Hold Cipla; target of Rs 480: Edelweiss

Cipla missed Q1FY17 estimates with revenue/EBITDA/PAT decline of 7%/42%/44% YoY, despite inorganic accretion, largely fallout of a still changing strategy, in our view. Tangible improvement in operating metrics was not visible. In a very important development, Mr. Umang Vohra has replaced Mr. Subhanu Saxena as MD and CEO of the company. Ms. Samina Vaziralli has also been elevated to Executive Vice Chairman of Cipla. While this may be a positive development, as the new team has exhaustive experience in pharma and may be more prudent with costs versus earlier, it will have a challenging task ahead to once again transform the business model that can best suit Cipla.

Long-term outlook for Cipla remains unclear versus peers. UK MDI approval does not seem exciting enough given that launched products do not seem to be doing well commercially. Given that some of the most important investments made by the company in past 3 years continue to face structural pressures – South Africa (currency), US (competitive pressures and price erosion) and EMs (forex volatility, price decline in the Middle East, rising competition), its organic growth trajectory may remain under pressure. We maintain ‘HOLD/SP’ with TP of INR480 (20x FY18E EPS).For all recommendations, click here 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.