Buy Cipla - Latin Manharlal

Continues to deliver robust growth in Domestic market

Cipla continued to deliver robust growth in the domestic market across therapies and maintain its leadership position in respiratory, urology and HIV. The company's Patalganga project for the up-gradation and scale-up of API facilities is nearing completion. The company is also scaling up its anti-cancer formulations facility at Goa. Besides, Cipla is in the process of setting up a new R&D as well as administration facility at Vikroli, Mumbai.

Cipla Medpro acquisition would be EPS accretive: Prioritises on African markets for Growth

Cipla has completed the buyout process of South African pharma firm Cipla Medpro in Mid July 2013 for an aggregate consideration of ~Rs.2,707 Crs. The acquisition is of strategic importance, as it will help Cipla have its own front-end in South Africa, as well as improve margins. While Cipla was manufacturing 80-85% of the products marketed by Cipla Medpro, it was earning only the manufacturing and part of marketing profits. After the acquisition, it will earn both production and distribution profits. Cipla believes that the Cipla Medpro acquisition would be EPS accretive in 2HFY14E.

Entry into the Biologic segment: Launched first Biosimilar of etanercept brand name 'ETACEPT'

Recently Cipla has launched the first biosimilar of Etanercept in India; under the brand name 'ETACEPT' for the treatment of rheumatic disorders. Formed through a partnership alliance, ETACEPT is manufactured by a China-based company Shanghai CP Guojian Pharmaceutical Co. Ltd., which will be marketed by Cipla in India. The introduction of Etacept signals Cipla's entry into the Biologic segment offering an option to the patients suffering from rheumatic disorders at a lower cost.

US$5 bn revenue by 2020 through investments in R&D and expansion

Cipla has targeted revenue of US$ 5 billion by 2020, of which US$ 1 billion will come from the US market. Presently Cipla' earning from the US market is about ~US$ 200 million and it is a large generic market. The company expects it will contribute US$ 1 billion by 2020 following its expansion plans. The company had over 110 projects in pipeline and wants to increase its filings over the next 2-3 years by 50% in the overseas market.

Exploring all the options: working on various ANDA's + inhalers products

The company is working on 10 inhalers products for Europe, out of this 5 are approved (not big one) and 2 are at various stage for regulatory approvals. The bigger launches will take one to two years in EU market and then to the US market. It has filed 6 ANDA's in FY13 with USFDA; currently working on various ANDA's but not a filed any.

Beat the street estimates in 1QFY14 + Optimistic guidance for FY14E

At the CMP of Rs.397, the stock is trading at 17.6x FY14E and 15.4x FY15E consolidated EPS of Rs.22.59 and Rs.25.81 respectively. We recommend BUY rating on the stock with a 12-18 months Target price of Rs.477, providing an upside of 20%.

Source : Equity Bulls

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