Reduce Cipla; target of Rs 657: Prabhudas Lilladher

Prabhudas Lilladher's research report on Cipla

While CIPLA’s US business is struggling with growth issues since last 12 months, it has received an additional setback because of CRL issued (Complete Response Letter) against NDA application for its specialty product IV Tramadol. We believe CRL would delay the approval for at least 3-6 months and final launch may perhaps be in 2HFY22E. Our earnings estimate has not discounted potential benefits from IV Tramadol as we await better clarity of CIPLA’s strategy to market/monetize the products in global markets including US and EU. The product being a specialty medicine, it would take 12-18 months to breakeven, post which it would start contributing in operating profit.

Outlook

However, we prefer to have further clarity post FDA refusal of approval along with issue of CRL and marketing/monetizing strategy of CIPLA in US and ROW. We maintain ‘REDUCE’ with TP of Rs657 based on 22x (PE) of FY22E.

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