Book Value (x)
P/E Ratio (x)

One Year indexed Stock Performance

Cipla Ltd Sensex
Cipla Ltd
Return (%)


(in %)

+91 22 6639 3000


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.

Faster than expected approvals to drive growth

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.



The Indian pharmaceuticals market supplies over 50 per cent of global demand for various vaccines, 40 per cent of generic demand in the US and 25 per cent of all medicine in UK. Indian drugs are exported to more than 200 countries in the world, with the US as the key market. Pharmaceutical exports from India, which include bulk drugs, intermediates, drug formulations, biologicals, Ayush & herbal products and surgicals reached US$ 19.14 billion in FY19 and US$ 10.8 billion in FY20 (up to November 2019). The exports are expected to reach US$ 20 billion by 2020.

Generic drugs account for 20 per cent of global exports in terms of volume, making the country the largest provider of generic medicines globally and expected to expand even further in coming years. Based on moving annual turnover, Anti-Infectives (13.6 per cent), Cardiac (12.4 per cent), Gastro Intestinals (11.5 per cent) had the biggest market share in the Indian pharma market in 2018. Indian pharma companies received a total of 415 product approvals in 2018 and 73 tentative approvals.

Source: IBEF, Company, Market research

Profit & Loss Statement:- (Consolidated)

(Rs Crores)

Description Mar 18 Mar 19 Mar 20 Mar 21 E Mar 22 E
Net Sales 15219.26 16362.41 17131.99 17825.40 19409.73
Net Sales Growth % 4.02% 7.51% 4.70% 4.05% 8.89%
COGS 5438.42 5784.49 5991.44 6060.64 6502.26
Gross Profit 9717.29 10577.92 11140.55 11764.76 12907.47
GP % 63.85% 64.65% 65.03% 66.00% 66.50%
Power & Fuel Cost 298.82 335.11 356.51 388.19
Employee Cost 2690.10 2856.53 3027.01 3119.45 3299.65
R&D spent 1126.23 1145.37 1212.13 1358.68
Gen & Admin exp. 1096.87 1236.07 4907.57 1426.03 1552.78
S&D. exp. 1082.90 1281.29 1247.78 1358.68
Miscellaneous Exp. 968.98 855.40 891.27 970.49
Total Expenditure 12702.32 13494.26 13926.02 14313.80 15430.73
EBITDA 2826.41 3170.85 3205.97 3511.60 3978.99
EBITDA Growth % -0.90% 16.91% 1.11% 9.53% 13.31%
EBITDA Margin % 18.57% 19.38% 18.71% 19.70% 20.50%
Depreciation 949.83 1097.15 1174.65 1293.62 1353.12
EBIT 1876.58 2073.70 2031.32 2217.98 2625.87
EBIT Margin % 12.28% 13.74% 11.86% 12.44% 13.53%
Interest 114.23 168.43 197.36 188.73 151.23
Other Income 357.65 476.57 344.20 344.20 344.20
PBT before excp. 1746.98 2079.14 2178.16 2373.45 2818.84
Excep. Inc/exp -77.52 0.00 0.00 0.00 0.00
Profit Before Tax 1746.98 2079.14 2178.16 2373.45 2818.84
Provision Tax 250.11 569.53 631.20 593.36 704.71
Tax Rate % 14.98% 27.39% 28.98% 25.00% 25.00%
PAT 1413.31 1509.61 1546.96 1780.09 2114.13
PAT Growth % 39.46% 9.31% 2.47% 15.07% 18.77%
PAT Margin % 9.33% 9.44% 9.03% 9.99% 10.89%
EPS 17.53 18.97 19.16 22.08 26.22
Source: Stockaxis Research, Company Data


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 do not see any major impact of Covid-19 on Cipla. We initiate a “buy” on Cipla limited for long term perspective for a TP of Rs.815 based on 31x FY22 EPS. We expect company’ revenues/EBITDA/PAT to grow at a CAGR of 6%/11%/17% for the term of FY19-FY22.