Cipla saw a number of management changes in the past couple of years, but it has now entered into the growth phase again
Cipla suffered a number of changes in the last couple of years. First, Amar Lulla, joint MD, put in his papers in 2011 on health grounds. Then the CMD, Y K Hamied, stepped down in 2013. These were followed by a spate of top-level exits, including the CFO. A change in strategy saw the company buying up its distributors in export markets. Low offtake by the South African government led to sluggish revenue growth in FY15.
After its two-year investment phase ended in FY15, Cipla has now entered into a high growth phase as it ramps up market share in the EU and the US, with improvement in demand in South Africa and resolving of supply-related issues in the domestic market.
What lies ahead?
Cipla's UK push will add to the bottom line as will greater Nexium sales in the US. Improved government buying in South Africa promises further gains.
Cipla trades at 45 times earnings. With earnings set to go up, valuations are likely to cool down. Buy.