Cipla shares dive 6% after Pithampur unit gets observations from US drug regulator

Shares of Cipla fell sharply on Monday after the drug major's Pithampur manufacturing facility received eight inspectional observations in Form 483 from the United States Food and Drug Administration (USFDA). The stock tanked 6.79 per cent to hit an intraday low of Rs 956.20 over a previous close of Rs 1,025.80. The scrip eventually settled 6.02 per cent lower at Rs 964.05.

"We hereby notify that the USFDA conducted a current Good Manufacturing Practices (cGMP) inspection at our Pithampur manufacturing facility from February 6-17, 2023. On conclusion of the inspection, the Company has received 8 inspectional observations in Form 483," Cipla stated in an exchange filing. The company also said it would work closely with the USFDA and address these comprehensively within the stipulated time.

According to USFDA's website, an FDA Form 483 is issued to a firm's management at the conclusion of an inspection when an investigator has observed any conditions that in their judgment may constitute violations of the Food Drug and Cosmetic Act and related Acts.

On the earnings front, Cipla reported a 7 per cent increase in its consolidated net profit at Rs 808 crore in the third quarter ended December 2022 (Q3 FY23).

Support on the counter could be seen at Rs 940, followed by Rs 950 and Rs 960 levels, technical analysts suggested.

"As far as levels are concerned, immediate support is placed around Rs 950-960-odd zone and breaching of same can bring it towards the vicinity of 900. On the upside, any sustainable move beyond Rs 1,000-1,020-odd zone should be considered as an encouraging sign," said Sneha Seth, Derivatives Research Analyst at Angel One.

"The counter is approaching its historical support zone of Rs 940-950 which could be good levels for buying. On a daily scale, a bullish bat pattern has emerged with a potential reversal zone of Rs 940-950. One can buy Cipla in the range of Rs 940-950 with an upside target of Rs 1,010 with a stop loss placed at Rs 913," said Jigar S Patel - Senior Manager, Technical Research Analyst at Anand Rathi Shares and Stock Brokers.

"Despite average Q3 FY23 results, Cipla stock price has become oversold on the daily charts due to today's steep fall with next support seen at Rs 940. Investors should buy only if a daily close is above Rs 980. Targets will be Rs 1,043-1,084 in the coming days," said AR Ramachandran from Tips2trades.

The stock traded lower than 5-day, 20-, 50-, 100- and 200-day moving averages. The counter's 14-day relative strength index (RSI) came at 28.30. A level below 30 is defined as oversold while a value above 70 is considered overbought. The company's stock has a price-to-equity (P/E) ratio of 29.46.

Cipla has an average target price of Rs 1,236.78, Trendlyne data showed, suggesting a potential upside of 28.30 per cent. The scrip has a one-year beta of 0.46, indicating low volatility.

Around 2.38 lakh shares changed hands today on BSE, which was more than 11 times higher compared to Cipla's two-week average volume of 21,000 shares. Turnover on the counter stood at Rs 23.03 crore, commanding a market capitalisation (m-cap) of Rs 77,812.71 crore.

Considering the intraday low price of Rs 956.20, Cipla traded 19.32 per cent lower from its 52-week high of Rs 1,185.20, hit on November 1 last year. That said, the stock has moved 8.66 per cent higher from its one-year low level of Rs 880, touched on February 24, 2022.

Meanwhile, Indian equity benchmarks extended their losses for the second straight session, dragged by banks, financials and energy stocks. At close, the 30-share BSE Sensex pack was down 311 points, or 0.51 per cent, at 60,692. The broader NSE Nifty index fell 100 points, or 0.56 per cent, down to close at 17,845.

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