Cipla:Too Much Dependance On Nexium ? Watch 677 For A Possible Bounce Back After Steep Correcton Post Above Estimate Q1 Result--755/800 Might Be The Target

Technical Charts:

Technical Analysis:

Looking at the chart, for Cipla (CMP:684) has good support of 677-667 and sustain below that it may fall immediately to 661-655, which might be again a good zone for accumulating. Only consecutive closing below 655, Cipla could be further dragged to 640-634 and sustaining below that 625-618-612 & 600-570 territory in the worst bear case probability.

On the upper side, sustaining above 677, Cipla may target 690-697 & 709-714-725-733-745-755 in the immediate to near term. Only consecutive closing above 755, Cipla might scale up to 800-825 & 930 in the long term (FY:16-18 bullish case probability).

Trading Levels (Positional)

	SL</>2	FROM SLR
		Cipla	CMP	684
			T1	T2	T3	T4	T5	T6	T7	SLR
Strong >	677		690	697	709*	714	725	733	745-755	<667
Weak <	667		661-655	640	634*	625	618	612	600-570	>677

Some Rationale:

Although Q1FY16 result of Cipla was above market expectations (nearly 79% growth in export business), but there was too much dependance on Nexium API. Excluding Nexium, Cipla's export formulations growth was muted sequentially, but has a growth of around 39% YOY. Apart from Teva (to which Cipla supplied the Nexium API), Mylan has also launched the Nexium generic drug (Original Astra research) in US. Nexium (a digestive/anti peptic ulcer drug) is a block buster drug there and has huge market. 

Going ahead, various analysts are upgrading Cipla's EPS for FY17/18 significantly for this block buster drug Nexium, although there might be severe competition and pricing pressure. There will be also another drug called Plumicort, which will be launched shortly may help Cipla immensely.

The company is also confident of domestic formulations business and expected a top line growth of around 20% in FY16.

As medicine is a recession proof industry, being a leading brand with comparatively less FDA ghost behind it, Cipla could be a bright spot in the days ahead.

Techno Funda Valuations As Par BG Metrics:

Current median valuation may be : 715

Projected fair valuations might be: 780-875-950 (FY:16-18)

SCRIP	EPS(TTM)	BV(Act)	P/E(AVG)	LONG TERM	SHORT TERM	MEDIAN VALUE	200-DEMA	10-DEMA
CIPLA	19.16	137.98	38.96	691.29	729.88	710.59	640.19	713.66

CIPLA

22.95

152.5

38.96

756.58

798.82

777.70

640.19

713.66

CIPLA

28.81

167.75

38.96

847.69

895.01

871.35

640.19

713.66

CIPLA

33.85

178.75

38.96

918.85

970.14

944.49

640.19

713.66