24 November 2009
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24 November 2009
Cipla Ltd. - Is it Investment-worthy? The Company, in brief Cipla is one of the largest Pharma Companies by domestic market share, with a strong presence in the anti-asthma, anti-infective, antiAIDS and cardiovascular segments and a moderate presence in the anti-inflammatory and anti-ulcerants segments. The company has grown organically over the years and today is the largest standalone generics company in the world. The Company engages in the manufacture, sale, and export of pharmaceutical and personal care products in India and across the globe (in 180 countries). The major revenues come from the domestic market followed by Africa, the Americas and Europe as shown in the pie-chart Geographical distribution of Revenues in FY2009.
The product portfolio of the company is shown below
Product Portfolio
What does the 10 YEAR X-RAY of its Financials reveal? The five most important parameters that one needs to look into are Net Sales Growth Rate, EPS Growth Rate, BVPS Growth Rate, ROIC & Debt to Net Profit Ratio.
Visit us at http://www.MoneyWorks4me.com/
The 10 YEAR X-RAY at MoneyWorks4me.com facilitates analysis of the financial performance of the company considering the five most important parameters. A 10 Year period will normally encompass an entire business cycle. Analysing the performance over this timeframe is essential to understand how a company has fared during good as well as bad times. The five most important parameters that one needs to look into are Net Sales Growth Rate, EPS Growth Rate, Book Value per Share (BVPS) Growth Rate, Return on Invested Capital (ROIC)
Page 1
Cipla Ltd. – Is it Investment-worthy? and Debt to Net Profit Ratio.
10 YEAR X-RAY of Cipla Ltd.
During the last 10 Years, Cipla has performed well growing at high growth rates in its Net Sales and BVPS. The EPS growth rate dropped in 2007 and 2008; however it has increased to 11.34% in 2009. The BVPS growth rates have been high throughout the 10 year period. The ROIC figures have also been consistent and always been higher than
12% which indicates that the company has utilized the funds very efficiently. However in the last 4 years, the decreasing ROIC figures are cause for a bit of a concern. The Debt to Net Profit ratio as of March 2009 is very comfortable. In September 2009, the company raised Rs.671 Crore through QIP which will be utilized for funding expansion and also retiring debt. This will further improve the Debt to Net Profit ratio. Hence, Cipla Ltd is a financially strong business worth looking at for investment at the right price.
What enables it to make money? Cipla has become a market leader due to a diverse product portfolio combined with cost competitive manufacturing.
Visit us at http://www.MoneyWorks4me.com/
Started in 1935, Cipla has now become a market leader in important segments of the Indian Pharmaceutical sector. This has been possible due to its diverse product portfolio combined with its cost competitive manufacturing. The company has developed a good reputation for quality and affordable medicines which has helped it to establish itself in the global markets and become the world’s largest standalone generics company. It has continuously laid emphasis on Research &
Page 2
Cipla Ltd. – Is it Investment-worthy? Development in an effort to further improve its product portfolio and make the most of opportunities in the Pharmaceutical Sector. Product Portfolio
Cipla is the only company which manufactures Oseltamivir & Zanamivir, used in the treatment of Swine Flu.
Cipla produces a variety of products, like formulations, bulk drugs, agrochemicals, animal health care products, various life-style drugs and personal care products and flavours & fragrances. Cipla has a wide range of pharmaceutical products in its portfolio. It has a host of products which are part of WHO list. These products are eligible for procurement for all WHO / UN sponsored programs. Cipla's Oseltamivir 75 mg capsule marketed as `Antiflu' has been included in the World Health Organisation (WHO) list of Pre-qualified Medicinal Products useful in the treatment of influenza A (H1N1) infection i.e. Swine Flu. Another product used in the treatment of Swine Flu that the company produces is Zanamivir. Cipla is the only company in the world that has both these products. The company is also in the final stages of exporting of non-CFC (chlorofluorocarbons) metered dose inhalers in Europe. The overall market for these inhalers is around 1800 Million Euro. The Company is working on a joint venture with a Chinese Company to produce biosimilars and is expected to make an announcement regarding this soon. It has also entered into an agreement to develop and distribute stem cell related products. Cost-competitive manufacturing
Cipla is one of the lowest cost manufacturers of drugs. This gives it a distinct competitive advantage.
Cipla is the world’s largest manufacturer of cost effective anti-retroviral drugs. In Africa, it launched an HIV drug which was three times cheaper than drugs offered by global companies. The price differential between Cipla’s pricing of anti-HIV drugs and equivalent drugs being sold in the USA by the patent holders is in excess of US$ 2 to 3 billion per year on the volume of drugs supplied. This low cost production gives Cipla a competitive advantage. Reputation & Quality Over the years, Cipla has established an enviable reputation worldwide as a Company that manufactures safe, quality, effective and affordable medicines. High quality research and ethical standards followed has helped Cipla create this reputation. Several dosage forms and Active Pharmaceutical Ingredients (API’s) manufactured in the Company’s plants have been approved by most major international regulatory agencies. These agencies include the US FDA, MHRA (UK), PIC (Germany), MCC (South Africa), TGA (Australia), Department of Health (Canada), ANVISA (Brazil), SIDC (Slovak Republic), Ministry of Health (Kingdom of Saudi Arabia), the Danish Medical Agency and the WHO.
Visit us at http://www.MoneyWorks4me.com/
Page 3
Cipla Ltd. – Is it Investment-worthy? Global Operations
A leading European advisory firm has th ranked Cipla 14 among all Pharmaceutical companies worldwide.
The Company has an impressive global presence and is expected to continue to lay emphasis on its overseas business. Around 56 per cent of the overall income from operations comes from outside India. Cipla exports raw materials, intermediates, prescription drugs, OTC products and veterinary products. Cipla also offers technology for products and processes. The Company works closely with all its overseas partners in over 180 countries to maintain its export growth. As on date, the Company has registered about 5500 products in various countries. Recently, a leading European advisory firm ranked Cipla 14th among all pharmaceutical companies worldwide as a provider of access to medicines with a corporate social responsibility. Exports for the financial year ended March 31, 2009 amounted to more than Rs. 27,500 million. Research and Development
Cipla is the first player outside US and Europe to launch non-CFC metered dose inhalers.
Cipla has extensive research capabilities, ranging from Chemical Synthesis, Delivery Systems and Medical Devices to Process Engineering, Animal Health Products, Nutraceuticals and Biotechnology. Its quality R&D facilities have helped the company in generating revenues from diverse product segments. It was the first player outside US and Europe to launch non-CFC (chlorofluorocarbons) metered dose inhalers. As mentioned the Company is also planning to enter the biosimilars segment soon. Growing Generics Market The generics market is expected to have buoyant growth worldwide primarily due to blockbuster patent expiries, increasing generic penetration, increasing burden of healthcare costs in developed countries and wider access to healthcare in developing economies. With over US$ 80 bn of drugs to go off patent by 2012 and with higher penetration across developed and emerging markets expected, the generics market will continue to provide attractive growth opportunities in future.
What are the likely roadblocks ahead? Even though Cipla is one of the top companies in the Pharma sector, it has its share of problems and roadblocks which can affect its growth story. Drugs in India are subject to price regulation by the government. The new Pharma Policy proposed by the Government can affect the company adversely as many of its products may be brought under price control regulations. The Patent Act 2005 may affect development of future products and lead to an increase in the number of litigations filed
Visit us at http://www.MoneyWorks4me.com/
Page 4
Cipla Ltd. – Is it Investment-worthy? against Cipla. With the Government allowing 100% FDI in the Pharma sector, competition will intensify in the next few years. As the share of revenues from foreign countries increases, Cipla will be exposed to the effects of Foreign Exchange volatility on its profitability. Price Control
Some products produced by Cipla may come under price control.
The growth of the domestic pharmaceutical industry is very much dependent on the government’s drug pricing policy. The new Pharma Policy proposed by the Government threatens to cover most of the drugs under price control. Government has included products like Salbutamol, Theophylline, Ciprofloxacin, Cloxacillin, Norfloxacin etc which are produced by Cipla and has good market coverage, into the ambit of price control. Litigation with Government is still going on. These price controls threaten to reduce the profitability of the company and needs to be watched. New Patent Regime
The pipeline of new drugs available for launch will gradually shrink owing to the new patent regime.
The government's decision in 2005 to amend drastically the Patent Act 1970 and backdating product patenting to 1995 has already initiated an unpleasant series of litigations between pharmaceutical companies. Introduction of high priced, monopoly drugs has already started in the country and will gain momentum with the passage of time. The Patent Act 2005 could have a major adverse impact on future generations not only in India but throughout the third world and the developing world that looks at India for supplies of their essential medicines. Patented and monopoly drugs could become unaffordable. It is expected that the pipeline of new drugs available for launch will gradually shrink owing to this new patent regime. Competition India, with a strong generic drug industry is fast becoming a battle ground between domestic drug makers and big Pharma MNCs. Indian Pharma industry is expected to grow annually at 13%. To reap the benefit of a rising market, global drug discovery companies are keen to establish a strong presence in India and protect their patents here. Exchange Rate Volatility
Cipla earns more than 50% of its earnings from overseas markets and is thus affected by the exchange rate volatility.
Visit us at http://www.MoneyWorks4me.com/
Cipla has an impressive presence in global pharmaceutical markets. It earns more than 50% of its earning from overseas markets. Exports formed 56% of total turnover in FY’09 and are expected to rise in FY’10. Any fluctuation in exchange rate affects the company earnings significantly and needs to be watched with caution.
Page 5
Cipla Ltd. – Is it Investment-worthy? Rising Costs and Availability of Materials The prices of many API’s and input materials have risen significantly due to restriction in production by Chinese chemical manufacturers, rise in price of petroleum-based products, frequent shortages and general inflationary conditions. The Company is looking at alternative arrangements and has also increased its stock levels. However, the increased prices and shortages of materials will adversely affect production schedules and overall margins on all the Company’s products.
Figure 1 – TTM EPS, latest 4 Quarters
What is our Short Term Outlook? If we see the trend of TTM EPS (fig 1.) over the last 4 quarters, we see that it has been increasing steadily. The last four quarters have been good for the company and it has been performing well. This augurs well for its short term future prospects. The quarterly growth rates graph (fig. 2) shows that the growth rates of net sales have fallen in the first two quarters of the current financial year, as compared to those of corresponding quarters of last year. However the EPS growth rate (fig.3) has increased considerably in both the quarters. This was the result of lower operating costs owing to a better product mix. This ensured higher margins contributing to the profitability.
Figure 2 - Net Sales Growth Rate, Quarterly (% Change Vs Prior Year)
The World Health Organization (WHO) has declared Swine Flu a 'pandemic'. Swine Flu has thus become the first global pandemic in 41 years. The Company’s drug Oseltamivir marketed as ‘Antiflu’ is the only branded generic drug of its kind available anywhere and qualified by the WHO for treatment of H1N1 (Swine Flu). This could lead to governments across the world buying the drug from Cipla. A point of concern for the company is the negative cash flows that it has been generating for the past two years. However this has been mainly due to the expansion projects taken by the company the last few years.
What is our Long Term Outlook?
Figure 3 - EPS Growth Rate, Quarterly (% Change Vs Prior Year)
Visit us at http://www.MoneyWorks4me.com/
A highly competent team of scientists and workforce and high quality R&D activities are expected to give Cipla an edge over other domestic Pharma players. Recent quality checks by US FDA and its ban on imports of some drugs is a matter of concern for the entire Indian Pharma industry. However Cipla has got the FDA’s nod after addressing all the deficiencies pointed out by the FDA in August 2009.
Page 6
Cipla Ltd. – Is it Investment-worthy?
Global Pharma Industry is likely to grow at a CAGR of 5% to US$ 1 trillion by 2013.
The Company has been in an expansion mode incurring total capital expenditure of nearly Rs. 2000 Crore in the last 3 years. This includes a new Pharma project in Sikkim, a formulation unit in a SEZ in Indore, a new API facility in Bangalore, expansion of existing API production facilities at Kurkumbh and Patalganga and expansion of R&D Facilities at Vikhroli and Patalganga. The company has successfully defended many litigations with global Pharma giants but in the future such litigations could increase. Global Pharma Industry is likely to grow at a CAGR of 5% to US$1trillion by 2013. Indian Pharma market, currently stands at US$16bn, is likely to be a US$50bn market by 2015. Cipla with its strengths is well equipped to make the most of the opportunities that exist and hence the long term outlook for Cipla looks very bright.
Concluding, we can say Cipla Ltd is a company that is worth investing in due to its growing business, the competitive advantage of its strong product portfolio and low cost manufacturing, its financial performance & its future prospects. It is a solid company to buy into at the right time & the right price. You can find out Sensible Buy and Sell Prices for the company based on Value Investing principles using the ‘PRICE CALCULATOR’ at MoneyWorks4me.com. Cipla has featured in ‘Outlook Profit 100’ as one of India’s 100 most financially stable companies.
Visit us at http://www.MoneyWorks4me.com/
Cipla Ltd has also featured in ‘Outlook Profit 100’. ‘Outlook Profit 100’ is a list of ’100 India’s most financially stable companies’ brought out by Outlook Profit, in its November 13, 2009 issue, applying criteria that is closely aligned to that of MoneyWorks4me.com.
Page 7
Cipla Ltd. – Is it Investment-worthy?
Source: Capital Line - The short term graphs have been made using the quarterly results of the company from Capital Line. Company Website Company Annual Reports
Equity Analyst: Nikhil Kale [email protected]
MoneyWorks4me.com B-101, Signet Corner Building, Baner Road, Baner, Pune – 411 045, India. Tel: 91-20-27293990, 91-20-67210400 Disclaimer: This publication has been prepared solely for information purpose and does not constitute a solicitation to any person to buy or sell a security. This document is not to be reported or copied or made available to others without prior permission of Moneyworks4me.com. It does not constitute personal recommendations or take into account the particular investment objectives, financial situations or needs of an individual client or a corporate/s or any entity/s. All investments involve risk and past performance doesn't guarantee future results. The value of, and income from investments may vary because of the changes in the macro and micro factors at a certain period of time. The person should use his/her own judgment while taking investment decisions. The transmission of information from Moneyworks4me.com to you is not intended to create nor does it create an advisor-client relationship between MoneyWorks4me.com and you. Though every effort is made to make accurate, reliable and current information available, MoneyWorks4me.com makes no representation, warranty or claim that the information made available is current or accurate. MoneyWorks4me.com is not responsible for any errors or omissions in the resources or information made available. MoneyWorks4me.com is not a Portfolio Manager, Broker or a Sub-broker and is not registered with any stock exchange. MoneyWorks4me.com does not manage your funds or advices or directs you to acquire, dispose of or retain any securities. MoneyWorks4me.com does not come under the purview of the SEBI (Portfolio Managers) Regulations 1993 or SEBI (Stock Brokers and Sub Brokers) Regulations 1992.
Visit us at http://www.MoneyWorks4me.com/
Page 8
Cipla Ltd. - Is it Investment-worthy? The Company, in brief Cipla is one of the largest Pharma Companies by domestic market share, with a strong presence in the anti-asthma, anti-infective, antiAIDS and cardiovascular segments and a moderate presence in the anti-inflammatory and anti-ulcerants segments. The company has grown organically over the years and today is the largest standalone generics company in the world. The Company engages in the manufacture, sale, and export of pharmaceutical and personal care products in India and across the globe (in 180 countries). The major revenues come from the domestic market followed by Africa, the Americas and Europe as shown in the pie-chart Geographical distribution of Revenues in FY2009.
The product portfolio of the company is shown below
Product Portfolio
What does the 10 YEAR X-RAY of its Financials reveal? The five most important parameters that one needs to look into are Net Sales Growth Rate, EPS Growth Rate, BVPS Growth Rate, ROIC & Debt to Net Profit Ratio.
Visit us at http://www.MoneyWorks4me.com/
The 10 YEAR X-RAY at MoneyWorks4me.com facilitates analysis of the financial performance of the company considering the five most important parameters. A 10 Year period will normally encompass an entire business cycle. Analysing the performance over this timeframe is essential to understand how a company has fared during good as well as bad times. The five most important parameters that one needs to look into are Net Sales Growth Rate, EPS Growth Rate, Book Value per Share (BVPS) Growth Rate, Return on Invested Capital (ROIC)
Page 1
Cipla Ltd. – Is it Investment-worthy? and Debt to Net Profit Ratio.
10 YEAR X-RAY of Cipla Ltd.
During the last 10 Years, Cipla has performed well growing at high growth rates in its Net Sales and BVPS. The EPS growth rate dropped in 2007 and 2008; however it has increased to 11.34% in 2009. The BVPS growth rates have been high throughout the 10 year period. The ROIC figures have also been consistent and always been higher than
12% which indicates that the company has utilized the funds very efficiently. However in the last 4 years, the decreasing ROIC figures are cause for a bit of a concern. The Debt to Net Profit ratio as of March 2009 is very comfortable. In September 2009, the company raised Rs.671 Crore through QIP which will be utilized for funding expansion and also retiring debt. This will further improve the Debt to Net Profit ratio. Hence, Cipla Ltd is a financially strong business worth looking at for investment at the right price.
What enables it to make money? Cipla has become a market leader due to a diverse product portfolio combined with cost competitive manufacturing.
Visit us at http://www.MoneyWorks4me.com/
Started in 1935, Cipla has now become a market leader in important segments of the Indian Pharmaceutical sector. This has been possible due to its diverse product portfolio combined with its cost competitive manufacturing. The company has developed a good reputation for quality and affordable medicines which has helped it to establish itself in the global markets and become the world’s largest standalone generics company. It has continuously laid emphasis on Research &
Page 2
Cipla Ltd. – Is it Investment-worthy? Development in an effort to further improve its product portfolio and make the most of opportunities in the Pharmaceutical Sector. Product Portfolio
Cipla is the only company which manufactures Oseltamivir & Zanamivir, used in the treatment of Swine Flu.
Cipla produces a variety of products, like formulations, bulk drugs, agrochemicals, animal health care products, various life-style drugs and personal care products and flavours & fragrances. Cipla has a wide range of pharmaceutical products in its portfolio. It has a host of products which are part of WHO list. These products are eligible for procurement for all WHO / UN sponsored programs. Cipla's Oseltamivir 75 mg capsule marketed as `Antiflu' has been included in the World Health Organisation (WHO) list of Pre-qualified Medicinal Products useful in the treatment of influenza A (H1N1) infection i.e. Swine Flu. Another product used in the treatment of Swine Flu that the company produces is Zanamivir. Cipla is the only company in the world that has both these products. The company is also in the final stages of exporting of non-CFC (chlorofluorocarbons) metered dose inhalers in Europe. The overall market for these inhalers is around 1800 Million Euro. The Company is working on a joint venture with a Chinese Company to produce biosimilars and is expected to make an announcement regarding this soon. It has also entered into an agreement to develop and distribute stem cell related products. Cost-competitive manufacturing
Cipla is one of the lowest cost manufacturers of drugs. This gives it a distinct competitive advantage.
Cipla is the world’s largest manufacturer of cost effective anti-retroviral drugs. In Africa, it launched an HIV drug which was three times cheaper than drugs offered by global companies. The price differential between Cipla’s pricing of anti-HIV drugs and equivalent drugs being sold in the USA by the patent holders is in excess of US$ 2 to 3 billion per year on the volume of drugs supplied. This low cost production gives Cipla a competitive advantage. Reputation & Quality Over the years, Cipla has established an enviable reputation worldwide as a Company that manufactures safe, quality, effective and affordable medicines. High quality research and ethical standards followed has helped Cipla create this reputation. Several dosage forms and Active Pharmaceutical Ingredients (API’s) manufactured in the Company’s plants have been approved by most major international regulatory agencies. These agencies include the US FDA, MHRA (UK), PIC (Germany), MCC (South Africa), TGA (Australia), Department of Health (Canada), ANVISA (Brazil), SIDC (Slovak Republic), Ministry of Health (Kingdom of Saudi Arabia), the Danish Medical Agency and the WHO.
Visit us at http://www.MoneyWorks4me.com/
Page 3
Cipla Ltd. – Is it Investment-worthy? Global Operations
A leading European advisory firm has th ranked Cipla 14 among all Pharmaceutical companies worldwide.
The Company has an impressive global presence and is expected to continue to lay emphasis on its overseas business. Around 56 per cent of the overall income from operations comes from outside India. Cipla exports raw materials, intermediates, prescription drugs, OTC products and veterinary products. Cipla also offers technology for products and processes. The Company works closely with all its overseas partners in over 180 countries to maintain its export growth. As on date, the Company has registered about 5500 products in various countries. Recently, a leading European advisory firm ranked Cipla 14th among all pharmaceutical companies worldwide as a provider of access to medicines with a corporate social responsibility. Exports for the financial year ended March 31, 2009 amounted to more than Rs. 27,500 million. Research and Development
Cipla is the first player outside US and Europe to launch non-CFC metered dose inhalers.
Cipla has extensive research capabilities, ranging from Chemical Synthesis, Delivery Systems and Medical Devices to Process Engineering, Animal Health Products, Nutraceuticals and Biotechnology. Its quality R&D facilities have helped the company in generating revenues from diverse product segments. It was the first player outside US and Europe to launch non-CFC (chlorofluorocarbons) metered dose inhalers. As mentioned the Company is also planning to enter the biosimilars segment soon. Growing Generics Market The generics market is expected to have buoyant growth worldwide primarily due to blockbuster patent expiries, increasing generic penetration, increasing burden of healthcare costs in developed countries and wider access to healthcare in developing economies. With over US$ 80 bn of drugs to go off patent by 2012 and with higher penetration across developed and emerging markets expected, the generics market will continue to provide attractive growth opportunities in future.
What are the likely roadblocks ahead? Even though Cipla is one of the top companies in the Pharma sector, it has its share of problems and roadblocks which can affect its growth story. Drugs in India are subject to price regulation by the government. The new Pharma Policy proposed by the Government can affect the company adversely as many of its products may be brought under price control regulations. The Patent Act 2005 may affect development of future products and lead to an increase in the number of litigations filed
Visit us at http://www.MoneyWorks4me.com/
Page 4
Cipla Ltd. – Is it Investment-worthy? against Cipla. With the Government allowing 100% FDI in the Pharma sector, competition will intensify in the next few years. As the share of revenues from foreign countries increases, Cipla will be exposed to the effects of Foreign Exchange volatility on its profitability. Price Control
Some products produced by Cipla may come under price control.
The growth of the domestic pharmaceutical industry is very much dependent on the government’s drug pricing policy. The new Pharma Policy proposed by the Government threatens to cover most of the drugs under price control. Government has included products like Salbutamol, Theophylline, Ciprofloxacin, Cloxacillin, Norfloxacin etc which are produced by Cipla and has good market coverage, into the ambit of price control. Litigation with Government is still going on. These price controls threaten to reduce the profitability of the company and needs to be watched. New Patent Regime
The pipeline of new drugs available for launch will gradually shrink owing to the new patent regime.
The government's decision in 2005 to amend drastically the Patent Act 1970 and backdating product patenting to 1995 has already initiated an unpleasant series of litigations between pharmaceutical companies. Introduction of high priced, monopoly drugs has already started in the country and will gain momentum with the passage of time. The Patent Act 2005 could have a major adverse impact on future generations not only in India but throughout the third world and the developing world that looks at India for supplies of their essential medicines. Patented and monopoly drugs could become unaffordable. It is expected that the pipeline of new drugs available for launch will gradually shrink owing to this new patent regime. Competition India, with a strong generic drug industry is fast becoming a battle ground between domestic drug makers and big Pharma MNCs. Indian Pharma industry is expected to grow annually at 13%. To reap the benefit of a rising market, global drug discovery companies are keen to establish a strong presence in India and protect their patents here. Exchange Rate Volatility
Cipla earns more than 50% of its earnings from overseas markets and is thus affected by the exchange rate volatility.
Visit us at http://www.MoneyWorks4me.com/
Cipla has an impressive presence in global pharmaceutical markets. It earns more than 50% of its earning from overseas markets. Exports formed 56% of total turnover in FY’09 and are expected to rise in FY’10. Any fluctuation in exchange rate affects the company earnings significantly and needs to be watched with caution.
Page 5
Cipla Ltd. – Is it Investment-worthy? Rising Costs and Availability of Materials The prices of many API’s and input materials have risen significantly due to restriction in production by Chinese chemical manufacturers, rise in price of petroleum-based products, frequent shortages and general inflationary conditions. The Company is looking at alternative arrangements and has also increased its stock levels. However, the increased prices and shortages of materials will adversely affect production schedules and overall margins on all the Company’s products.
Figure 1 – TTM EPS, latest 4 Quarters
What is our Short Term Outlook? If we see the trend of TTM EPS (fig 1.) over the last 4 quarters, we see that it has been increasing steadily. The last four quarters have been good for the company and it has been performing well. This augurs well for its short term future prospects. The quarterly growth rates graph (fig. 2) shows that the growth rates of net sales have fallen in the first two quarters of the current financial year, as compared to those of corresponding quarters of last year. However the EPS growth rate (fig.3) has increased considerably in both the quarters. This was the result of lower operating costs owing to a better product mix. This ensured higher margins contributing to the profitability.
Figure 2 - Net Sales Growth Rate, Quarterly (% Change Vs Prior Year)
The World Health Organization (WHO) has declared Swine Flu a 'pandemic'. Swine Flu has thus become the first global pandemic in 41 years. The Company’s drug Oseltamivir marketed as ‘Antiflu’ is the only branded generic drug of its kind available anywhere and qualified by the WHO for treatment of H1N1 (Swine Flu). This could lead to governments across the world buying the drug from Cipla. A point of concern for the company is the negative cash flows that it has been generating for the past two years. However this has been mainly due to the expansion projects taken by the company the last few years.
What is our Long Term Outlook?
Figure 3 - EPS Growth Rate, Quarterly (% Change Vs Prior Year)
Visit us at http://www.MoneyWorks4me.com/
A highly competent team of scientists and workforce and high quality R&D activities are expected to give Cipla an edge over other domestic Pharma players. Recent quality checks by US FDA and its ban on imports of some drugs is a matter of concern for the entire Indian Pharma industry. However Cipla has got the FDA’s nod after addressing all the deficiencies pointed out by the FDA in August 2009.
Page 6
Cipla Ltd. – Is it Investment-worthy?
Global Pharma Industry is likely to grow at a CAGR of 5% to US$ 1 trillion by 2013.
The Company has been in an expansion mode incurring total capital expenditure of nearly Rs. 2000 Crore in the last 3 years. This includes a new Pharma project in Sikkim, a formulation unit in a SEZ in Indore, a new API facility in Bangalore, expansion of existing API production facilities at Kurkumbh and Patalganga and expansion of R&D Facilities at Vikhroli and Patalganga. The company has successfully defended many litigations with global Pharma giants but in the future such litigations could increase. Global Pharma Industry is likely to grow at a CAGR of 5% to US$1trillion by 2013. Indian Pharma market, currently stands at US$16bn, is likely to be a US$50bn market by 2015. Cipla with its strengths is well equipped to make the most of the opportunities that exist and hence the long term outlook for Cipla looks very bright.
Concluding, we can say Cipla Ltd is a company that is worth investing in due to its growing business, the competitive advantage of its strong product portfolio and low cost manufacturing, its financial performance & its future prospects. It is a solid company to buy into at the right time & the right price. You can find out Sensible Buy and Sell Prices for the company based on Value Investing principles using the ‘PRICE CALCULATOR’ at MoneyWorks4me.com. Cipla has featured in ‘Outlook Profit 100’ as one of India’s 100 most financially stable companies.
Visit us at http://www.MoneyWorks4me.com/
Cipla Ltd has also featured in ‘Outlook Profit 100’. ‘Outlook Profit 100’ is a list of ’100 India’s most financially stable companies’ brought out by Outlook Profit, in its November 13, 2009 issue, applying criteria that is closely aligned to that of MoneyWorks4me.com.
Page 7
Cipla Ltd. – Is it Investment-worthy?
Source: Capital Line - The short term graphs have been made using the quarterly results of the company from Capital Line. Company Website Company Annual Reports
Equity Analyst: Nikhil Kale [email protected]
MoneyWorks4me.com B-101, Signet Corner Building, Baner Road, Baner, Pune – 411 045, India. Tel: 91-20-27293990, 91-20-67210400 Disclaimer: This publication has been prepared solely for information purpose and does not constitute a solicitation to any person to buy or sell a security. This document is not to be reported or copied or made available to others without prior permission of Moneyworks4me.com. It does not constitute personal recommendations or take into account the particular investment objectives, financial situations or needs of an individual client or a corporate/s or any entity/s. All investments involve risk and past performance doesn't guarantee future results. The value of, and income from investments may vary because of the changes in the macro and micro factors at a certain period of time. The person should use his/her own judgment while taking investment decisions. The transmission of information from Moneyworks4me.com to you is not intended to create nor does it create an advisor-client relationship between MoneyWorks4me.com and you. Though every effort is made to make accurate, reliable and current information available, MoneyWorks4me.com makes no representation, warranty or claim that the information made available is current or accurate. MoneyWorks4me.com is not responsible for any errors or omissions in the resources or information made available. MoneyWorks4me.com is not a Portfolio Manager, Broker or a Sub-broker and is not registered with any stock exchange. MoneyWorks4me.com does not manage your funds or advices or directs you to acquire, dispose of or retain any securities. MoneyWorks4me.com does not come under the purview of the SEBI (Portfolio Managers) Regulations 1993 or SEBI (Stock Brokers and Sub Brokers) Regulations 1992.
Visit us at http://www.MoneyWorks4me.com/
Page 8
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