 "Cipla: Heading for higher growth, margins in 2015-16")
The Cipla stock touched 52-week highs a couple of times this week on winning a patent case, triggering expectations of a better performance in FY16. Last month, the company had won a global tender worth $189 million to supply antiretroviral or AIDS drugs. Given upsides from its inhaler portfolio, revenue growth from niche products, new markets, joint ventures and alliances, analysts believe there are upsides to the stock in the medium to long term.
The recent trigger was Cipla’s outperformance in the domestic market in February, registering a 24 per cent year-on-year (y-o-y) growth, the highest among the country’s top 10 pharma companies. The pharma sector, too, grew at 18.9 per cent y-o-y. Growth was led by higher volumes and price hikes, which were among the highest in a year.
The revocation of a patent on asthma drug Spiriva held by German major Boehringer Ingelheim is also a positive as Cipla had opposed the patent on the drug.
Last month, the company had also won a $189-million order for supply of AIDS-related drugs for three years effective January 1, 2015. The supplies are expected to begin from the current quarter.
Sharekhan analysts have upgraded their rating and revised their price target upwards for Cipla due to better visibility of growth. To expand its presence in key geographies and improve performance in niche segments, Cipla has signed 17 collaborative and joint venture deals in the past year.The recent trigger was Cipla’s outperformance in the domestic market in February, registering a 24 per cent year-on-year (y-o-y) growth, the highest among the country’s top 10 pharma companies. The pharma sector, too, grew at 18.9 per cent y-o-y. Growth was led by higher volumes and price hikes, which were among the highest in a year.
The revocation of a patent on asthma drug Spiriva held by German major Boehringer Ingelheim is also a positive as Cipla had opposed the patent on the drug.
Last month, the company had also won a $189-million order for supply of AIDS-related drugs for three years effective January 1, 2015. The supplies are expected to begin from the current quarter.
Analysts at the firm believe a focus on technology-intensive products will strengthen the operating profit margins (OPM) and expect them to improve 350 basis points during FY2015-17. The management guidance seems conservative given upside in the supply of Nexium (antacid) generic and new tenders rolling out in emerging markets. The management had guided for a 9-10 per cent growth in revenues and an OPM of over 20 per cent in the current financial year, while FY16 is expected to see growth in mid teens and an improvement in the OPM.
While the firm has been looking at growth on the basis of tie-ups and acquisitions, they have been small so far and what could give kicker to the stock is a larger acquisition in the US. Consensus Bloomberg target price for the stock for ratings in March is pegged at Rs 834. Of this, 15 per cent is attributable to the inhaler business and the rest, for the base business.