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On Tuesday, BofA Securities adjusted its outlook on Cipla (NSE:CIPL) Ltd (CIPLA:IN), a prominent pharmaceutical company, by increasing its price target to INR 1,420 from INR 1,400. Despite the adjustment, the firm maintained its underperform rating on the stock. The revision comes after Cipla disclosed its earnings, revealing an EBITDA of Rs 15.4 billion with a margin of 22.8%, which fell short of BofA Securities’ expectation of Rs 17 billion and a 24.6% margin but aligned with the consensus.
Cipla’s performance in the Indian market showed an 8.5% growth, which did not meet BofA Securities’ projections. Additionally, the company’s revenue from the United States remained stagnant, disappointing expectations despite a low comparative base in generic drugs and some supply resumption for Lanreotide, a treatment for gastroenteropancreatic neuroendocrine tumors.
The analyst from BofA Securities pointed out that while Cipla’s upcoming product launches over the next few quarters are anticipated to partially compensate for the impact of generic Revlimid, a cancer medication, the guidance for U.S. revenue in the first quarter of FY26 is likely to lead to a downward revision of market estimates.
The stock’s current valuation stands at 25 times the projected earnings for FY27, which takes into account the potential revenue from high-value product launches. However, the valuation does not seem to fully reflect the execution risks associated with earnings growth driven by the U.S. market, as evidenced by delays in approvals during FY24-25.
In summary, BofA Securities reaffirms its underperform rating for Cipla, with a revised price objective of INR 1,420, up from INR 1,400, while expressing caution over the execution risks that may affect the company’s performance in the U.S. market.
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