Checkout Budget Highlights 2023Motilal Oswal's research report on Cipla
The USDFA issued form 483 to Cipla for its Pithampur site and we assessed that the observations are primarily related to inadequate root cause analysis, handling of market complaints, upgrading of software and GMP records. We expect CIPLA to implement strong corrective and preventive actions (CAPA) to resolve the issues. We cut our earnings estimate by 3% for FY24 to factor in the delay in g-Advair approval, due to observations in form 483. The Official action indicated (OAI) at Goa and the recent form 483 at Indore increase the overall regulatory risks from US generics business perspective. Accordingly, we reduce the PE multiple to 21x from 23x. We value Cipla on an SoTP basis (21x 12M forward earnings and INR40 as NPV for g-Revlimid) to arrive at a price target of INR990. Considering a) moderate earnings growth and b) valuation providing limited upside potential, we reiterate our Neutral rating on the stock.
Outlook
Although the company has aggressive growth plans, the commodity nature of its products does not leave much uWe value Cipla on an SoTP basis (21x 12M forward earnings and INR40 as NPV for g-Revlimid) to arrive at a price target of INR990 and reiterate our Neutral stance on the stock.
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