Cipla Ltd.: Weak Earnings; F27 Remains a Transition Year; Maintain UW

研报英文原文证据摘录

Cipla Ltd.: Weak Earnings; F27 Remains a Transition Year; Maintain UW

IdeaM

Valuation Methodology

Our valuation methodology – base case P/E multiple – is unchanged. We use a framework

around earnings growth, visibility of earnings, pipeline of molecules, R&D and balance

sheet strength.

F2027 recovery hinges on execution of US respiratory and peptide launches, while strong

net cash and India/EM franchise provide stability. We build in US$850mn and US$987mn

in US sales in F27/28, respectively, with US lanreotide remediation timeline uncertainity,

competition and muted growth keeping us at UW. We lower our EPS estimate for F27 by -

10.7%, and F28 by 1.5%. The stock trades at P/Es of ~25x/ 21x F27E/F28E. We value Cipla

at 19x March 2028E P/E, in line with peers like Dr Reddy's. At 19x, this implies a ~20%

discount to its 10-year average. With these changes, our price target falls to Rs1,218.

Bull case: Accelerated revenue growth from major approvals and ramp-up in complex

respiratory assets (gAdvair, gAbraxane, gSymbicort, and other peptide products), leading

to stronger growth in the US. Indian business outperforms thanks to chronic disease

therapy. Aided by a higher-margin business mix and operating leverage, we assume

EBITDA margin expands to ~24%, with strong RoCE at ~20%. We apply a 24x P/E to our

March 2028e bull case EPS.

Bear case: Prolonged weakness in the US market, driven by slower approvals and

regulatory headwinds as well as slow Indian Rx growth. We assume weaker-than-expected

performance in the consumer segment. Further, we assume EBITDA margin dips to ~18%

in F2027, and growth decelerates across verticals. We apply a 17x multiple to our March

2028e bear case EPS.

Risks to upside

• Approval and timely launch of respiratory and peptides products