Sharekhan Recommends Buying This Multibagger Large Cap Pharma Stock, Shares

Cipla Limited in a recent report by Sharekhan has been rated 'buy' for a target price of Rs 1,225 apiece. The brokerage claims a potential gain of up to 16% considering the estimated target price and the current market price of the stocks. Cipla Limited is a large cap Pharmaceuticals sector company having a market capitalization of Rs 85,854.93 crore.

Stock Outlook

The Current market price of the stock is Rs 1,063 apiece. The 52-week low is Rs 850 apiece recorded on 17 December 2021, and the 52 week high is Rs 1,083 apiece recorded on 15 March 2022, respectively.

Returns over the Past 5 Years

Over the week, the stock gained 3.73%. Whereas, in the past 1 and 3 months, it gave a positive return of 3.58% and 10.05%, respectively. Over the past 1 year, it gave a positive return of 12.08%. In the past 3 years, the stock gave a multibagger return of 127.44%. In the past 5 years, the stock also gave 89.82% positive return.

Sustainable growth supported by strategic business objectives

The healthcare industry has been grappling with pandemic-induced headwinds; geopolitical tensions in Europe suddenly reached a flashpoint and further affected the uncertain, complex, and ambiguous environment. However, Cipla is well equipped to navigate through such challenges. With sharper strategies, which continue to strengthen the core business and extend into adjacent areas as well, Cipla has laid its 10 strategic business objectives encompassing areas of passion, economic engine, and capability, which would drive the company's growth ahead.

Focus on complex products to drive US growth

Cipla has a strong product pipeline of complex and high- value products to be launched in the US with most of them likely in H2FY2023. These include the likes of Advair, gRevlimid, and peptides injectables - the approval for these is expected in FY2023. In addition to Advair, the company has two more assets in the pipeline, which are expected to be commercialised in late FY2023/early FY2024, coupled with the unlocking of the peptide portfolio, thus pointing toward strong traction in high-value complex products, which would strengthen the company's presence in US markets. Management believes price pressures would sustain, but the product launch momentum could enable it to tide over the same.

Cipla to outperform IPM growth

Cipla's One-India Strategy has played out well and management now expects that it would further aid growth. This coupled with the company's strong position in the chronic segments could help it post strong growth. Cipla has a strong product portfolio across therapies and sales from the same are expected to ramp up. The company is witnessing increased traction in the branded prescription business and has outpaced the industry's growth. Moreover, the company is witnessing ealthy order flows in the trade generics business across regions, which would support growth. Cipla's consumer health business is witnessing strong traction and is expected to sustain the growth trajectory.

Valuation - Maintain Buy with a revised PT of Rs. 1,225

In its Annual Report for FY2022, Cipla has mentioned about significant progress across all strategic areas while navigating the tough external environment. Going ahead, commentary around growth prospects stays bright and future growth of the company would be guided by Cipla's 10 strategic business objectives around passion, economic engine, and capabilities. Cipla expects India business to post strong growth going ahead, backed by growth in core therapies and synergies from One-India Strategy. Strengthening of the respiratory franchise and a strong product pipeline, including complex generics, could drive US sales higher. "At the CMP, the stock is trading at P/E multiple of 27.5x/21.6x its FY2023E/FY2024E earnings, which is lower than the long-term historical average multiple and provides headroom for expansion. Hence, we maintain our Buy recommendation on the stock with a revised price target (PT) of Rs. 1,225," the brokerage said.

Key Risks

According to the brokerage firm, the key risks are:

1) Currency fluctuations,
2) Delay in key product approvals/faster approvals for competitors' products,
3) Any regulatory changes in India, South Africa, or the US could affect business.

Disclaimer

The stock has been picked from the brokerage report of Sharekhan. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.