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What makes Cipla a standout stock

What makes Cipla a standout stock

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By Sandeep Singh  Sept 29, 2022 6:54:55 PM IST (Updated)

Cipla has outperformed most of its large peers over the past few months. Analysts are positive on multiple opportunities materialising for the drug maker over the coming months though valuations are playing spoilsport.

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Cipla shares have been in high demand on Dalal Street, shrugging off bouts of nervousness in the market. Analysts are upbeat on the Mumbai-based drug maker's profitability amid optimism over its new launches and the end of a period of uncertainty around a list of medicines — the prices for which are regulated by the government.
The Cipla stock has touched a chain of unprecedented levels over the past few days, and outperformed most of its major peers over the past few months, and counting. Analysts see the company's less dependence on the US market, where regulatory pricing pressure is higher than back home, as one of the primary reasons behind Cipla's winning streak on the Street.  
It is one of Sanford Bernstein's top picks given Cipla's exposure to the domestic market, which makes it attractive.“Cipla is one of our top picks both in the short as well as the medium term, from a view of about 1-2 years from now," Nithya Balasubramanian, Director at Sanford Bernstein, told CNBC-TV18
Her bullishness is based on two reasons:
  • Cipla has almost 45 percent exposure to India
  • The domestic market is attractive
  • She pointed out that there are some concerns with the US market for the sector. "Generic pricing deflation has been quite high in the last year," she said.
    However, she expects US price deflation to come down from 10-11 percent to 5.6 percent, which are more manageable levels.
    Balasubramanian sees "one opportunity after the other" materialising for the drug maker over the next 2-3 years. Cipla, as she describes it, will possibly be one of "the few names that will grow quite aggressively in the US market”.
    Many analysts are banking on the company's guidance of launching 2-3 complex generic launches a year.
    Some are also bullish on the opportunity arising from cancer drug Revlimid. Cipla has received a final US regulatory nod for a generic version of the drug.
    A pickup in inspections by the US FDA post-COVID and high valuations are among the key dampeners for the sector.
    Cipla's valuation adequately factors in the earnings upside over the next couple of years, according to Motilal Oswal, which maintains a 'neutral' call on the stock.
    The brokerage expects Cipla's earnings to grow at a 15 percent CAGR from from the year ended March 2022 to the year ending March 2024.
    Some are more cautious on the space, Cipla in particular.
    Independent market expert Ambareesh Baliga prefers Alembic Pharma and Lupin to Cupla as contra bets. "I am looking at a price of about Rs 930-950 for Lupin over the next one year,” he told CNBC-TV18. 
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