Cipla: 455-435 May Be A Good Support Despite Worst Q4FY16 Result Amid Various Restructuring Costs & US FDA Woes

Trading Idea: Cipla

CMP: 467

Either buy around 460-455 OR in dips around 440-430;

TGT: 481*-515-526-538-550*-575-600*-660 (1-3/6M)

TSL< 450 OR < 425

Note: Consecutive closing (3 days) below 425 for any reason, Cipla may further fall towards 410*-395 and 385-365* in the near to long term (alternative worst bear case scenario).

Cipla reported a 69% fall in Q4FY16 PAT (YOY), much below analysts expectations primarily on account of fall in consolidated revenue and various one-off  restructuring charges in EU and some emerging markets. Its also facing WL for its Indore plant from US FDA back in Oct'15.

Cipla has around 78 ANDA(s) in the pipeline for US market and 20 to be added in FY-17 and the management is confident for a 15-20% EBITDA growth over the next three years.

Considering the recession proof nature of pharma companies (defensive sector) and favourable risk reward ratio, investment buying from around 455-435 zone may not be a bad idea.

For Cipla: Consolidated

Q4FY16 TTM EPS: 18.69 (FY:16/Actual)

Projected FWD EPS: 21.75-24.95-28.55 (FY:17-19/Estimated)

Average PE: 25

Median Value: 467-544-624-714 (FY:16/Actual & FY:17-19/Estimated)

As par BG metrics & current market volatility:

Present median valuation may be around: 495 (FY:16/TTM)

Projected fair value might be around: 535-575-615 (FY:17-19/FWD)

BVPS: 134.17

Average P/BV: 4.15

Median fair value: 557  

CIPLA	EPS	BV	P/E	Low	High	Median	200-DEMA	10-DEMA
Q4FY16/TTM	18.69	134.17	25	516.79	472.26	494.52	571.58	477.32
FY17/FWD	21.75	150.15	25	557.49	509.45	533.47	571.58	477.32
FY18/FWD	24.95	166.85	25	597.10	545.64	571.37	571.58	477.32
FY19/FWD	28.55	186.05	25	638.72	583.68	611.20	571.58	477.32

Analytical Charts: