>Cipla Ltd. (BNP PARIBAS)

• Initiate with a BUY rating and TP of INR250 on the back of steady growth and a risk averse business model.
• Conclusion of its capital expenditure programme will mean capital efficiency returns to high levels.
• We value the stock at 19x FY10 EPS; target price implies 33% upside.

A breath of fresh air

Performance enhancing drugs
We initiate coverage of pharmaceutical company Cipla Pharmaceutical with a BUY rating and target price of INR250, implying 33% upside from current levels.Cipla has a unique business model that insulates it from fluctuations in end-user demand and from regulatory and R&D
investment risk. This is due to an effective partnership strategy and dominance in the domestic formulation market. We believe its recent outperformance vs. the broader market and its valuation premium will continue, on the back of strong earnings growth.

A clean bill of health
Cipla, unlike other large Indian pharma companies that have adopted aggressive growth strategies, has stuck to its core business of supplying pharmaceutical products to its customers (pharmaceutical companies) across the globe. This focus has resulted in more modest growth than some of its peers, but has ensured predictable cash flow and steady, long-term growth. Cipla’s geographically diverse and low-cost business model is well placed to leverage the growth of generics globally, which is relatively insulated from the broader economic environment.

To see full report: CIPLA