CIPLA LTD Analyst Report By Siddharth Ghaisas

WHO IS CIPLA & WHAT DO THEY DO? WHO WHO - The Chemical, Industrial & Pharmaceutical Laboratories; - Founded by Khwaja Abdul Hamied in the year 1935; and - On August 17, 1935, Cipla was registered as a public limited company. WHAT WHAT - Today, Cipla is a leading player in anti-infective and anti-asthmatic formulations; - Specializes in the manufacturing of steroids and hormones; and - Specializes in the manufacturing of steroids and hormones; and - Cipla has time and again earned the distinction of coming out with pioneering and life saving drugs. - Cipla has time and again earned the distinction of coming out with pioneering and life saving drugs.

HOLD Why we recommend so? Why we recommend so?

KEY RATIOS

A FEW MORE REASONS - Cipla has followed the market trend for the last 1 year; and - In December 2005, Cipla somewhere breached the market line crossing it to end at approx Rs  What’s in it for the investor? - HOLD on to your stock to benefit from its “Capital Appreciation”; - The “Estimations” showcase the company to be a healthy company with positive and healthy FCFF; - As of 9 December 2006 Cipla stands at Rs The price is Rs Cipla vs. S&P Nifty (1 Year)

PEER COMPARISON Cipla has outperformed the Industry average consistently! Cipla has outperformed the Industry average consistently!

A CHECK ON FUNDAMENTALS The company is trading at 33.7x 2006 earnings and 26.9x 2007 earnings. The company is trading at 33.7x 2006 earnings and 26.9x 2007 earnings. At the present level of activities we maintain that the company is a ‘Market Performer’ and recommend a ‘HOLD’ on the stock.. At the present level of activities we maintain that the company is a ‘Market Performer’ and recommend a ‘HOLD’ on the stock.. Strong product pipeline: Filed 658 DMFs and 71 ANDAs. The company has also secured 170 marketing authorizations in Europe, 4,000 product registrations globally and 7000 pending approvals; and Strong product pipeline: Filed 658 DMFs and 71 ANDAs. The company has also secured 170 marketing authorizations in Europe, 4,000 product registrations globally and 7000 pending approvals; and Exports: API drives growth: Exports grew by 37%; Accounts for 50% of total sales; API exports grew by 120%. Exports: API drives growth: Exports grew by 37%; Accounts for 50% of total sales; API exports grew by 120%.

EBT would be increasing at the rate of 15% over the next five years; CAPEX by Rs.2000 crores every year for the next 3 years & then for the next 2 years it is expected to grow at Rs.1500 crores. EBT would be increasing at the rate of 15% over the next five years; CAPEX by Rs.2000 crores every year for the next 3 years & then for the next 2 years it is expected to grow at Rs.1500 crores. R & D on the rise: R & D on the rise: R & D has enabled Cipla to register high realizations and maintain an edge above competition; Low-risk business model: Low-risk business model: Robust partnership model - has entered into global tie-ups with various generic players (like Watson, Mylan, Barr and Ivax) for supplying its generic products. This strategy enables Cipla to leverage local market knowledge of its partners and utilize its own R&D, product development, and manufacturing skills; GDR issue to fund acquisitions: GDR issue to fund acquisitions: Recently, Cipla raised Rs7.6bn through a $170mn GDR issue of 11.05mn shares, priced at Rs 695 per share.

SWOT ANALYSIS STRENGTHS - Ranks #2 in the retail prescription market in India; - 18 brands that feature among the top-300 brands; - Large basket of 1,500 formulations; and - Partnered 8 leading generics companies in the US for nearly 125 projects. WEAKNESSES - Impact of IPR regime. OPPORTUNITIES - Biotherapeutics – A new and promising area; - Agreement with Avesthagen; and - Venturing towards areas of cardiology and anti-cancer. THREATS - Partnership related; and - Potential de-rating.

STRATEGIC TIE-UPS Subsidiary in Dubai: Cipla has set up a wholly owned subsidiary, Cipla FZE situated at Jebel Ai Free Zone in Dubai, United Arab Emirates. This is the part of strategy to explore the growing markets in middle east countries through exports. Subsidiary in Dubai: Cipla has set up a wholly owned subsidiary, Cipla FZE situated at Jebel Ai Free Zone in Dubai, United Arab Emirates. This is the part of strategy to explore the growing markets in middle east countries through exports. It has a research alliance with a Bangalore-based biotech company Avesthagen, to develop biotherapeutic products; It has a research alliance with a Bangalore-based biotech company Avesthagen, to develop biotherapeutic products; Cipla entered agreement with Pentech Pharma of USA for marketing a range of generic products for American market; Cipla entered agreement with Pentech Pharma of USA for marketing a range of generic products for American market; The first phase of the new formulation plant at Baddi, Himachal Pradesh, for the manufacture of tablets and capsules commenced commercial production in April 2005; and The first phase of the new formulation plant at Baddi, Himachal Pradesh, for the manufacture of tablets and capsules commenced commercial production in April 2005; and Presence in Africa and Europe. Presence in Africa and Europe.

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