Cipla Q2 revenue grows, margins squeeze; analysts decode stock strategy

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Pharmaceutical major Cipla Ltd’s September 2025 quarter (Q2FY26) performance drew a mixed reaction from market participants as steady revenue growth was offset by margin pressures stemming from higher R&D (research & development) spending and fading Revlimid contributions. 

 

While domestic brokerage Choice Institutional Equities turned cautious, downgrading the stock to 'Reduce' amid limited near-term triggers and moderating margins, Nuvama Institutional Equities maintained a ‘Hold’ stance, citing sustained topline growth and promising new launches in GLP-1s and biosimilars as key long-term drivers.

Cipla Q2 results

In the Q2FY26, Cipla reported consolidated revenue from operations of ₹7,589 crore, up 8 per cent year-on-year (Y-o-Y) from ₹7,051 crore in the year-ago period. The company's consolidated net profit grew 8 per cent to ₹1,351 crore compared to 1,303 crore in Q2FY25. 

 

However, earnings before interest, tax, depreciation and amortisation (Ebitda) improved marginally by 0.5 per cent Y-o-Y to ₹1,895 crore. Ebitda margins came in at 25 per cent, down 178 basis points from year-ago period. 

 

Segment-wise, Cipla's India formulations business grew by 7 per cent from last year to ₹3,146 crore, the One Africa business grew 5 per cent from last year to $134 million, while the Emerging Markets and European business saw 15 per cent Y-o-Y growth to $110 million. 

Here's what brokerages say

According to Nuvama, the domestic business grew 7 per cent Y-o-Y, but was 160 basis points lower than their estimated. Adjusted for consumer health and in-licensed products, the brokerage believes the domestic business growth was 6 per cent Y-o-Y. "The company needs to improve the domestic growth going forward. Its US business fell 2 per cent Y-o-Y and missed our expectation by 2 per cent due to gRevlimid price erosion," the brokerage said in its note. 

 

However, the performance in Africa and emerging markets was ahead of the estimated, which offset the decline in the other businesses.

 

Choice noted that the India and the US business accounted for 68 per cent of revenue in Q2FY26, underscoring their significance in the company's portfolio mix. 

 

According to analysts, Cipla’s India business is expected to maintain strong growth momentum, driven by new product launches in the GLP-1 and chronic therapy segments, along with continued leadership in key respiratory brands like Foracort. However, the growth in the US market may moderate to mid-single digits, as gains from Albuterol and upcoming biosimilar launches such as Filgrastim are likely to only partly offset the decline in Revlimid revenues.

 

Both brokerages pointed to rising R&D costs and an evolving product mix as key reasons behind the margin compression outlook. Choice said that Ebitda margins are expected to moderate to around 23 per cent in FY26, down from 25–25.5 per cent in the first half of the fiscal, as R&D expenses rise to about 7 per cent of sales compared to 5.5 per cent in FY25. It expects a gradual recovery to 23.5 per cent in FY27, aided by revenue contributions from the GLP-1 franchise. 

 

Echoing similar views, Nuvama noted that upcoming launches of the partnered GLP-1 molecule Tirzepatide and Semaglutide generic offer promising domestic growth avenues, while four respiratory and three peptide product launches are expected in calendar year 2026. However, it warned that Amneal’s upcoming launch of the Lanreotide generic in early CY26 could lead to price erosion for Cipla’s version.

 

Nuvama has trimmed its FY26 earnings per share (EPS) estimate by around 2 per cent while retaining FY27 projections. It maintained a ‘Hold’ rating on Cipla with a target price of ₹1,715 (revised from ₹1,725 earlier).

 

Choice has cut its EPS estimates by 4.7 per cent and 4.2 per cent for FY26E and FY27E, respectively. The brokerage maintained its valuation at 20x FY27–28E average EPS, resulting in a revised target price of ₹1,580 (from ₹1,620 earlier) and downgraded the stock to ‘Reduce’.