Cipla Medpro wins R2bn (Rs10.8bn) of state ARV Tender; Raise PT to Rs644 (from Rs632) maintain HOLD :: IndiaNivesh

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Our View: Cipla announced yesterday that it has been awarded R2bn (Rs10.8bn) of
the South African Government’s 2015-17 national ARV tender. Cipla would have to
supply products in this tender over the period of three years starting from April
2015. This is the third tender after winning R280mn (Rs1.5bn) in August 2014 for
state therapeutic drug and R345mn (Rs1.8bn) national respiratory tender. We
incorporate Rs3.6bn of sales and Rs366mn of adjusted PAT in FY16E.
Key changes in estimates:
Valuation:
We raise EPS estimate of Cipla for FY16E by 1.8% to Rs25.7 and raise the target
price to Rs644 (from Rs632) on the basis of 25x FY16E (unchanged) earnings. With
capital investment almost done over past three-four years and efforts going on in
strengthening future leaders and building front end in regulated market, we expect
Cipla to show superior growth in sales and profitability in coming years. However,
we maintain HOLD rating on the basis of valuation at it is trading at 35.5x FY15E EPS
of RS17.7 and 24.5x FY16E EPS of Rs25.7.