Cipla shares jump 5% after promoter family sells 2.5% stake

Shares of Cipla rose nearly 5% in opening trade on Wednesday, driven by volume trade after certain members of the promoter group sold 2.53% stake in the company, worth around ₹2,637 crore. “Ms. Shirin Hamied, Ms. Rumana Hamied, Ms. Samina Hamied and Okasa Pharma Private Limited (all categorised as Promoter Group) have sold 2.53% shares of Cipla Limited for the purpose of creating liquidity for specific needs including philanthropy,” it says in an exchange filing today.

“Post transaction, the entire promoter group (including Person Acting in Concert) continues to hold 31.67% in the company and remains committed to the future of Cipla Limited,” the release notes.

The floor price for the block deal block was reported to be between ₹1289.50-1357.35 per share, a discount of 5% to Tuesday’s closing price at maximum. Kotak Securities is the sole broker of the block deal.

Cipla shares opened higher at ₹1,402, up 3.3% after closing 4.09% lower at ₹1,356.95 on the BSE. Paring previous session losses, the pharma stock gained as much as 4.9% to ₹1,423.60, while the market capitalisation rose to 1.12 lakh crore. On the volume front, more than 2 crore shares, representing around 2.5% stake changed hands over the counter in the three block deals.

The share price of Cipla touched its 52-week high of ₹1,519 on March 11, 2024, and a 52-week low of ₹911.80 on May 18, 2023.

Last Friday, Cipla released its earnings report, posting 78% rise in consolidated net profit at ₹939 crore in the fourth quarter ended March 2024, against ₹525.6 crore in the same period last year. The consolidated revenue from operation rose 4% to ₹6,082 crore, against ₹5,793.3 crore in the corresponding period a year ago. The board of the company also recommended a final dividend of ₹13 per equity share for the financial year 2024.

The R&D expenses for the quarter were higher by 19% YoY at ₹444 crore, or 7.2% of the revenue, driven by product filing costs and developmental efforts.

The company’s India business reported a growth of 7% YoY, backed by branded prescription and trade generics, while consumer business was impacted by soft seasonal demand. “Branded prescription outpaced market growth by 100 basis points; trade generics continues to lead the market,” the company said in its earnings report.

In the overseas market, revenue from North America was at $226 million, up 11% YoY supported by continued growth in key differentiated assets as well as base portfolio. The South African business reported revenue growth at 26% in local currency terms.

Post Q4, global brokerage HSBC maintained a 'Buy' rating on the stock with a price target of ₹1,600, an upside potential of 12.6% from current levels. "We continue to like Cipla's healthy outlook in key segments (India, South Africa, the U.S.), delivery on cost efficiencies and prudent capital allocation. Notable pipeline products - inhalers and peptides - provide comfort for the medium-term growth outlook for the US sales," the brokerage says in its report.

Another foreign brokerage Jefferies has retained its 'Hold' rating with an upgraded target price of ₹1,400 from ₹1,250 estimated earlier. "We maintain our Hold rating on the stock, as the company continues to falter on key product launches in the US along with inability to meet its own launch guidance while the stock trades at a rich valuation of 24x FY26 EPS," the report notes.

Motilal Oswal has also given a ‘Buy’ call on the stock with a price target of ₹1,600.
“We retain our earnings estimates for FY25/FY26. We value Cipla on an SOTP basis (25x 12M forward earnings for base business and NPV of NR30 for gRevlimid) to arrive at our TP of ₹1,600.”

Domestic brokerage firm Axis Securities has recommended ‘Buy’ to the stock with a price target of ₹1,550 per share from ₹1,515 estimated earlier. 

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