Cipla (CIPLA IN) – Q2FY26 Result Update – Higher R&D spend curtails margin – Downgrade to ‘Accumulate’
Published on 31 Oct 2025
CIPLA’s Q2FY26 EBITDA (Rs 19bn; 25% OPM) was 5% miss to our estimate on account of higher R&D spend (7.1% of sales) and lower GMs. Mgmt has revised its FY26 margin guidance downward owing to elevated R&D spend. Resultant our FY26/27/28E EPS stands cut by 3-6%. The announcement of change in KMP is likely to sentimentally weigh on the stock. We expect Cipla to maintain its existing US sales run-rate however pick up will hinge on timely key respiratory approvals. Cipla’s strong net cash position of +$1.5bn provides flexibility to pursue strategic M&A opportunities. At CMP, stock is trading 24.3x FY27E EPS. Given high FY25 base led by gRevlimid; we see mere 3% EPS CAGR over FY25-28E. We downgrade stock to ‘Accumulate’ with revised TP of Rs1,675/share (1730 earlier). Timely launch of critical high-value products in the US in H2FY26E/27E will be key.
