Cipla Ltd: A bargain or you should wait?

CIPLA Ltd. Last closed 449.2

ROE 9.62%

ROCE 10.94%

DEBT/EQUITY 0.23

EPS 20.69

EV/EBITDA 9.97

P/E 21.72

P/B 2.32

sales growth yoy 9.60%

Sales growth 5 years 9.97%

This company belongs to pharma sector and one of the leading companies in this industry. During this corona outbreak stock markets have witnessed great decline but macros are supportive for pharma sector. This company is currently trading 2.32 times of its book value which makes it an ideal buying with such a multiplier. EV/EBITDA is 9.97 which is also ideal for a company having good financials. PE multiplier is currently at 21.72. This year company saw lowest PE multiplier at 18.59 which was cheaper than it saw in 2009 which was 19.66. PE multiplier around 20 makes it a bargain buying. Other companies like Dr. Reddy’s labs, Torrent Pharma. Biocon are trading with a PE multiplier of 30.75, 41.20 and 45.28 respectively. Company has been maintaining positive cash flows from operations since 2008 and currently trading at 12.41 times of cash flow making it a good deal.

Recommendation: Based on information discussed above company deserves to be in active portfolio. One can start accumulation in small proportions from 415 and can keep on adding more on each decline of 30 rupees. If company manages its earning at same level which is currently 20.69 and reverts back to PE multiplier of 30 and above like its peers then stock can be easily sold at 600 and above in next few years.

While investing keep in mind…

1 Never put all your eggs in single basket

2 You can be right dead right; but you must survive

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