Cipla is a leading global pharmaceutical company manufactures metered dose inhalers, dry powder inhalers, nasal sprays, nebulizers and a range of inhaled accessory devices. The Company’s geographical segments include India, USA, South Africa and Rest of the World.
|Market Cap. (Cr.)||65500.72|
|52 Wk. high/low||878.50/356.75|
|Book Value (Rs)||211.74|
Share Holding Pattern %
|Non Promoter Corp.||5.57|
|Public & Others
Source: Capitaline Corporate Database, EWL Research
Key Investment Rationale:
Cipla’s Respiratory products demand double-digit market share. As per IQVIA October-December ’20 quarter Cipla continued to deliver market-beating growth in Respiratory where it registered 14% growth versus the minus 4% in the market, Urology 8% versus a 7% and Derma 15% versus 8%.
Cipla India business, which include the branded prescription, trade generics and consumer health businesses grew by 22% YoY with strong growth across the three businesses. The prescription business grew by 25% on a YoY basis led by covid-19 portfolio and healthy traction in respiratory therapies.
North America business grew by 6% year on year in Q3FY21 led by continued expansion in market share (14%) of Albuterol and other assets along with growth in the institutional channel. The emerging market business grew by 46% on a YoY led by continued demand across all regions.
S. which contributes 23% to toal revneue of cipla will be next leg of growth for the company led by the launch of one inhalation product each year, further ramp-up of gAlbuterol, launch of gRevlimidc (cancer drug) in FY23E and approval of Tramadol IV (painkiller).
Cipla reported EBITDA margin of 24.8% for the December quarter, which is the highest ever reported EBITDA for the company in the recent history
COVID products contribution in total revenue is lower than 5%. But it’s probably going to be much lower going forward. Growth in non-COVID products portion in India is about 7% and many therapies outside COVID have seen growth coming back now.
Cipla has leadership positions across respiratory and urology segments, and have fifth rank in cardiology in India. Cipla’s greater access to cost-effective medicines and treatment options positively impacts healthcare outcomes. With the good reseponse from Albuteral product Cipla plans to file for more respiratory products in the US. Besides, the target action date is approaching for the approval of its much-awaited generic Advair inhaler. Albuterol has a market size of about $900 million annually. The market for Advair inhaler generics is much larger than Albuterol. The consumer health business accounts for 5-6 percent of Cipla’s overall turnover which it aims to take beyond 12 per cent in the next five years. Other product launches and approvals are also continuing to accrue benefits. Cipla expects one niche launch per quarter starting Q1FY22 (at least $15-$20 million per annum opportunity with each launch). On performance front we expect company to report EPS of Rs.39.7 for FY22E, at CMP of Rs.808 PE works out to be 22.2x. Hence, investors can buy the stock at CMP of Rs.808 for target price of Rs.980. Time frame should be 9-12months.
Source: Livemint, EWL Research,Company
Key Threapy Areas :
According to the IQVIA report (Mar 2020), Cipla is the second largest inhaler selling company by volume and four of respiratory brands are listed among the Top 50 medicine brands in the country. Wide range of drug-device combinations have established Cipla’s position as a lung leader in India and other key emerging markets.
Market Share of Respiratory therapy in India of Cipla is at 25.4%
The Company manufactures metered dose inhalers, dry powder inhalers, nasal sprays, nebulizers and a range of inhaled accessory devices.
Asthma and chronic obstructive pulmonary disorder (COPD).
Asthma and COPD are both chronic lung diseases. COPD is mainly due to damage caused by smoking, while asthma is due to an inflammatory reaction.
‘Breathe-free’ is an initiative by Cipla to counsel asthmatic and COPD patients on the management of this disease
Cipla address an unmet need associated with obstructive airway diseases (OAD) such as asthma and chronic obstructive pulmonary disorder (COPD).
Cipla was the first to produce aerosol nebulisers for respiratory disease in the mid-1970s
In 2001, in the global fight against the HIV/AIDS pandemic, Cipla developed the world’s first triple anti-retroviral drug combination, Triomune and offered it at below USD 1 per day
At the end of 2019, out of 38 million people living with HIV/AIDS globally, 25.4 million people (67%) have had access to antiretroviral as APIs therapy (ART) and nearly 80% of the world’s antiretroviral drugs are supplied from India.
Cipla was the first company in India to introduce the drugs Vincristin and Vinblastine in the year 1984.
Since 1984, it has extended anti-cancer portfolio and now have more than 32 drugs (57 SKU) to treat various types of cancer
Generics caters to Over 26 therapeutic categories that include 150+ brands and 11+ different dosage forms.
API pipeline consists of 75+ complex developments in the therapy areas of Oncology, Hep C, ARV, Diabetology, CVS, CNS, Respiratory etc.
Cipla COVID – 19 Products
COVID Prpducts of the company includes Cipremi® Remdesivir Ciplenza® Favipiravir Actemra® Tocilizumab CIPHANDS® Sanitizer range.
Indian Pharmaceutical Industry
India enjoys an important position in the global pharmaceuticals sector. The country also has a large pool of scientists and engineers with a potential to steer the industry ahead to greater heights. Presently, over 80% of the antiretroviral drugs used globally to combat AIDS (Acquired Immune Deficiency Syndrome) are supplied by Indian pharmaceutical firms.
The US pharmaceutical market continues to be the top export destination for Indian pharmaceutical companies. Over the years, Indian pharma companies have adopted the strategy of pruning R&D pipelines to focus on complex formulations where competition and pricing pressures are limited.
The global pharmaceutical drug delivery market is projected to reach USD 2,015.3 billion by 2025 from USD 1,430.5 billion in 2020 to grow at a CAGR of 7.1% during the forecast period 2020-2025
In 2019, North America accounted for the largest share of the pharmaceutical drug delivery market. The large share of the North American market is due to factors such as the rising prevalence of chronic diseases such as cancer, respiratory allergies, and diabetes; growth in biologics in the pharmaceuticals market
Cipla is the 3rd-largest pharmaceutical player in South Africa. The Company has a strong presence in both the private and tender markets in the country. Top three therapies and market share of Cipla in Europe are – CNS (10.2%), Respiratory (12.6%) Alimentary tract & metabolism (5.1%)
Source: globenewswire,Annual Report,Company
Q3FY21 Financial Performance – Consolidated
|Particulars in Rs. Cr.||202012||202009||201912||QoQ||YoY|
|Revenue from Operations||5154.17||4972.58||4234.55||4%||22%|
|Other Operating Income||14.52||65.71||136.45||-78%||-89%|
|Total Revenue from Operations||5168.69||5038.29||4371||3%||18%|
|Raw Material Consumed||1353.34||1300.52||1034.39||4%||31%|
|Purchase of Finished Goods||604.5||790.12||571.87||-23%||6%|
|Profit After Tax||752.51||661.85||353.58||14%||113%|
|EPS in Rs.||9.28||8.25||4.35||12%||113%|
|PBIDTM(%)||25.57||24.74||19.61||83 bps||596 bps|
|PATM(%)||14.6||13.31||8.35||129 bps||625 bps|
|Partiiculars in Rs. Cr.||H1FY21||FY20||FY19|
|EQUITY & LIABILITIES|
|Reserves & Surplus||16915.09||15601.75||14851.14|
|Total Non Current Liabilities||3106.42||3212.14||4847.56|
|– Long Term Borrowings||2340.85||2369.28||3830.07|
|– Deferred Tax Liabilities(Net)||306.09||365.21||425.32|
|– Other Long Term Liabilities||323.14||344.38||470.76|
|– Long Term Provisions||136.34||133.27||121.41|
|Total Current Liabilities||4966.14||4393.14||3771.51|
|– Short Term Borrowings||828.45||447.15||486.16|
|– Trade Payables||2362.81||2281.81||1947.99|
|– Other Current Liabilities||799.95||715.99||600.6|
|– Short Term Provisions||974.93||948.19||736.76|
|Total Equity and Liabilities||25407.82||23662.56||23963.32|
|Total Non Current Assets||11652.79||11956.38||11536.69|
|– Fixed Assets(incl. Capital Work in Progress)||7303.66||7573.42||7415.4|
|-Intangible Assets under Development/R&D||395.54||403.53||345.13|
|-Capital Work in Progress||469.86||421||331.05|
|– Goodwill on Consolidation||2909.24||2934||2869.14|
|– Non Current Investments||442.89||454.5||193.86|
|– Deferred Tax Asset(Net)||273.18||239.77||201.41|
|– Long Term Loans & Advances||99.14||94.43||142.63|
|– Other Non Current Assets||624.68||660.26||714.25|
|Total Current Assets||13725.52||11703.84||12424.63|
|– Current Investments||2599.81||1016.52||2125.79|
|– Trade Receivables||3693.92||3891.31||4150.72|
|– Cash & Cash Equivalents||1035.1||1003.91||618.81|
|– Short Term Loans & Advances||3.38||5.6||6.28|
|– Other Current Assets||1443.03||1408.9||1558.2|
Cash Flow Statement
|Particulars in Rs.||202009||202003||201903||201803|
|Cash and Cash Equivalents at Beginning of the year||742.38||508.36||853.46||610.35|
|Net Cash from Operating Activities||1587.44||3068.45||1691.15||1462.76|
|Net Cash Used in Investing Activities||-1963.69||114.39||-1687.53||-834.17|
|Net Cash Used in Financing Activities||274.04||-2948.82||-348.72||-385.48|
|Net Inc/(Dec) in Cash and Cash Equivalent||-102.21||234.02||-345.1||243.11|
|Cash and Cash Equivalents at End of the year||637.64||742.38||508.36||853.46|
Key Financial Ratios
|Key Financial Ratios|
|Debt to Equity Ratio||0.19||0.18||0.29||0.33|
|Return on Equity (%)||–||9.81||10.17||9.91|
|Return on Capital Employed (%)||–||11.13||9.78||7.82|
|Interest Coverage Ratio||26.00||12.04||13.34||15.61|
|Operating Profit Margin (%)||19.05||13.87||13.35||11.45|
|Net Profit Margin (%)||13.14||9.03||9.23||9.33|
|Net Debt to Equity||(0.05)||0.05||0.10||0.14|
- Cipla’s total revenue from operations rose 18% YoY to 5,169 crore in December Quarter. The consolidated operating profit increased 69% YoY to Rs. 1,281 crore during the December quarter.
- During FY 2019-20, strong cash flow generation enabled the Company to prepay long-term debt by Rs. 1,939 crores leading to improvement in the Net Debt to Equity ratio to 0.05 (FY 2018-19: 0.10 ) and Net Debt to EBITDA ratio to 0.25 (FY 2018-19: 0.50).
- In FY 2019-20, overall cash flow further strengthened, which reflected in cash flow from operations growing to 3068 crores from Rs. 1,691 crores in FY 2018-19 and free cash flow growing to Rs. 1,955 crores from Rs. 1,043 crores in FY 2018-19.
- Cipla has efficiently allocated resources across the business to deliver long-term growth and value to its shareholders. Over the years, the Company has maintained a Return on Equity (RoE) of 10%
- Net Profit Margin of the company improved to 19.05% in H1FY21 from 13.87% in FY20
- The company is maintaing healthy Interest coverage ratio.
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