Cipla shares hit new 52-week high, surge 128% since March; Morgan Stanley sees this much upside in stock

Cipla shares have zoomed over 128 per cent from March lows of Rs 356.75 apiece

Cipla share price soared nearly 12 per cent to touch a new 52-week high of Rs 808 apiece after the pharmaceutical company posted a 26.6 per cent on-year jump in net profit at Rs 566.04 crore in the first quarter. The company had reported a net profit of Rs 447.15 crore in the same quarter a year ago. Cipla shares have zoomed over 128 per cent from March lows of Rs 356.75 apiece. Foreign brokerage firm Morgan Stanley sees over 16 per cent in Cipla stock. It has revised its price target to Rs 847 apiece from Rs 486 apiece earlier. “We remain OW (overweight), as Cipla has a steady domestic business, significant manufacturing capabilities, and visibility on intellectual property rights commercialization,” Morgan Stanley said. 

The foreign brokerage also said that Cipla has positioned itself as a key generic player in global markets. It has proven success with the depth of its product portfolio and breadth in overseas markets. Cipla recently launched albuterol in the US market and has complex drug Advair in the regulatory queue. “Its growing respiratory pipeline provides a competitive edge, we believe,” it said. 

Cipla shares were trading at Rs 804.90 apiece, up 10.47 per cent, as compared to a 0.77 per cent rise in the benchmark S&P BSE Sensex. Cipla said that the company continues to closely monitor the impact of the coronavirus pandemic on all aspects of its business, including how it will impact its customers, employees, vendors and business partners. “The quarter witnessed an impact of Covid19 linked cost escalations in material, freight and distribution costs. Even after normalizations in on-ground activity, the company expects to save Rs4,000-5,000mn in operating expenses,” said Nirmal Bank in a research report. The brokerage firm has given an ‘accumulate’ rating to the stock with a price target of rs 773 apiece, a 6% upside from the previous close. 

The pharmaceutical company said it is working with USFDA to comprehensively address observations received in Goa. “India growth was driven by strong performance across three verticals – prescription business, trade generics and consumer health. “Cipla is at the forefront with Covid care portfolio (Remdesvir, Favipiravir, Toclizumab, hand sanitizer), the contribution of which is likely to reflect from Q2 onwards,” HDFC Securities said in a research report. The brokerage firm has maintained buy rating with a revised target price.

Cipla said its India business grew by 16 per cent on-year in the first quarter with strong growth across the three businesses. The management envisages the India business to drive the growth, while the South African business too is expected to clock healthy growth. “The company has reported a strong set of results for Q1FY2021 with margins expanding strongly attributable to cost optimisation measures. Consequently, this is likely to improve the margins trajectory for Cipla going ahead,” Sharekhan said in a report. It has also given a buy rating to the stock.

According to the brokerage firm the key risks include currency fluctuations, delay in key product approvals / faster approvals for competitors’ products and any regulatory changes in India, South Africa or the US could affect business.

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