Buy Cipla, target price Rs 650: Sharekhan

Sharekhan has given a buy rating to Cipla Ltd. with a target price of Rs 650. The share price moved down by -0.34 per cent from its previous close of Rs 636.55. The last traded stock price is Rs 634.40.
Q4FY2020 results reflected the partial impact of COVID-19 related disruptions. The quarter witnessed stabilization of price erosion in the US markets . Also, approvals from the US regulator – USFDA have relatively increased, which augurs well for Indian pharma companies with US exposure.

Investment Rationale


The brokerage says Cipla's Q4FY2020 results missed estimates impacted by the Covid-related crisis, which the management sees as a short term phenomenon. With the restructuring at the Indian operations done, planned new launches would strengthen the respiratory franchise.

The ongoing Covid-19 pandemic, has led to operational disruptions. The India and the API business grew in double digits while the North America business reported a decline in revenue. Operating profits, at Rs 633 crore, dropped by 34 per cent year on year while OPM contracted by 730 bps year on year to 14.5 per cent. OPM reflected an impact of 200 bps on account of the COVID-19 related issues. Adjusted PAT at Rs. 246 crore dropped by 53 per cent year on year. The management expects the impact of COVID-19 to be short-lived and has guided for a recovery in the near term.

Quarterly Results

Source: ETMarkets.com

Financials

For the quarter ended March 31, 2020, the company reported consolidated sales of Rs 4301.60 crore, up 1.58 per cent from last quarter sales of Rs 4234.55 crore and up 0.72 per cent from last year same quarter sales of Rs 4271.00 crore, The company reported net profit after tax of Rs 242.31 crore in the latest quarter.

Promoter/FII Holdings

Promoters held 36.68 per cent stake in the company as of March 31, 2020, while FIIs held 20.31 per cent, DIIs 20.86 per cent and public and others 22.16 per cent.