(Batch 2020 – 2022)

FUNDAMENTAL AND TECHNICAL ANALYSIS

INDUSTRY - PHARMACEUTICAL INDUSTRY
COMPANY – CIPLA LIMITED

Submitted To:- Submitted By :-

Dr Sarfaraz Ansari Ayush Patel (1121182918)
(Associate Professor) Himanshu Patidar (1121812861)
Shivani Patidar (1121812976)
Saxena Upasana (1121812680)
Class: - MBA FA III (Section-A)

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 TABLE OF CONTENTS
S.NO PARTICULAR P.NO.
1 About the Industry 3
2 About the Company 4
3 Macro-Economic Analysis 5
4 Pest Analysis 7
5 Porter’s Analysis 9
6 Financial Statements Analysis 10
7 Trend Analysis 11
8 Ratio Analysis 12
9 Technical Indicators- Candlestick 13
Patterns
10 Reversal Patterns 22
11 Continuation Pattern 25
12 Simple Moving average 29
13 Exponential Moving average 32
14 MACD 33
15 Relative strength index 34
16 Money flow index 35
17 Bollinger Band 36
18 Conclusion 37

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 ABOUT THE PHARMACEUTICAL INDUSTRY

 The Pharmaceutical Industry in India is one of the largest in the world

 It ranks 4th in the world, pertaining to the volume of sales

 The estimated worth of the Indian Pharmaceutical Industry is US$ 6 billion

 The growth rate of the industry is 13% per year

 Almost 70% of the domestic demand for bulk drugs is catered by the Indian Pharma Industry
 The Pharma Industry in India produces around 20% to 24% of the global generic drugs

 The Indian Pharmaceutical Industry is one of the biggest producers of the active pharmaceutical

ingredients (API) in the international arena

 The Indian Pharma sector leads the science-based industries in the country
 The pharmaceutical sector has the capacity and technology pertaining to complex drug

manufacturing

 Around 40% of the total pharmaceutical produce is exported

 55% of the total exports constitute of formulations and the other 45% comprises of bulk drugs
 The Indian Pharma Industry includes small scaled, medium scaled, large, scaled players, which

totals nearly 300 different companies.

 There are several other small units operating in the domestic sector.

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 ABOUT THE COMPANY

CIPLA LIMITED

 An Indian multinational pharmaceutical company, headquartered in Mumbai, India.

 Cipla primarily develops medicines to treat respiratory, cardiovascular disease,
arthritis, diabetes, weight control and depression, other medical conditions.
 Cipla has 34 manufacturing units in 8 locations across India and a presence in over 80 countries.
 Cipla sells active pharmaceutical ingredients to other manufacturers as well as
pharmaceutical and personal care products, including Escitalopram (anti- depressant),
Lamivudine and Fluticasone propionate.
 They are the world's largest manufacturer of antiretroviral drugs.
 Cipla spent INR 517 cr. (5.4% of revenue) in FY 2013–14 on R&D activities.
 The primary focus areas for R&D were development of new formulations, drug-
delivery systems and APIs (active pharmaceutical ingredients).
 The equity shares of Cipla are listed on the Bombay Stock Exchange, where it is a
constituent of the BSE SENSEX index, and the National Stock Exchange of India, where
it is a constituent of the CNX Nifty.
 Its Global Depository Receipts (GDRs) are listed on the Luxembourg Stock Exchange.

Founded : 1935 (86 years ago)

Founder : Khwaja Abdul Hamid

Headquarters : Mumbai, Maharashtra, India

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 MACROECONOMIC ANALYSIS

1. GDP
GDP stands for "Gross Domestic Product" and represents the total monetary value of all final goods and
services produced (and sold on the market) within a country during a period of time. The Indian
pharmaceutical industry is a strategic industry for the nation, with the advantage of scale (at $37 billion in
2019-20, it contributed 1.5 per cent to the GDP directly, with another 3 per cent coming indirectly).

2. National Income
the value of goods and services produced by a country during a financial year. Thus, it is the net result of all
economic activities of any country during a period of one year and is valued in terms of money

3. Inflation
Inflation is the rate of increase in prices over a given period of time. Inflation is typically a broad measure,
such as the overall increase in prices or the increase in the cost of living in a country.

4. Employment
Employment most generally means the state of having a paid job—of being employed. To employ someone
is to pay them to work. An employer provides employment to employees. According to employment news of
the government, Pharma industry currently employs about 5.5-5.7 lakh people

5. Interest
Interest is the monetary charge for the privilege of borrowing money, typically expressed as an annual
percentage rate (APR). Interest is the amount of money a lender or financial institution receives for lending
out money.

6. Tax Structure
A compulsory contribution to state revenue, levied by the government on workers' income and business
profits, or added to the cost of some goods, services, and transactions.

7. Monetary Policy
The policy adopted by the monetary authority of a nation to control either the interest rate payable for very
short-term borrowing or the money supply, often as an attempt to reduce inflation or the interest rate, to
ensure price stability and general trust of the value and stability of the nation's currency.

8. Exports and Imports

Exporting is defined as the sale of products and services in foreign countries that are sourced or made in the
home country. Importing refers to buying goods and services from foreign sources and bringing them back
into the home country. Importing is also known as global sourcing.

9. Savings and Investments

Saving means setting aside money which we don't spend. Its mainly for future uncertainties. Investing is
buying assets such as Bonds, Property, Gold, etc to get higher returns in coming future.

10.Balance of Payments
It is a systematic and summary record of country's economy and financial transaction with the rest of the
world over a period of time.

11.Union Budget

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It is a statement of the estimated receipts and expenditure of the government for that particular year. As per
the union budget 2019-2020, Rs 19 billion has been set aside for R & D by Ministry of Health and family
welfare. The govt also set up plans an early Rs 1000 billion fund to provide boost to companies to
manufacture pharmaceutical ingredient domestically.

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 PEST ANALYSIS OF PHARMA INDUSTRY

1. POLITICAL FACTORS
Government Framework
All countries have a certain framework regarding the pharmaceutical industry. This includes safety standards,
certifications, and drug-related laws. While in many countries these laws are not so strict, in not so developed
countries they are quite harsh and do not allow the pharmaceutical industry to progress.

Closed Market
The pharmaceutical industry consists of various large corporations. And the global level of their distribution and
marketing along with the regulatory framework makes it difficult for newcomers to enter the market. This shows
strict competition within the market as well as provides a larger industry persona since most of the brands are
established.

Price Control
Many countries along with the United States are creating laws that place strict control on pricing of drugs. This
has caused hindrance to the growth of the industry. However, there are also populist demands of cheaper drugs for
lower classes of society. Many pharmaceutical companies are facing major losses, and further fall in prices may
force them to quit.

2. ECONOMIC FACTORS
Growth in Individual Income
The general trend of household spending is increasing, and they spend a large part of it towards the pharmaceutical
industry. Purchase of drugs has become more common than ever and one of the primary causes is that people can
now own drugs that were previously of a high price.

New Drugs
Since R&D is at an all-time high thanks to the tremendous growth in technology, many new drugs are being
introduced into the market. As a result of this people are purchasing these drugs and providing further growth to the
industry. We expect the release of more such drugs soon.

3. SOCIAL FACTORS
Generation Health
The current population features people of older generation in a large number. This means the number of sick
people is higher than ever. This has placed a high amount of pressure on the pharmaceutical industry leading to its
growth. However, when this generation passes away there is expected to be a downfall in the demand of various
drugs.

Global Obesity
Obesity is a larger factor than ever before. The last few decades witnessed rapid changes in the global diet style,
and this has led to obesity in a large part of the population. In most developed countries obesity is almost an
epidemic, and this will soon be the condition in developing countries as well. The rapid growth in obesity rates has
led to the requirement for many drugs and allowed those particular sectors of the pharmaceutical industry to grow.

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Health Consciousness
Monitoring one’s own health has become a trend of the current generation. While this may lead to lesser
requirement of doctors and general physicians, people are now consuming more drugs than ever. However,
exercising and fitness trends are also leading to lesser requirement for drugs as they lead to healthier lifestyle
without the need fordrugs

4. TECHNOLOGICAL FACTORS
Growth in Biotechnology
Biotechnology helps in decoding of animal and plant to help in welfare of society, it plays an important role in the
making of drugs and the current growth in this industry is producing many new medicines and developing new
methods to make cheaper drugs.

Artificial intelligence in pharma industry

AI helps in data analysis in research centers and allows researchers to collect data from different sources.
Robotics, AI etc. will impact the manufacturing and distribution (through social media) of drugs. Hospital in
Tamil Nādu are using such intelligence to detect diabetic retinopathy(eye). etc.

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 PORTER’S FIVE FORCE ANALYSIS

1. COMPETITIVE RIVALRY(HIGH)

 Pharma industry is one of the most competitive industries in the country with as many as 10,000
different players. The rivalry in the industry can be looked from the fact that the top player in the
country has only 6% market share, and the top five players together have about 18% market
share.
 High growth prospects make it attractive for new players to enter in the industry.
 Another major factor that adds to the industry rivalry is the fact that the entry barriers to pharma
industry are very low. The fixed cost requirement is low but the need for working capital is high.

2. THREAT TO SUBSTITUTE (HIGH)

 The substitute of synthetic (using man made chemical rather than natural ingredients) pharma
industry would be emerging biotechnology chemical industry.
 Traditional Medicine also plays a substituting role as India is a Developing country. Homeopathy
and Ayurvedic medicine are also a close substitute to pharma industry.

3. POWER OF SUPPLIERS (LOW)

 Suppliers have very little power in the pharmaceutical industry. The raw materials for manufacturing
drugs are commodity products in the chemical industry, which are available from numerous sources.
 Most of the equipment used in manufacturing and research is available from multiple manufacturers.
Suppliers usually offer multiple products to the manufacturer, which moderates pricing on rarer
materials and unique equipment.

4. POWER OF BUYERS (LOW)

 Pharma is unique among industries because the medical patient has an absolute lack of power
regarding pricing. The prescriber of the drugs, the physician, ethically is not allowed to profit from
the sale of drugs.
 The entity that pays for the drugs, the insurance company, only has a say in how much it will pay to
the distributor of the drugs, meaning it has little power with the drug manufacturers. The insurer can
refuse to pay for treatments it believes are overpriced.

5. THREAT OF NEW ENTRY(HIGH)

 As Growth in this industry is better as compared with other sectors so it becomes more appealing for
individuals to enter in this market, so it’s there is a treat of new entry.

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 FINANCIAL STATEMENT ANALYSIS
CIPLA LIMITED
An Indian multinational pharmaceutical company, headquartered in Mumbai, India. Cipla primarily develops
medicines to treat respiratory, cardiovascular disease, arthritis, diabetes, weight control and depression; other
medical conditions.

Founded 1935 (86 years ago)

Founder Khwaja Abdul Hamid

Headquarters Mumbai, Maharashtra, India

FINANCIAL HIGHLIGHTS

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Following are the Amounts (In Cr.) from the Final Report 2019-20
Particulars 2020 2019 Inc/Dec.

Sales Revenue 16694.85 15970.97 Increased

Operating Profit 3543.71 3347.90 Increased

Net Profit 1499.52 1492.44 Increased

Total Equity 16057.28 15344.25 Increased

Total Debt 7605.28 8619.07 Decreased.

 Sales revenue Increased by 4.5%

 Operating Profit Increased by 5.8%
 Net Profit Increased by 0.43%
 Total Equity Increased by 4.6%
 Total Debt increased by 11.7%

TREND ANALYSIS

Particular 2017 2018 2019 2020 2021

Sales Revenue 14280.86 14750.46 15970.97 17476.19 19425.58
- 3.29% 8.27% 9.42% 11.15%

Operating Profit 2381.76 1462.76 1691.14 2178.18 3290.06

- -38.58% 15.61% 28.80% 51.05%

Net Profit 1035.42 1416.57 1492.44 1499.52 2388.51

- 36.81% 5.36% 0.47% 59.28%

Total Equity 12198.89 14581.63 15344.25 16057.28 18585.59

- 19.53% 5.23% 4.65% 15.75%

Total Debt 4112.66 4098.05 4316.23 2816.43 1755.56

- -0.36% 5.32% -34.75% -37.67%

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 RATIO ANALYSIS

Current Ratio: Current Assets 13181 = 2.9

Current Liabilities 4591

Cash Ratio
Cash and Bank
Bal 793+608 0.31
Current Liabilities 4591

Shareholders’
Equity Ratio equi 18585.59 = 0.74
Net Assets 25151

Debt Ratio Total Debt 1755.56 = 0.07

Net assets 25151

Debt to Equity
Ratio Total Outsiders’ Liabilities 1755.56 = 0.094
Shareholders’
equity 18585.59

Debt to Total Assets

Ratio Total Outsiders’ Liabilities 1755.56 =
0.070 Net Assets 25151

Interest Coverage
Ratio EBIT 3290 = 20.6
Interest 160

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TECHNICAL ANALYSIS-CANDLESTICK PATTERNS
SIMPLE PATTERNS
1. Dogi

 Opening price=Closing price

 Since OP=CP, Candlestick virtually have no body
 Upper and lower shadow are quite long here
Inference: Increase in volatility and Indecisiveness in market

2. Dragon Fly Dogi

 Opening price and closing price are at the highest of the day
 Longer lower shadow, signals more bullish trend
 Considered to be reversal signal, when appeared in market bottoms

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3. Gravestone Dogi

4. Hammer
 Appear with short body, on upper end of candle with long lower shadow
 Often regarded as trend reversal
 Hammer can either be green or red

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5. Inverted Hammer

 Appear with short body, on lower end of candle with long lower shadow
 Found at downtrend and often regarded as bullish reversal signal

6. Bullish Marubozu

 In Japanese, Marubozu stands for Bald

 Has only body, no upper and lower shadow
 Considered as a continuation pattern
 Inference, Opening Price= Low Price., Closing Price=High Price
 Signifies, bulls had complete control over the market for particular date., Intense buying Pressure

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7. Bearish Marubozu
 In Japanese, Marubozu stands for Bald
 Has only body, no upper and lower shadow
 Considered as a continuation pattern
 Inference, Opening Price= High Price., Closing Price=Low Price
 Signifies, Bears had complete control over the market for particular date., Intense Selling
Pressure

8. Spinning Top
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 Green and red candle with small body.
 Similar to Doji, shows uncertainty and indecisiveness in market
 Interpreted as a neutral pattern but gains importance when it is part of other formation
 50% chance of trend reversal, but if followed by Dogi, it is confirmed for trend reversal

9. Shooting Star
 Has small body, long upper shadow and little or no lower tail
 Considered a bearish pattern in an uptrend

COMPLEX PATTERNS
1. Bullish Engulfing

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 Small red body and large green body
 Red body is contained within following green body
 Appeared in downtrend/Bottom., so is major trend reversal

2. Bullish Engulfing

 Small green body and large red body

 Green body is contained within following red body
 Appeared in Top/uptrend., so is major trend reversal

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3. Bullish Harami Cross

 Large red body followed by doji

 Considered as bullish pattern when preceded by a downtrend

4. Evening Star

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5. Morning Star

6. Three Black Crows

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 Three long black candles with consecutively lower closes.
 Closing prices are near to or at their lows.
 Appears at the top and considered as reversal signal

7. Three White Soldiers

 Three long white candles with consecutively higher closes

 Closing prices are near to or at their highs.
 Appears at bottom and is interpreted as reversal signal

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 REVERSAL PATTERNS
Reversal patterns indicate a high probability that the existing trend has come to an end and that there is good
chance of the trend reversing direction. They give entry signals early in the formation of a new trend,
making their entries quite lucrative, with fairly small protective stops. However, the trend might not reverse
immediately and may enter a trading range instead.

1. Double Top
It is M shaped pattern. Which has two same level highs.

2. Triple Top
It is also a type of up to down pattern which consists of three same level highs.

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3. Head and Shoulder
It is also same as triple tops, but it has two similar height peaks and the middle one is the highest which
make the head and other two as their body.

4. Double Bottom
It is opposite of double top. Here letter W can be seen.

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5. Triple Bottom
This pattern consists of three same level of lows.

6. Reverse Head and Shoulder

It is just opposite of head and shoulder pattern; it consists of one head and two body which similar
heights.

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 CONTINUATION PATTERNS
Continuation patterns are price patterns that show a temporary interruption of an existing trend. Continuation
patterns occur mid-trend and are a pause in the price action of varying durations. When these patterns occur,
it can indicate that the trend is likely to resume after the pattern completes.

1. Symmetric Triangle
This pattern is formed with two trend lines connecting a series of candle sticks and forming a triangle

2. Ascending Triangle
This pattern is formed with almost steady highs, but the lows are getting higher with each candle stick.
(Here higher lows are formed)

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3. Descending Triangle
In this pattern we can see steady lows, but the highs are getting lower with every candlestick (here lower
highs are seen).

4. Bearish Flag

A downward sloping rectangle can be observed in this pattern.

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5. Bullish Flag
An Upward moving rectangle is formed in this pattern.

6. Flatten Flag
A Straight movement of candlesticks which is neither going in
upward direction or in downward direction than it is formed a flatten flag pattern.

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 TECHNICAL INDICATORS
Technical indicators, also known as “technical,” are focused on historical trading data, such as price,
volume, and open interest, rather than the fundamentals of a business, such as earnings, revenue, or profit
margins. Technical indicators are commonly used by active traders, since they’re designed to analyze short-
term price movements, but long-term investors may also use technical indicators to identify entry and exit
points.
Examples of common technical indicators include

 The simple moving average

 The exponential moving average
 Moving average convergence divergence (MACD)
 Relative Strength Index (RSI)
 Money Flow Index (MFI)
 Bollinger Bands

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 SIMPLE MOVING AVERAGE
Moving averages are usually calculated to identify the trend direction of a stock or to determine its support
and resistance levels. A rising moving average indicates that the security is in an uptrend, while a declining
moving average indicates that it is in a downtrend.

The main moving average trading strategies:

1. Crossovers The first type is a price crossover, which is when the price crosses above or below a
moving average to signal a potential change in trend.

30 D Moving Average

60 D Moving Average
If it is angled up, the price is moving up (or was recently) overall; angled down, and the price is moving
down overall; moving sideways, and the price is likely in a range.

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 90 D Moving Average
A moving average can also act as support or resistance. In an uptrend, a 50-day, 100-day or 200-day
moving average may act as a support level, as shown in the figure below. This is because the average acts
like a floor (support), so the price bounces up off it. In a downtrend, a moving average may act as
resistance; like a ceiling, the price hits the level and then starts to drop again.

2. Applying two Moving average- one longer, one shorter

30 D and 100 D Moving Average

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 30 D moving Average – Red line
100 D moving Average – Blue line
We can see the short-term moving average is more responsive than long-term moving average.
When the shorter-term MA crosses above the longer-term MA, it's a buy signal, as it indicates that the
trend is shifting up. This is known as a "golden cross."

Meanwhile, when the shorter-term MA crosses below the longer-term MA, it's a sell signal, as it indicates
that the trend is shifting down. This is known as a "dead/death cross."

--

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 EXPONENTIAL MOVING AVERAGE
15 D and 50 D Moving Average

15 D moving Average – Red line

50 D moving Average – Blue line
We can see the short-term EMA is more responsive than long-term EMA.
When the shorter-term EMA crosses above the longer-term EMA, it's a buy signal, as it indicates that the
trend is shifting up. This is known as a "golden cross."

Meanwhile, when the shorter-term EMA crosses below the longer-term EMA, it's a sell signal, as it
indicates that the trend is shifting down. This is known as a "dead/death cross."

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 MOVING AVERAGE CONVERGENCE AND
DIVERGENCE
When the MACD Line crosses the center line from the negative territory to positive territory, it means there
is divergence between the two averages. This is a sign of increasing bullish momentum; therefore, one
should look at buying opportunities.
When the MACD line crosses the center line from positive territory to the negative territory it means there is
convergence between the two averages. This is a sign of increasing bearish momentum; therefore, one
should look at selling opportunities.
Example of MACD. strategy at work in chart of Cipla Ltd
ENTRY: Buy when the MACD crosses over the zero line
EXIT: Sell at a profit or loss when the MACD crosses below the zero line
Blue line is a MACD line

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 RELATIVE STRENGTH INDEX
It measures the magnitude of recent price changes to evaluate overbought or oversold conditions in the
price of a stock or other asset. An asset is usually considered overbought when the RSI is above 70%
and oversold when it is below 30%.

RSI=100− [100/1+Average loss/Average gain]

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 MONEY FLOW INDEX

The Money Flow Index (MFI) is a technical indicator that generates overbought or oversold signals
using both prices and volume data. An MFI reading above 80 is considered overbought and an MFI
reading below 20 is considered oversold

example, a very high Money Flow Index that begins to fall below a reading of 80 while the underlying
security continues to climb is a price reversal signal to the downside. Conversely, a very low MFI
reading that climbs above a reading of 20 while the underlying security continues to sell off is a price
reversal signal to the upside.

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 BOLLINGER BAND
The BB has 3 components:
1. Middle line which is the 20-day simple moving average of the closing prices
2. An upper band – this is the +2-standard deviation of the middle line
3. A lower band – this is the -2-standard deviation of the middle line
The upper and lower bands act as a trigger to initiate a trade.

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 CONCLUSION

Cipla current Share Price is 965.00 and its overall financial statement analysis shows a
positive digit. Its compound annual growth has always been increased gradually.
Cipla’s Sales Revenue, Operating Profit, Net profit, Total Equity has increased year by
year and its Total Debt has been decreased which shows that this company is strong.
Cipla’s Competitive rivalry is high, and its competitors are Pfizer, Par Pharmaceutical,
Dr. Ready’s Laboratory. The Pharmaceutical industry is also one of the largest in the
world, so Cipla has an advantage of using this for Growth purpose.

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