Shares of Cipla rose more than 2.5 percent in early trade on Friday after the company reported an operational performance that largely met market expectations for the quarter ended June 30. Investors responded positively to the sequential improvement in revenue, profitability and the company's reaffirmation of its FY27 operating margin guidance.

Cipla reported a consolidated net profit of Rs 789 crore for the June quarter, an increase of 42 percent compared with Rs 555 crore in the previous quarter. However, profit declined 39 percent from Rs 1,298 crore reported in the corresponding quarter last year. Revenue from operations increased 9 percent sequentially and 2 percent year-on-year to Rs 7,119 crore.

EBITDA stood at Rs 1,192 crore, rising 25 percent over the previous quarter, while the EBITDA margin improved to 16.74 percent from 14.6 percent in the March quarter. Despite the sequential improvement, both EBITDA and margin remained below the levels reported a year ago. The company closed the quarter with a net cash position of Rs 9,494 crore.

Following the results, Motilal Oswal Financial Services retained its Neutral rating on the stock with a target price of Rs 1,420. The brokerage said the company's operational performance was largely in line with expectations, while higher other income supported earnings during the quarter.

The brokerage highlighted that Cipla's India business has delivered year-on-year growth for the fourth consecutive quarter, driven by sustained demand for chronic therapies, improving performance in acute therapies, and strong execution in trade generics and consumer healthcare. However, it noted that the North America business continued to witness a subdued sales run rate due to the gradual ramp-up of new product launches, remediation measures related to Lanreotide, and the lead time required for upcoming launches.

Motilal Oswal raised its FY27 and FY28 earnings estimates by 4 percent and 2 percent, respectively, supported by stronger domestic growth and continued momentum in the South African prescription business. The brokerage expects FY27 to remain a second consecutive year of earnings decline but believes product launches planned in the second half of FY27 could support earnings recovery in FY28. It also noted that the current valuation already reflects expectations of such a recovery.

The management maintained its FY27 EBITDA margin guidance of 18.5 percent to 20 percent and reiterated its confidence in achieving a US business annualised exit run rate of USD 1 billion by the end of FY27, supported by key product launches including g-Advair, potential peptide products and the continued scale-up of g-Ventolin.