CMP: INR 1,207 | Target Price: INR 1,350 (INR 1,207) 11.

84% | BUY

Analysis of Financial Statements

Report Submitted by: Table of Contents:

Name Roll No.  Dashboard

Aadish Patni D001

Aashutosh Chawla D003  Brief Profile of the Sector

Akash Katlpwar D005
 About the Company
Atharva Sahasrabuddhe D009

 Financial Analysis

 Conclusion and Recommendation

Guided by: Dr Jyoti Nair
N.L. Dalmia Institute of Management
Research and Studies, Mumbai

Disclaimer: The following project is created only for educational purpose and it is not a advice or any kind of recommendation
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to buy/sell of the stock. Please consult your financial advisor before making decisions.
Result Highlights of Q2FY23:

•In the second quarter of fiscal 2024, Cipla's revenue reached INR 6,678.2
billion, up 14.6% year-on-year and 5.5% quarter-on-quarter. Revenue in t
he first half of FY24 was reported to be INR 13,007 billion, an increase of
12.4% compared to the same period last year.

• EBITDA for the quarter increased by 33.1% YoY and 16.1% QoQ to INR
17,338 Mn. The EBITDA margin expanded by 362 bps on a YoY basis and
236 bps on a QoQ basis at 26.0%. For H1FY24, EBITDA grew by 30.4% on a
YoY basis to INR 32,277 Mn and the EBITDA margin expanded 341 bps on
a YoY basis to 24.8%.

• PAT had a YoY growth of 43.4% and 13.6% QoQ to INR 11,309 Mn. For
H1FY24, PAT increased by 26.9% on a YoY basis to INR 21,266 Mn. PAT
margin expanded by 340 bps on a YoY basis and 120 bps on a QoQ basis
to 16.9% while for H1FY24, PAT margin expanded 187 bps on a YoY basis Source: Industry Research Report
to 16.3%.

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 Brief Profile of the Sector

PHARMACEUTICALS
Key Player’s Sector Distribution –

Source: NSE

Key Financial Performance and Highlights –

 In Q2FY24, the Pharma Coverage universe posted robust revenue growth of 14.3%/1.7%
YoY/QoQ on account of volume ramp-up, new launches (especially gRevlimid, gSpiriva,
gPrezista), and stabilizing pricing pressure in the US base business.
 EBITDA margin improved by a healthy 210bps/50bps YoY/QoQ amidst normalizing cost
inflation and stabilizing prices.
 The US sales were robust, aided by the new launches comprising gRevlimid, gSpiriva, and
gPrezista and increased demand for resilient suppliers amid drug shortages.
 US price erosion is stabilizing due to benefits from drug shortages which are currently at an
all-time high.
 Field force expansion is expected to drive volume growth in India. Moreover, growth picked
up in Oct’23 and continues to remain strong in Nov’23.
 Softening input costs and lower freights are improving margins.
 Hospitals – Seasonally strong quarter. Brownfield expansion to fuel growth without much
dilution in RoCE.

3
 Brief Profile of the Sector

SECTOR OUTLOOK – Pharma Back on Growth Track

 High Single-digit domestic growth is expected in FY24. Moreover, growth in the US market
will remain robust, thanks to the normalization of prices in the base business and the continued
ramp-up of gRevlimid and new product launches (gSpiriva, gPrezista).
 In the US business, supply constraints have led most business leaders to point to a sharp
decline in price erosion, which is expected to remain low for the remainder of FY24.
 In India, growth has been driven mainly by price increases and strong growth in chronic
therapies and all major companies forecast high single-digit growth in FY24.
 Margins will also improve as RM and freight costs normalize, US price erosion eases, and a
better mix is achieved.
 However, USFDA inspections remain an overhang and price erosion in the US is expected to
increase once supplies normalize.
 Therefore, we continue to eye on companies that are focused on launching niche products in
the U.S. market and a strong product mix (Chronic Portfolio) in the Indian market.

SHORT TERM AND MEDIUM-TERM OUTLOOK –

SHORT TERM

MEDIUM TERM

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 About Company

Introduction –

Cipla, as a company, has carefully built its reputation on a foundation of consideration. The
cornerstone that has driven their activities and decisions has been "Caring for Life". Driven by this
objective, Cipla has extended its reach to more than 80 nations, providing a wide range of over 1,500
medications in more than 50 dosage forms spanning several therapeutic areas. The organisation is
proactively increasing its footprint in key countries including South Africa, India, the United States,
and other growing economies, with the aim of improving the accessibility of healthcare globally.

Cipla's uncompromising dedication to having a significant influence on patients' lives has been the
motivating factor behind every endeavour during its historic eight-decade journey. It’s pioneering
efforts to use three doses of antibiotics to treat HIV/AIDS in Africa for less than a dollar a day in 2001
have been rewarded with success in easy access, affordability, and integration into the changing HIV
context. . Cipla, healthcare services are recognized as a responsible company based on the Life Care
core mission of creating social benefit in society in all areas it works. With this mindset, Cipla has
become a preferred business partner of stakeholders and healthcare organizations around the world.

Source: Annual Report

 About Company

5
 Key Product Launches –

1. Lenalidomide capsules - In our quest to improve access to

effective life-saving treatments, we developed Lenalidomide
Capsules 5 mg, 10 mg, 15 mg and 25 mg in the USA.
Lenalidomide is a medication prescribed to treat many types
of cancer, including multiple myeloma, a type of bone
cancer in adults.

2. Lupron acetate injection - Leuprorelin acetate injection

was approved by the United States Food and Drug
Administration (US FDA) in a New Drug Application (NDA)
submitted under the 505(b)(2) regulatory process. Long-
acting leuprolide acetate is indicated for the intramuscular
palliative treatment of prostate cancer. It is supplied as
lyophilized microspheres in single-dose vials and as a kit
containing a prefilled syringe and replacement device.

3. Palbociclib capsules - Palbociclib capsules are used to

treat patients with certain breast cancers that have spread
to other cancers. It is used together with hormonal
anticancer treatment.

4. Phytonadione Emulsion Injection - Phytonadione

Emulsion is an injection that treats bleeding or clotting
problems caused by vitamin K deficiency.
Source: Annual Report
5. Pirfenidone tablets - Pirfenidone is used to treat
idiopathic pulmonary fibrosis, a serious, chronic condition
that affects the tissue around the air sacs (alveoli) in the lungs. Medicines continue to evolve without
surviving.

6. Sacubitril-Valsartan Tablets- A combination of sacubitril and valsartan is used to treat heart failure.
Reduces the risk of hospitalization and death due to 6 documents following BRSR Question 1.
Principles 8, 4 and 5 in the Cardiovascular Guidelines Are Not Good. This is a compound product
containing APIs.

7. Ceftazidime Injection - Ceftazidime Infusion Solution is an antibiotic used alone or in combination

with other antibiotics, such as metronidazole, to treat serious infections of the lungs, stomach, and
urinary tract in children and adults. Published in three months in anti-inflammatory medicine.

8. Apixaban tablets - Apixaban is an anti-coagulant or blood thinner. It reduces the risk of stroke and
heart attack by helping prevent and treat blood clots in the legs, lungs, brain and heart.

 Share Holding Pattern & Subsidiaries

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Promoters and Promoter Group:

 Dominant stake at 33.4%, indicating strong control and long-term commitment to the
company.
 Stability and continuity in decision-making, potentially reassuring for investors.
 However, high promoter holding can also limit free float and liquidity for broader market
participation.

Foreign Institutional Investors (FIIs):

 Second largest shareholder group at 25.69%, highlighting international confidence in Cipla's

growth potential.
 FIIs bring in global exposure and diverse investment perspectives.
 Increased FII holding in September 2023 compared to March 2023 suggests growing external
interest.

Indian Institutional Investors (DIIs):

 Significant presence at 21.74%, showcasing domestic trust in Cipla's prospects.

 DIIs include mutual funds, insurance companies, and pension funds, offering long-term
investment capital.
 Stable DII holding indicates sustained domestic confidence in the company.

Other Shareholder Groups:

 GDRs: Holding a small 0.21%, representing shares held through global depositary receipts.
 Others: Comprise individuals, retail investors, and other institutions, contributing to
diversification but with smaller individual holdings.

Additional Aspects to Consider:

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 Corporate Announcements
 Pledging of shares by promoters: Currently none, indicating healthy financial state and
confidence in the company's future.
 Changes in shareholding over time: Track historical data to identify trends and shifts in
ownership pattern.
 Lock-in periods for specific investments: Understand potential restrictions on shareholder
selling, impacting liquidity.

Overall, Cipla's shareholding pattern suggests a well-balanced ownership structure with diverse
stakeholder interests. The significant promoter holding provides stability, while the presence of FIIs
and DIIs signifies external confidence and long-term investment potential. However, further analysis
of historical trends and individual investor groups can offer a more nuanced understanding of the
dynamics influencing the company's stock performance.

Subsidiaries and association of companies

Cipla, a multinational pharmaceutical behemoth, has grown its business through several
affiliated businesses and subsidiaries. Among its prominent affiliates and subsidiaries are:
Cipla USA Inc – Operating in the US, this company is essential to Cipla's aspirations to grow
in the US pharmaceutical industry. Its main objectives are to promote and distribute a large
variety of pharmaceutical items.
Cipla Europe NV – This company, which is based in Belgium, acts as the centre of Cipla's
European activities. Business development focuses on business strategy and regulatory
issues in the European economy.
Cipla Pharma Lanka Pvt. Ltd. – Cipla's Sri Lankan company oversees the nationwide
marketing and distribution of medicines to cater for a wide range of medical conditions.
Cipla Gulf FZ LCC – Headquartered in the United Arab Emirates, the company manages
Cipla's operations and distribution in the Middle East and Gulf region.
Cipla Bio Tec Pvt. Ltd. – The company supports Cipla's biopharmaceutical development
efforts, focusing on biotechnology and biosimilar products.
Cipla Medpro South Africa Ltd. – Cipla's partnership with Medpro in South Africa provides a
major contribution to the distribution and marketing of medicines on the continent.
Cipla Quality Chemical Industries Limited – This business manufactures and distributes
chemical products in East Africa, with headquarters in Uganda.

 SWOT Analysis

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 Strengths – Cipla has a global presence operating in more than 80 countries, giving it a wide
market reach and huge revenues. Cipla is aware of the importance of innovation and has
made significant investments in research and development, driving the development of
innovative, state-of-the-art pharmaceutical products. One of the company's greatest assets
is its commitment to providing affordable medicine in critical care settings, especially in
developing countries. Cipla has more than 1,500 medicines in its product range, including
many medical facilities, and has a good reputation in many medical markets.

Weaknesses – Cipla is subject to many regulatory environments due to its global operations,
which can make compliance and approval processes difficult and complex. Although the
company has many products, a significant portion of its revenue will come from a few core
products, making it easier for market changes and patent expirations.

Opportunities – Growth and Opportunities Gain greater market share through further
expansion in emerging markets such as the United States. By leveraging its expertise in
biotechnology and biosimilar development, it can access valuable medicines and new
markets. Analysing telemedicine platforms and digital health solutions can facilitate the
growth of telemedicine services.

Threats – Competition in the pharmaceutical industry is fierce and joint ventures of

different companies that are constantly creating and expanding new areas are at risk. Cipla's
operations and market access may be affected by changes in laws or regulations, particularly
in key areas. As patents on major drugs expire, generic competitors may become more
common, which will impact sales and marketing.

Important Corporate Announcements made.

 Corporate Announcements
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Acquired additional stake in GoApptiv Private Limited (December 14, 2023) –
Cipla increased its stake in GoApptiv to 22.99% with an investment of INR 42 crore. Through
this initiative, Cipla's position in the healthcare space has been strengthened, especially in
underserved areas. Cipla has a long-standing relationship with GoApptiv; This is their third
investment in the company.

A good investment in the American bioplastics company Yeda (July 2023) –

The aim of this partnership is to create a long-term drug delivery system. Although the exact
price of the deal was not disclosed, it was described as a "significant minority group". Cipla
hopes to leverage Yeda's technology and expertise to increase the number of sustainable
packaging options available for its pharmaceutical products. This initiative is in line with
Cipla's commitment to environmental sustainability and reduction of plastic use.

Investment in South African pharmaceutical company Medivic (March 2023) –

So CIPLA's presence in the sub-Saharan Africa continues to grow. Although the contract has
not been announced yet, it is said to include a minority stake in Medivic. The investment
was made by investment company Cipla Mauritius Holdings Ltd. It was done by. The
partnership is designed to combine Cipla's comprehensive product and global reach with
Medivic's strong local energy and business operations in South Africa.

Launch of Cipla Altra, a digital platform for healthcare professionals (October 2023)-

Pharmaceutical giant Cipla launched Cipla Altra, a complete digital platform aimed at
promoting Indian doctors, in October 2023. This is a major step forward for Indian
healthcare and aims to facilitate healthcare professionals' access to supplies and equipment.
Provides access to a comprehensive database of drug information, disease control
guidelines, treatment recommendations and the latest research.

Commitment to be carbon neutral by 2030 (October 2023) –

Cipla announced its commitment to become carbon neutral in October 2023. The company's
CEO, Dr. Youssef Hamied said the decision was based on the belief that "we have a
responsibility to protect the world for future generations." Achieving carbon neutrality is a
difficult task and Cipla needs to overcome many challenges. These include the high cost of
renewable energy, the difficulty of changing bad habits, and the lack of clean electricity in
some regions. Despite the setbacks, Cipla is moving in the right direction towards its goal of
carbon neutrality. The company has reduced its carbon emissions by 20% since 2015.

Launch of "Project Aashaye," an initiative to improve access to healthcare for

underprivileged communities (April 2023) –

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 The main project called 'Project Aashay' was launched in April 2023 by CIPLA, India's largest
pharmaceutical company . Increasing access to quality health care in disadvantaged
communities. The project's main goals are to build medical facilities in underserved areas,
including mobile medical units and collaborations with nearby healthcare providers, give
patients in need free or heavily discounted drugs and treatments, and teach local
populations about health concerns and preventive care through health camps and
educational initiatives. Educating community health workers to act as a liaison between
patients and medical experts and to offer basic healthcare services.

 Financial Analysis

Ratio Analysis - CIPLA LTD

Year Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23 Trend Mean Median
Profitability Ratios
Sales Growth - 11.52% 21.55% 4.38% 5.29% 7.96% 4.70% 11.84% 13.59% 4.55% 9.49% 7.96%
EBITDA Growth - 0.74% 14.65% 0.67% 13.22% 9.59% 3.51% 32.64% 7.06% 10.42% 10.28% 9.59%
EBIT Growth - -6.55% 4.06% -32.00% 28.14% 17.79% 14.70% 56.78% 9.92% 10.11% 11.44% 10.11%
Net Profit Growth - -6.47% 8.94% -29.73% 36.56% -9.32% 16.43% 77.53% 15.24% 3.32% 12.50% 8.94%
Dividend Growth - -0.01% 0.01% 0.00% 50.00% 0.00% 33.34% 24.98% 0.01% 69.99% 19.81% 0.01%
Gross Margin 39.30% 37.44% 36.39% 36.63% 38.05% 39.41% 39.45% 37.39% 37.71% 39.99% 38.18% 37.88%
EBITDA Margin 21.10% 19.06% 17.98% 17.34% 18.65% 18.93% 18.71% 22.19% 20.92% 22.09% 19.70% 19.00%
EBIT Margin 17.44% 14.62% 12.51% 8.15% 9.92% 10.82% 11.86% 16.62% 16.09% 16.94% 13.50% 13.56%
EBT Margin 16.01% 13.13% 11.01% 7.04% 9.17% 9.79% 10.71% 15.78% 15.60% 16.46% 12.47% 12.07%
Net Profit Margin 11.45% 9.61% 8.61% 5.80% 7.52% 6.31% 7.02% 11.14% 11.31% 11.17% 8.99% 9.11%

Sales Expense % Sales 18.20% 18.37% 18.41% 19.28% 19.40% 20.48% 20.74% 15.20% 16.79% 17.90% 18.48% 18.39%
Depriciation % Sales 16.01% 13.13% 11.01% 7.04% 9.17% 9.79% 10.71% 15.78% 15.60% 16.46% 12.47% 12.07%
Operating Income % 17.44% 14.62% 12.51% 8.15% 9.92% 10.82% 11.86% 16.62% 16.09% 16.94% 13.50% 13.56%

Return on Capiatal Employed 15.70% 13.26% 10.32% 7.04% 8.20% 9.16% 10.93% 15.66% 15.99% 15.92% 12.22% 12.10%
Retained Earnings % 86.22% 85.26% 86.47% 80.71% 78.80% 76.60% 73.19% 81.12% 83.61% 73.02% 80.50% 80.91%
Return on Equity 11.59% 10.09% 10.31% 6.65% 8.01% 6.88% 7.63% 11.65% 11.81% 10.86% 9.55% 10.20%
Self Sustained Growth Rate 10.00% 8.60% 8.91% 5.37% 6.31% 5.27% 5.58% 9.45% 9.87% 7.93% 7.73% 8.27%
Interest Coverage Ratio 12.17x 9.85x 8.35x 7.36x 13.16x 10.51x 10.29x 19.82x 32.92x 35.19x 15.96x 11.34x

Efficiency Ratios
Debtor Turnover Ratio 6.21x 5.68x 5.85x 5.62x 4.89x 3.94x 4.40x 5.56x 6.36x 5.61x 5.41x 5.61x
Creditor Turnover Ratio 4.84x 3.58x 3.18x 3.42x 3.49x 3.69x 3.54x 4.24x 4.39x 4.47x 3.88x 3.64x
Inventory Turnover 3.51x 3.00x 3.62x 4.13x 3.75x 4.13x 3.91x 4.10x 4.07x 4.41x 3.86x 3.99x
Fixed Asset Turnover 1.57x 1.66x 1.47x 1.52x 1.52x 1.70x 1.77x 2.01x 2.25x 2.48x 1.80x 1.68x
Capital Turnover Ratio 1.01x 1.05x 1.20x 1.15x 1.07x 1.09x 1.09x 1.05x 1.04x 0.97x 1.07x 1.06x
Debtor Days 59 64 62 65 75 93 83 66 57 65 69 65
Payable Days 75 102 115 107 105 99 103 86 83 82 96 100
Inventory Days 104 122 101 88 97 88 93 89 90 83 9611 91
Cash Conversion Cycle 87 84 49 47 67 82 73 69 64 66 69 68

Cash Ratios
CFO/Sales 0.15x 0.10x 0.13x 0.17x 0.10x 0.10x 0.18x 0.20x 0.15x 0.14x 0.14x 0.15x
CFO/Total Assets 0.12x 0.07x 0.08x 0.11x 0.06x 0.07x 0.13x 0.15x 0.12x 0.11x 0.10x 0.11x
CFO/Total Debt 1.25x 0.69x 0.33x 0.58x 0.36x 0.39x 1.09x 1.86x 3.15x 4.03x 1.37x 0.89x
Profitability Ratios:

 Sales Growth: Shows a mixed trend, with periods of strong growth followed by declines.
Notably, high growth in Mar-15, Mar-18, and Mar-21, but dips in Mar-16, Mar-19, and Mar-
20.
 EBITDA Growth: Similar to sales growth, with volatility but generally positive, except for
significant drops in Mar-16 and Mar-19.
 EBIT Growth: More volatile than EBITDA growth, with negative values in some years like Mar-
16 and Mar-17, indicating challenges in core business profitability.
 Net Profit Growth: Similar volatility to EBIT growth, with negative values in Mar-16, Mar-17,
and Mar-19.
 Dividend Growth: Inconsistent and mostly flat, with occasional increases like 50% in Mar-18
and 69.99% in Mar-23, suggesting a cautious dividend policy.

Profitability Margin Ratios:

 Gross Margin: Relatively stable around 38%, with a slight upward trend in recent years.
 EBITDA Margin: Fluctuates between 17% and 22%, but generally improving since Mar-19.
 EBIT Margin: More volatile than EBITDA margin, ranging from 8% to 17%, but showing an
upward trend in recent years.
 Net Profit Margin: Ranges from 5% to 11%, with no clear trend but some improvement in
recent years.

Efficiency Ratios:

 Sales Expense % Sales: Rising trend from 18% to 20%, indicating increasing sales expenses as
a percentage of sales.
 Debtor Turnover Ratio: Declining trend from 6x to 5x, suggesting longer collection times for
receivables.
 Creditor Turnover Ratio: Generally stable around 4x, indicating efficient management of
payables.
 Inventory Turnover Ratio: Fluctuations between 3x and 4x, without a clear trend in inventory
management efficiency.
 Fixed Asset Turnover Ratio: Increasing trend from 1.5x to 2.4x, indicating better utilization of
fixed assets in recent years.

Solvency Ratios:

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  Interest Coverage Ratio: Highly volatile, ranging from 7x to 35x, making it difficult to assess
debt servicing capacity.
 Debt-to-Equity Ratio: Fluctuates but generally declining from 1.6x to 1.2x, suggesting some
improvement in financial leverage.

Interpretations:

 Cipla's profitability growth has been inconsistent over the years, with periods of strong and
weak performance.
 Profitability margins have shown some improvement in recent years, but remain volatile.
 Sales and operating expenses have been increasing, suggesting potential cost pressures.
 Efficiency in managing debtors and inventory has declined slightly.
 Fixed asset utilization has improved in recent years.
 Debt servicing capacity is difficult to assess due to high volatility in the interest coverage
ratio.
 Financial leverage has improved somewhat, but remains a concern.

Common Size Statement P&L - CIPLA LTD

(₹ in Cr.)
Particulars Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Ma
Sales 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1
Raw Material Cost 0.39 0.40 0.36 0.36 0.37 0.35 0.36 0.39 0
Change in Inventory 0.01 0.03 0.00 -0.01 0.02 0.00 0.01 0.01 0
Power and Fuel 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0
Other Mfr. Exp 0.05 0.06 0.07 0.06 0.06 0.06 0.06 0.06 0
Employee Cost 0.15 0.17 0.18 0.18 0.18 0.18 0.18 0.17 0
Selling and admin 0.14 0.14 0.14 0.15 0.15 0.17 0.17 0.13 0
Other Expenses 0.04 0.04 0.05 0.04 0.04 0.04 0.04 0.03 0
Other Income 0.02 0.01 0.02 0.01 0.02 0.03 0.02 0.01 0
Depreciation 0.04 0.04 0.05 0.09 0.09 0.08 0.07 0.06 0
Interest 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0
Profit before tax 0.18 0.15 0.13 0.08 0.11 0.13 0.13 0.17 0
Tax 0.05 0.04 0.02 0.01 0.02 0.03 0.04 0.05 0
Net profit 0.14 0.10 0.10 0.07 0.09 0.09 0.09 0.13 0
Dividend Amount 0.02 0.01 0.01 0.01 0.02 0.01 0.02 0.02 0

13
 Common Size Statement Balance Sheet - CIPLA LTD
(₹ in Cr.)
Particulars Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Ma
Total Liabilities 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1
Equity Share Capital 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0
Reserves 0.74 0.68 0.54 0.59 0.62 0.62 0.67 0.73 0
Borrowings 0.09 0.11 0.25 0.20 0.18 0.18 0.12 0.08 0
Other Liabilities 0.16 0.20 0.21 0.20 0.19 0.19 0.21 0.18 0

Total Assets 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1
Net Block 0.48 0.44 0.45 0.45 0.44 0.40 0.41 0.38 0
Capital Work in Progress 0.03 0.04 0.10 0.08 0.04 0.03 0.04 0.04 0
Investments 0.05 0.04 0.04 0.05 0.06 0.11 0.06 0.11 0
Other Assets 0.08 0.08 0.09 0.10 0.10 0.09 0.09 0.09 0
 Financial Analysis
Receivables 0.12 0.13 0.11 0.12 0.14 0.17 0.17 0.14 0
Inventory 0.22 0.24 0.18 0.17 0.18 0.17 0.19 0.19 0
Cash & Bank 0.01 0.04 0.04 0.03 0.04 0.03 0.04 0.06 0

Common Size Income Statement Analysis:

 Change in Inventory is relatively small, suggesting effective inventory management.
 Employee Cost has slightly decreased in recent years, indicating potential cost control efforts.
 Other Income has experienced a slight decline in recent years. PBT shows some fluctuations
but remains within a reasonable range.
 Net Profit has remained relatively stable, showcasing consistent profitability.
 Tax as a percentage of sales exhibits some variation, possibly influenced by changes in tax
regulations.
 Dividend Amount as a percentage of sales has increased, which could reflect a commitment
to returning value to shareholders.

Common Size Balance Sheet Analysis:

 Reserves have shown fluctuations, possibly due to variations in retained earnings or changes
in accounting policies.
 Borrowings have decreased significantly as a percentage of total liabilities, indicating a
reduced reliance on external debt.

 Financial Analysis 14
  Net Block and Capital Work in Progress have decreased, which could be a result of efficient
capital expenditure management.
 Investments show fluctuations but have increased recently, possibly indicating strategic
investments or portfolio adjustments.

Interpretation:
Income Statement:

CIPLA LTD demonstrates stable revenue and effective cost management, resulting in consistent
profitability.

Reduced financial costs and increased dividend payments may be positively received by investors.

Balance Sheet:

The decrease in borrowings and stable liabilities indicate a healthier financial structure.

Efficient asset management is reflected in reduced capital expenditure and increased investments.

 Financial Analysis

Comparative Analysis:

Pharma Company EPS(INR) CAGR ROCE% P/E(x) EV/EBIDTA(x)

# FY23A FY24E FY25E FY23-25E FY23A FY24E FY25E FY23A FY24E FY25E FY23A FY24E FY25E
Sun 35.4 40 46.4 14.6 14.3 14.2 15.1 31.8 28.1 24.2 22.7 18.9 16.2
Dr Reddy's 237.7 309.2 313.1 14.8 16.7 19.5 17.5 25.1 19.3 19 16.7 12 11.3
Aurobindo 33.4 46.7 60.3 34.4 7.1 9 11.1 25.1 18 13.9 12.7 9.5 7.5
Lupin 8.4 32.2 36.1 107.2 3.5 10 10.4 130.2 34 30.3 30.4 17 15.4
Cipla 36.3 46.8 56 24.2 13.3 15.2 15.9 33.9 26.3 22 18.9 15.2 12.5
Zydus Lifesciences 24 31 32.6 16.5 11.7 14.7 13.5 26.8 20.8 19.8 17.3 13.8 12.7

Interpretation for Finance and Investment Decisions:

Growth Potential:

15
 • Aurobindo Pharma: With the highest projected CAGR for FY23-25E, Aurobindo could be attractive
for investors seeking high growth.
• Sun Pharma: Strong projected EPS growth in FY24E and FY25E suggests potential for earnings
expansion.
Profitability and Efficiency:
• Dr. Reddy's: Leading ROCE% indicates efficient use of capital for generating profits, possibly offering
a stable and reliable investment.
• Lupin: Lower P/E ratio suggests it might be undervalued compared to its earnings, potentially
presenting a buying opportunity.
Valuation and Future Expectations:
• Cipla: High EV/EBITDA ratio implies high investor expectations for future growth, but also
potentially higher risk.
• Sun Pharma: Balanced P/E and EV/EBITDA ratios suggest a fairly valued company with good growth
prospects.
Investment Considerations:
• Risk Tolerance: If you prefer stability, Dr. Reddy's or Lupin might be suitable. For higher growth
potential, Aurobindo or Sun Pharma could be better options.
• Investment Time Horizon: For long-term investors, companies with strong projected growth like
Aurobindo or Sun Pharma could be more attractive. Short-term investors might focus on undervalued
options like Lupin.

 Conclusion and Recommendation

The company has shown a decent growth over the years and with new advancement in medical
sciences and technology.

Cipla ltd has been upgrading their intellectual property and with a high EV/EBITDA ratio implies high
investor expectations for future growth.

In the comparison with the competitors Cipla has shown a better and stable price to earnings,
showing this company is valued. Dr Reddy being the industry outlier for EPS, Cipla has shown a
steady and balanced growth in earnings per share as well.

Looking ahead, CIPLA’s outlook seems promising based on its current financial strengths. The
company appears to have been successful in overcoming business problems by maintaining
profitability, carefully managing revenue and expenses, and performing well.

RECOMMENDATION
CIPLA LTD - Pharma sector

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CMP - ₹ 1,207.00
Target Price - ₹ 1,350.00
% Return - 11.85%
Recommendation - BUY

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