Introduction
Established in 1935 and headquartered in Mumbai, Cipla Ltd. is a global pharmaceutical company renowned for its strong presence in key markets such as India, South Africa, North America, and other regulated and emerging regions. Cipla is dedicated to providing high-quality, affordable medications and has a diverse portfolio that includes treatments for respiratory, cardiovascular, and infectious diseases, among others. With a commitment to innovation and sustainability, Cipla continues to make significant strides in improving healthcare access and outcomes worldwide.
Product Portfolio
– Generics and branded generics
– Over-the-counter (OTC) products
– Specialty and consumer health products
– Respiratory drugs
– Anti-retroviral medications
– Urology, cardiology, anti-infective, CNS, and other therapeutic segments
– 1500+ products in 65 therapeutic categories available in over 50 dosage forms
Subsidiaries as of FY23:
– 45 subsidiaries
– 8 associate companies
Growth Strategies of CIPLA
– Cipla has achieved sales exceeding $500 million in the past four years, positioning it as the fastest-growing US generic pharmaceutical company among its competitors.
– The company’s Indian operations have experienced robust growth of 10% in FY24, driven by increased demand for branded prescription medications and trade generics.
-Cipla boosted its market share in North America by 15.5% in FY24, driven by significant shares in key markets such as Lanreotide and Albuterol.
-South Africa’s Private Market witnessed exceptional year-on-year growth of 26% in local currency terms, surpassing overall market growth rates.
-Strategic filings include 5 respiratory assets, including gSymbicort and gQvar, with launches expected within the next three years.
-The company has filed 12 assets in peptides and complex generics, slated for launch over the next 2-4 years, illustrating a focused expansion into specialized segments.
CIPLA Ltd Financial Highlights
Q4FY24
– Revenue: Rs.6,163 crore (7% increase YoY)
– Operating profit: Rs.1,316 crore (12% increase YoY)
– Net profit: Rs.932 crore (79% increase YoY)
– Operating profit margin: 21% (54 bps YoY improvement)
– Net profit margin: 15% (587 bps YoY improvement)
– R&D expenditure: Rs.444 crore (19% YoY increase)
FY24
– Revenue: Rs.25,455 crore (14% increase YoY)
– Operating profit: Rs.6,233 crore (26% increase YoY)
– Net profit: Rs.4,106 crore (47% increase YoY)
Financial Performance (FY19-24)
– Revenue and PAT CAGR: 10% and 25%
– Average 5-year ROE: 14%
– Average 5-year ROCE: 17%
– Debt-to-equity ratio: 0.02
Industry Outlook
– India is the largest provider of generic drugs globally
– Indian pharmaceutical industry: 3rd largest by volume, 14th largest by value
– Projected CAGR of over 10% to reach US$ 130 billion by 2030 and US$ 450 billion by 2047
– Largest number of USFDA-compliant pharmaceutical plants outside the US
– 2,000+ WHO-GMP approved facilities serving demand from 150+ countries
Growth Drivers
– 100% FDI allowed through automatic route for Greenfield pharmaceuticals projects
– Rs.1,000 crore (US$ 120 million) earmarked for promotion of bulk drug parks in FY25
– PLI scheme for pharmaceuticals with a total outlay of Rs. 15,000 crore (US$ 2.04 billion) from 2020-21 to 2028-29
Competitive Advantage
Compared to competitors like Sun Pharmaceuticals Industries Ltd and Lupin Ltd, Cipla stands out as an undervalued stock with significant potential for P/E expansion, supported by its strong margin and earnings growth
Outlook
- Cipla Ltd. has been crucial in making affordable HIV treatment accessible from India.
- Cipla is developing new products including inhaled insulin and plazomicin, with more in the pipeline.
- The company aims to rank 2nd in OTC markets and launch peptide assets in FY25.
- Cipla is developing complex ANDA products for its future portfolio.
- Cipla plans to invest Rs.1,500 crore to enhance manufacturing and sustainability, with an EBITDA guidance of 24.5% to 25.5%.
Valuation
With an improved product mix, deepening distribution network, and technological innovations, Cipla is expected to see considerable growth in revenue and margins. A BUY rating is recommended with a target price (TP) of Rs. 1,776, 32x FY26E EPS.
Risks
– Forex risk due to significant operations in foreign markets.
– Regulatory risk, including scrutiny by regulatory agencies like the USFDA.
Recap of our previous recommendations (As on 24 May 2024)
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