Reiterate ‘buy’ on Cipla and set price target of R770 per share, which is based on 23x FY17e EPS and R40 per share as NPV of gSeretide pMDI opportunity in the EU. This is in line with the large-cap peers average and broadly in line with the stock’s 5-year historical trading P/E multiple.
We expect the stock to re-rate to historical trends, driven by a healthy earnings trajectory, and stronger cash flows and improved return ratios.
We expect sales to rise three-fold over FY14-20, driven by 50% incremental growth from India/Africa and 30% incremental growth from respiratory franchise in US/EU.
As a result of leverage and mix improvements, we are forecasting a 20% improvement in ROIC and a five-fold increase in PAT by 2020. A long-term scenario analysis in which we evaluate the company on its prospective ROIC suggests a potential three-fold increase in the share price by FY20.
Cipla Medpro (a subsidiary of Cipla) won a HIV tender worth $180 million from the South African government ($2.2 billion tender) for antiretroviral drugs to be supplied over the next three years. The supply will commence from April ’15 and the products will be manufactured at Cipla Medpro’s South African facility.
This is the third tender win for Cipla Medpro in CY14. The company had earlier won two tenders worth $55 million in June 2014 and August 2014, respectively. Cipla is aiming to achieve $1 billion sales through global access programme by 2020.