On Wednesday, HSBC maintained a Buy rating on Cipla Ltd. (CIPLA:IN) but reduced the price target to INR1,755.00 from the previous INR1,890.00. The adjustment follows the company's second-quarter financial year 2025 results. HSBC's stance remains positive, citing long-term growth prospects in the company's key markets, which include India, South Africa, and the United States, along with prudent capital allocation strategies.
The analyst believes that the current stock price of Cipla already accounts for the worst-case scenario regarding the company’s facility in Goa. Expectations for recovery in lanreotide sales and the introduction of new products, such as generic versions of inhalers Advair and Symbicort as well as injectables including peptides, are anticipated to bolster U.S. sales in the medium term. Furthermore, sales in India are expected to benefit from enhanced market focus and an expanded sales team.
HSBC's revised price target reflects a potential upside of approximately 19%. The reduction in the target price comes after incorporating the impact of lanreotide supply disruptions and a more gradual increase in India sales into the forecasts. Consequently, this has led to approximately 4-5% reductions in the estimated earnings per share (EPS) for the fiscal years 2025 to 2027.
Despite increases in costs for research and development, sales, and marketing, Cipla is expected to maintain earnings before interest, taxes, depreciation, and amortization (EBITDA) margins in the mid-20% range for the fiscal years 2025 to 2027. The firm also highlighted Cipla's strong position for strategic mergers and acquisitions, supported by a net cash balance of around USD 1 billion.
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