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Cipla Ltd
Shareholding Pattern as on 31 December 2021
CMP: Rs 943 Rating: BUY Target: Rs 1,088
Company Information
BSE Code 500087
NSE Code CIPLA
Bloomberg Code CIPLA IN
ISIN INE059A01026
Market Cap (Rs. Cr) 76410
Outstanding shares(Cr) 80.67
52-wk Hi/Lo (Rs.) 1,005/738
Avg. daily volume (1yr. on NSE) 38,13,990
Promoters, 36.11% FIIs, 24.35%
Face Value(Rs.) 2.0
DIIs, 21.53% Others, 18.01%
Book Value (Rs) 250.26

Investment Rationale
Key Drug launches in US to drive
growth
During the 9MFY22, US revenue grew
flat at 4% YoY. Cipla has 72 ANDAs
pending approval. Management has
guided for the quarterly run-rate of
USD 150 million. Cipla is expected
to launch its first peptide product
during the quarter as it has received
approval for the Lanreotide injection
with a partner. Further, company has
got the timely approval of three big
drugs namely Abraxane, Revlimid,
and Advair which are lined up for
the launch in the 2HFY23. In addi-
tion, company is accelerating the
pace of clinical trials in Respiratory
products in the US. Cipla, with its
expertise in Respiratory products,
is in a strong position to grow its
US franchise. Cipla witnessed a
decent market share gains in generic
Albuterol and Arfometrol. Currently,
Cipla has 15.8% market share in
Albuterol and 27% in Arfometrol in

23 INSIGHT February 2022

US market. However, rising generic 38 brands in the private market in
drug approval in US which resulted 9MFY22. Going forward, Cipla would
Cipla reported
in high price erosion is weighing focus on maintaining this mar-
on overall US sales over the near to
better-than- ket-beating growth in large branded
medium term. Cipla is in process to expected and unbranded generic franchises.
ramp up the Albuterol sales in US performance for Further, in the Sub-Saharan Africa
and also looking for some meaningful Q3FY22 mainly region, Cipla is the fastest growing
launches over the next 2–3 quarters
driven by strong company in Kenya. With respect to
in US market which is expected to the Cipla Global Access segment,
drive the US revenue for Cipla going
performance in Cipla is seeing strong traction in TLD,
forward. India and the US which is a combination of tenofovir,
markets and better lamivudine and dolutegravir drug.
Domestic formulation business
grew strongly during 9MFY22 operating leverage. Reported better than expected
Cipla’s India formulation business Q3FY22 numbers
grew strongly by 29% YoY during Cipla reported better-than-expected
portfolio is expected to deliver muted
9MFY22, mainly driven by high con- performance for Q3FY22 mainly
performance during FY23 on the back
tribution from COVID- 19 products driven by strong performance in
of high base in FY22.
in Q1FY22. However, since September India and the US markets and better
onwards, COVID related drugs South Africa business gave operating leverage. Revenue during
sales has declined substantially, market beating growth the quarter grew by 6% YoY at Rs
and the non COVID related drugs During 9MFY22, South Africa and 5478.9 crore. EBITDA margin during
are expected to drive the domestic others business grew 4% YoY on the the quarter declined by 135 bps
formulation business growth going back of market beating growth in YoY at 22.5%, though sequentially
forward. The Consumer Health South Africa Private market. How- it improved by 25 bps. Company’s
business, supported by the prod- ever, during 9MFY22, the growth net profit during the quarter grew
uct shift from the Trade Generics has also been adversely impacted by 0.7% YoY and 6.7% QoQ at Rs
business, continues to enjoy strong by muted performance in the South 756.9 crore. Domestic sales that
growth momentum. Products such as Africa tender market. Cipla achieved contributed 46% to overall revenues
Omnigel, Cipladine, Cofsils, Prolyte growth in the South Africa Private remained a key growth driver for
ORS, Clocip, and Maxirich delivered market by outperforming in the Cipla’s performance. Strong growth
over 40% YoY growth during 9MFY22. Antiretroviral (ARV), Oncology, in the Indian market should lend
It is expected that domestic formu- Respiratory, and Anti-Infective confidence to investors on the future
lation business will be broad based therapies. Cipla is one of the largest prospects of the company. In another
going forward, driven by Respiratory ARV suppliers in the South Africa key geography, the US, Cipla contin-
product sales and the Consumer private market in terms of volume. ued its strong performance. US sales
Health and Trade Generics segments. Company has also maintained the were up 9% YoY and 6% sequentially,
As the COVID cases waning, COVID growth momentum by launching contributing slightly more than fifth
to the overall number. The compa-
ny’s respiratory portfolio continues
Cipla ltd. 3 year Price Chart
to contribute to this traction,
1200 marking a growth of 36% YoY in
dollar terms. Albuterol and Arformo-
1000
terol inhaler generics are regularly
800
gaining market share, strengthening
the company’s US sales. US business
600 for Cipla now sees a new base of $150
million quarterly run-rate. As per
400
management, company is on track
to achieve EBITDA margin of 22-23%
200
for FY22. The new important generic
0 drug launches in US in coming quar-
ters and strong growth momentum in
Jan-19

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Jul-21
Mar-19

May-19

Mar-20

May-20

Mar-21

May-21
Sep-19

Sep-20

Sep-21
Nov-19

Nov-20

Nov-21

Domestic formulation business will

February 2022 INSIGHT 24

aid the company to reports healthy
earnings growth going ahead.
Key risks
Any delay of generic drug launches
in US market and further steep
erosion in generic drug price in US
could affect company’s long term US
revenue growth.
Any US FDA warnings or alert on
manufacturing practices could have
a negative bearing on company’s
earnings growth.
Valuation
Cipla is one of the largest India
generic drug manufacturers having
strong presence in US market and
India branded generic market. Cipla’s
effort to scale its commercial traction
from respiratory products as well as
the buildup of the potential pipe-
line largely remains on track. The
key generic drug launches namely
Abraxane, Revlimid, and Advair are
the main growth drivers for the
The key generic
company going ahead. The strong
drug launches growth momentum in Domestic
namely Abraxane, formulation business will also be
Revlimid, and backed by new launches and superior
Advair are the main marketing efforts. These factors
growth drivers for would drive the improvement in
margins and RoE going forward. Fur-
the company going ther, continuous market share gains
ahead. The strong in Albuterol and Arfermetorol in US,
growth momentum will help the company to partially
in Domestic mitigate the price erosion impact.
formulation In addition, the 10 brands launched
business will also in the Trade Generics business in
9MFY22 are expected to continue to
be backed by new gain momentum and to contribute
launches and to overall growth. Hence, we remain
superior marketing Positive on Cipla ltd and recommend
eforts. These factors our investors to BUY the scrip with
target of Rs 1,088 from 12 months
would drive the
investment perspective. At, CMP, the
improvement in scrip is valued at P/E multiple of 22.8x
margins and RoE on Bloomberg consensus FY23E EPS
going forward. of Rs 41.4.

Particulars (in Rs Cr) FY20 FY21 FY22E FY23E

Revenue 16,694.9 18,988.5 21,593.9 23,568.4
Growth (%) 4.5% 13.7% 13.7% 9.1%
EBITDA 3,285.3 4,304.6 4,797.1 5,514.3
EBITDA Margin (%) 19.7% 22.7% 22.2% 23.4%
Net profit 1,529.6 2,350.3 2,845.5 3,342.1
Net Profit Margin (%) 9.2% 12.4% 13.2% 14.2%
EPS (Rs) 19.0 29.1 35.0 41.4
Consensus Estimate: Bloomberg

25 INSIGHT February 2022

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73 INSIGHT February 2022