Buy Cipla; target Rs 440: Sushil Finance
Sushil Finance is bullish on Cipla and has recommended buy rating on the stock with a price taget of Rs 440 in its June 26, 2013 research report.
June 27, 2013 / 12:11 IST
Sushil Finance's research report on Cipla
"Cipla invested ~Rs.9 bn for its Indore SEZ project and over the last 2 years faced pressure on its operating earnings due to the facility, even though being commissioned, was awaiting site approvals from various regulatory agencies across different countries. However, with the facility now being USFDA approved coupled with no further significant capex plans at least for the next 2 yrs, we believe a potential pick up in its asset turnover ratio is on the cards. With ramp up in sales from SEZ & a pick up in Dymista supplies, operating leverage would come in, thereby improving the margins (excluding Lexapro) going ahead. Also, Cipla has always been a very low leveraged company and has been able to build a substantial cash reserve giving it enough room to fund its entire capex plans through internal accruals or raise debt going forward.""Outlook & Valuation: With the transition being seen in the domestic business (FY13 growth @14.6 percent) coupled with sizeable opportunity from high margin products in US (Ramp up in Dymista Supply to Meda)+ monetization of Seretide inhaler in Europe (launch Sept 2013)+ new ARV tender supplies to SA partner, we believe, Cipla could conservatively grow its sales & earnings at a health pace of 13.4 percent & 15.6 percent CAGR over FY12-15E. Further with potential pick up in asset turnover (ramp up in Indore SEZ), Medpro synergy kicking in & a healthy balance sheet with strong cash generation ability, we continue to hold a positive view on the stock & change our rating to BUY with a revised target of Rs.440 (20x FY15E EPS of Rs.22.0)," says Sushil Finance research report.Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions. 
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