Cipla Soars After Q1 Earnings: A Must-Have Pharma Stock

Cipla Shares Soar 12% After Strong Q1 Results; Why You Should Consider This Pharma Stock

Cipla, one of the leading pharma companies in India, has delivered impressive results for the first quarter of FY24, beating market expectations and registering double-digit growth across its key markets. The stock price surged by nearly 12% on Thursday, hitting a new 52-week high and adding to its 21% gain in the past year. Cipla’s strong performance was driven by its diversified portfolio, robust demand in India, the US, and South Africa, and cost efficiencies. The company also announced a new subsidiary to cater to the rural markets in India. Here are some of the reasons why Cipla is an attractive pharma stock to buy.

Strong Growth Across Verticals

Cipla reported a 17.7% year-on-year increase in revenue from operations to Rs 6,329 crore in Q1 of FY24, driven by strong performance in India, the US, and South Africa. The company’s net profit jumped by 45.1% year-on-year to Rs 996 crore, while its EBITDA grew by 39.7% year-on-year to Rs 1,494 crore, expanding its margin by 230 basis points.

Cipla’s One India business, which includes branded prescription, trade generics, and consumer health segments, grew by 12% year-on-year, supported by its leadership position in respiratory, urology, and cardiology therapies. The company also launched 11 new products in India during the quarter.

Cipla’s US business recorded its highest-ever revenue of $222 million, growing by 43% year-on-year, driven by its differentiated portfolio of complex generics, specialty products, and biosimilars. The company also received six new approvals from the US FDA during the quarter.

Cipla’s South Africa business grew by 13% year-on-year in local currency terms, backed by double-digit growth in both prescription and over-the-counter segments. Cipla is now the second-largest player in the prescription market in South Africa by market share.

Positive Outlook for Key Markets

Cipla has a positive outlook for its key markets, as it expects to benefit from the favorable pricing environment in the US generics market, the strong demand for chronic therapies in India, and the recovery of the private market in South Africa.

Cipla has also raised its guidance for its US sales and EBITDA margin for FY24, reflecting its confidence in its pipeline and execution. The company has several high-value products lined up for launch in the US market, including generic versions of Abraxane (a cancer drug), Advair (an asthma inhaler), and Revlimid (a blood cancer drug).

In India, Cipla plans to complete its medical representative hiring by Q2 of FY24, which will improve its field force productivity and market reach. The company also aims to grow its consumer health franchise and increase its chronic therapy contribution to its domestic sales.

In South Africa, Cipla expects to see a recovery in the private market as the Covid-19 situation improves and vaccination rates increase. The company also plans to leverage its strong presence in respiratory and anti-infective segments to capture growth opportunities.

New Initiatives to Enhance Growth

Cipla has also announced some new initiatives to enhance its growth prospects and create value for its stakeholders. The company has incorporated a wholly-owned subsidiary called Pactiv Healthcare, which will focus on manufacturing, developing, producing, purchasing, and selling pharmaceutical, healthcare, and wellness products for the rural markets in India. This will help Cipla tap into the huge potential of the rural healthcare segment, which is expected to grow at a faster rate than the urban segment.

Cipla has also increased its research and development investments by 27% year-on-year to Rs 349 crore or 5.5% of sales in Q1 of FY24, driven by the continued progress of clinical trials on key pipeline assets and other developmental efforts. The company has a strong pipeline of innovative products across various therapeutic areas such as respiratory, oncology, dermatology, and biosimilars.

Attractive Valuation

Cipla is currently trading at a price-to-earnings ratio of 28.6x based on its trailing 12-month earnings, which is lower than its peers such as Sun Pharma (33x), Dr Reddy’s (36x) and Lupin (38x). The stock also offers a dividend yield of 0.7%, which is higher than Sun Pharma's (0.5%) and Dr Reddy’s (0.4%).

Cipla’s valuation is attractive considering its strong growth prospects, diversified portfolio, robust pipeline, cost efficiencies, and new initiatives. The company has also consistently delivered on its guidance and expectations, which reflects its operational excellence and execution capabilities.

Kotak Institutional Equities, a leading brokerage firm, has raised its target price on Cipla to Rs 1,230 from Rs 1,100 earlier, implying a potential upside of 5% from the current market price. The brokerage has maintained a buy rating on the stock, citing Cipla’s sharpened focus on domestic Rx, US generics, and strong delivery of cost efficiencies.

Conclusion

Cipla is one of the best pharma stocks to buy in India, as it offers a combination of growth, stability, and value. The company has delivered impressive results for Q1 of FY24, beating market expectations and registering double-digit growth across its key markets. The company has a positive outlook for its key markets, as it expects to benefit from the favorable pricing environment in the US generics market, the strong demand for chronic therapies in India, and the recovery of the private market in South Africa. The company has also announced some new initiatives to enhance its growth prospects and create value for its stakeholders, such as incorporating a new subsidiary to cater to the rural markets in India and increasing its research and development investments. Cipla is currently trading at an attractive valuation compared to its peers and offers a dividend yield of 0.7%. Kotak Institutional Equities has raised its target price on Cipla to Rs 1,230 from Rs 1,100 earlier, implying a potential upside of 5% from the current market price. The brokerage has maintained a buy rating on the stock, citing Cipla’s sharpened focus on domestic Rx, US generics, and strong delivery of cost efficiencies. Cipla is a pharma stock that you should consider adding to your portfolio.

Disclaimer: This blog post is for informational purposes only and does not constitute any investment advice or recommendation. The author is not a financial expert and does not take any responsibility for the accuracy, completeness, or suitability of the information provided. Readers should do their own research and consult a professional before making any investment decisions. Investing in stocks involves risks and may result in losses. Past performance is not indicative of future results.