CIPLA Shares Complete Fundamental Analysis and Future Outlook
Cipla is one of the largest pharmaceutical company in India. It has 46 state of the art manufacturing facilities across 5 countries and has 1500+ products.
- It employs 1300+ scientists and has seen double-digit growth in R&D investments in the recent years.
- The major revenue share is about 38% from India, 21% from North America and 20% from Africa. It also has a presence in the European and other emerging markets in Asia.
- The company’s shares have seen a mild correction from its 52 weeks high of INR 586 and currently has a market capitalization of INR 400 Billion.
- The pharmaceutical industry is dominated by Innovation and R&D. Cipla spends around 7.5% of its revenue in R&D, which is considered very high in pharmaceutical business. It has 6 R&D facilities across the globe and has a dedicated patent pipeline. They already have a total of 308 patent out of which 32 were granted in FY 2018.
- The other factor which strengthens the moat is the distribution network. Cipla has a network of 4,00,000+ health care professionals and 3,50,000+ pharmacists. It also has a supplier network of 1000+ suppliers, which makes it one of the largest buyer of pharmaceutical ingredients in India.
I have evaluated the company on 10 fundamental categories and each has been given a rating out of 5 stars. From this, I have arrived at a combined stock rating for the company.
This is the summary of the analysis. You can read the detailed analysis with the excel models on my blog (Check the source link)
Source: CIPLA Shares Complete Fundamental Analysis
Some insights for the coming years from management discussion & analysis (MD&A) and con calls are as follows.
- Cipla’s R&D is expected to go down in coming years given that g-Advair (generic version of the GSK Advair in the US market) related spends ended last year.
- Study outcome of trials related to g-Advair is expected by March 2020. It would then take 2–2.5 years for the review by the FDA and other regulators.
- The impact of COVID-19 outbreak will not be high on the emerging market consumption of generic drugs. Therefore it will not impact Cipla’s earnings much in FY 2020.
- Gross margin is expected to be at 63–63.5% on a steady-state basis in the coming years.
- The US-based business is currently at $120–130 millions with top 3 products contributing a total of 25% of US sales. This is expected to grow in double digits.
The company shows promising growth opportunities but it is largely dependent on the g-Advair trials which will take time to commercialize. Also, the company continues to grow in the domestic market at a steady rate.
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