Update on Indian Equity Markets:
After two days of an upswing, markets reflected weakness on Wednesday as Nifty closed the day 0.5% lower at 15,030. Within the index, COALINDIA (3.4%), CIPLA (2.1%), and SUNPHARMA (1.9%) were the highest gainers while TATAMOTORS (-5.5%), BAJAJFINSV (-1.8%), and M&M (-1.8%) were few of the losers. Within the sectoral indices, REALTY (2.2%), MEDIA (2.0%), and PHARMA (1.2%) led the gainers while FIN SERVICE (-0.9%), PVT BANK (-0.8%), and AUTO (-0.7%) were the losers.
Excerpts of an interview with Mr. Umang Vohra, MD and Global CEO, Cipla Ltd (CIPLA) with CNBC -TV18 dated 18th May 2021:
- CIPLA has maintained its growth guidance for FY22E as the momentum is intact in the business trajectory with the upcoming launches in the US and India.
- The rise in input price will abate when the demand for COVID-19 drugs abate, dependent on the trend in cases.
- The company has ramped up its Remdesivir production by five times. The company believes that the supply is not short beyond a week’s demand or so because many other manufacturers have also increased production. Along with that, the company is also selling a lot of other vitamins and minerals related to COVID-19.
- During 4QFY21, company made 3% of sales from COVID-19 drug as compared to 5% in the earlier quarters.
- There is a global shortage of Tocilizumab but the company has been able to serve for the same at its highest. Government importing Tocilizumab drug has helped alleviate demand pressure.
- The company is also willing to partner with global majors to import vaccines. The company can re-purpose factories for fill and finish of vaccines if required.
Asset Multiplier Comments:
- The next 1-2 quarters might see a spurt in revenues from Remdesivir, Tocilizumab, and other COVID-19 related drugs due to the second wave of the pandemic.
- With the share of COVID-19 related drugs declining as a percentage of revenues, the focus will be on core business with new launches and new markets for revenue growth.
Consensus Estimates: (Source: market screener website)
- The closing price of CIPLA was ₹ 898/- as of 19-May-2021. It traded at 27x/ 23x the consensus EPS estimate of ₹ 33.6/ 39.8 for 22E/23E respectively.
- The consensus price target is ₹ 993/- which trades at 25x the EPS estimate for FY23E of ₹ 39.8/-
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