Cipla shares decline post Q3; brokerages slash targets on US headwinds

Cipla shares declined 2.4 per cent in trade on BSE, logging an intra-day low at ₹1,283 per share on BSE. At 9:25 AM, Cipla’s share price was trading 1.59 per cent lower at ₹1,293.9 per share. In comparison, the BSE Sensex was down 0.45 per cent at 81,169.87.

 

The stock was under pressure after the company reported its December quarter (Q3FY26) numbers.

Cipla Q3 results highlights:

• In Q3,  Cipla’s net profit dropped 57 per cent year-on-year (Y-o-Y) to ₹675 crore, as compared to ₹1,570.51 crore a year ago. 
• Its revenue from operations remained flat at ₹7,074 crore, as compared to ₹7,072.97 crore Y-o-Y. Check detailed results here 

Brokerages' view on Cipla

Nomura | Buy | Target cut to ₹1,510 from ₹1,770

According to the brokerage, Cipla's Q3FY26 sales, Earnings before interest, tax, depreciation and amortisation (Ebitda), and profit after tax (PAT) came in 7 per cent, 33 per cent, and 50 per cent below estimates, respectively. The brokerage attributes roughly 40 per cent of the Ebitda miss to weaker North America & Global (NAG) revenues, driven primarily by lower gRevlimid sales, with the remainder stemming from softer performance across other markets. 

 

While management has not yet provided FY27E guidance, it signaled the possibility of a couple of high-value respiratory product launches in the US within the next six months, with potential one high-value launch each in the respiratory and peptide segments toward end-FY27. These launches could be key catalysts, but near-term headwinds from gRevlimid and Lanreotide remain a concern, according to analysts.  ALSO READ | IndusInd Bank shares drop 4% even as analysts hike target post Q3

Elara Capital | Accumulate | Target cut to ₹1,438 from ₹1,670

Elara said Cipla’s Q3FY26 was weak, with revenue, Ebitda and profit after tax (PAT) missing estimates due to adjustments for a one-off impact from the new Labour Code. 

 

The key negative was a sharp 700–1,000 basis points (bps) contraction in Ebitda margin both sequentially and annually. Elara suggests that the earlier contribution from the one-off gRevlimid was significantly higher than both the brokerage and the Street had estimated, resulting in a much higher base and a steeper-than-expected decline.

 

International businesses were broadly soft, though a sharp INR depreciation partly cushioned the impact, while India grew 10 per cent, broadly as expected. With Lanreotide expected to decline further in Q4, Elara sees continued near-term weakness, but is building in meaningful launches in FY27 as per guidance; if those launches deliver, downside could be limited given the stock is already down 14 per cent in six months and INR weakness is a tailwind. Elara has cut its FY26E–FY28E estimates by 9–12 per cent. 

Emkay Global Financial Services | Reduce | Target cut to ₹1,350 from ₹1,600

The brokerage in its note said that Cipla’s Q3FY26 was materially weaker than expected, with the combined impact of a gRevlimid decline and Lanreotide supply disruptions driving a sharp miss in the US topline and overall gross margin. The quarter revealed a concerning sub-$150 million quarterly US base (excluding those two products), signaling the company's core business is weaker than thought. 

 

Despite the stock's recent fall, Emkay sees this as just the beginning of an earnings downgrade cycle—with more cuts ahead. Key concerns include: inhalation approvals likely taking longer than the market expects, pipeline assets still priced into FY27 estimates, and repeated Lanreotide disruptions that could permanently shift market share to competitors. 

 

Management's margin guidance cut to 21 per cent for FY26 (from 22.75–24 per cent) may force a Street reset. Emkay has cut FY27/FY28 earnings by 12 per cent/8 per cent and slashed its valuation multiple to 22x (below historical average).   ALSO READ | Axis Bank up 4% on Q3 show; analysts bullish on asset quality, loan growth

Motilal Oswal Financial Services | Neutral | Target cut to ₹1,310 from ₹1,500

Motilal Oswal has lowered its target on Cipla, noting that the company’s earnings are expected to decline in FY26 after four years of robust growth. While revenue was in line, Ebitda and PAT missed estimates by 21 per cent and 22 per cent, respectively, marking Cipla's first Y-o-Y Ebitda decline in 13 quarters.

 

Going ahead, the brokerage expects earnings to remain flat in FY27 as competitive intensity in gRevlimid and regulatory hurdles in Lanreotide keep US sales under pressure. While potential respiratory and peptide launches offer hope for FY28 (where 15 per cent growth is modeled), the brokerage believes current valuations offer limited upside, valuing the stock at 22x 12-month forward earnings.

 

Disclaimer: View and outlook shared belong to the respective brokerages/analysts and are not endorsed by Business Standard. Readers discretion is advised.