Motilal Oswal has maintained a Neutral rating on Cipla, with a target price of Rs 1,530 which is 8% upside from the current market price. According to the firm, due to delays in niche product approvals and launches, earnings growth is expected to slow down to just 5% from FY25 to FY27.
Here are three main reasons why Motilal Oswal is staying cautious –
Motilal Oswal on Cipla: Strong Q3 but limited upside from current levels
As per the brokerage firm, Cipla’s Q3FY25 exceeded expectations, mostly driven by a healthier product mix and lower research and development spending. The company reported a 7.1% YoY revenue growth to Rs 70.7 billion.
However, the brokerage firm has maintained a Neutral rating due to limited growth potential at current levels. The firm sees the stock’s upside as constrained, and earnings growth is expected to moderate in the coming years.
Motilal Oswal on Cipla: Delays in niche product approvals impact growth prospects
Motilal Oswal highlights that Cipla has been expanding its market share, more specifically in the chronic prescription business and trade generics segment. However, a key risk for the company is the delay in approvals for niche products, which is holding back its growth potential in the medium term.
“We expect CIPLA to deliver 18% YoY earnings growth in FY25 after posting strong 39% YoY growth in FY24. However, considering the delay in niche approvals/launches, we expect earnings growth to moderate to 5% over FY25-27. We maintain Neutral, given limited upside from current levels,” added the brokerage firm in its report.
The brokerage firm further points out that while Cipla expects growth in its upcoming launches such as g-Advair and g-Abraxane, but requires USFDA approval and could face delays.
Furthermore, it noted out that the launch of g-Advair is now expected in the first half of FY26, while g-Abraxane might not be available until the second half of FY26, which can likely impact the company’s growth.
Motilal Oswal on Cipla: Slower earnings growth post FY24
While Cipla saw a 39% YoY growth in earnings in FY24, the brokerage firm predicts a slowdown in earnings growth over the next few years.
As per the brokerage firm, it expects 18% YoY earnings growth for FY25, but forecasts a sharp moderation to 5% growth from FY25 to FY27 due to delayed launches and niche product approvals.
Cipla stock performance Vs Nifty 50
Cipla share price has been down recently, falling by 6.49% in the last month and 8.48% in the past six months. Over the last five days, it has fallen by 1.08%. However, it has gained 6.38% over the past year.
Cipla has a market capitalisation of 1.15 lakh crore. The share price of the company’s 52-week high is Rs 1,702.05 and the low is Rs 1,312.00.
In comparison, the Nifty 50 index has also struggled in the short term, dropping by 2.18% in the past month and 6.87% over the past six months. But the share price of Nifty 50 posted a 6.41% increase over the past year.
Cipla Q3FY25 performance
Cipla on January 28 announced its Q3 earnings. In Q3FY25, the company reported a 49% increase in net profit, reaching Rs 1,571 crore compared to Rs 1,056 crore in the same quarter last year.
Furthermore, the company in this earning also achieved its highest-ever quarterly revenue, recording Rs 7,073 crore, up 7% from Rs 6,604 crore in Q3FY24. Its EBITDA rose by nearly 16% YoY, reaching Rs 1,989 crore, while EBITDA margin improved to 28.1% from 26.3% last year. Total expenses increased by 5% to Rs 5,378 crore, and the company’s EPS for the quarter stood at Rs 19.45.