Cipla: strong generic pipelines

ANALYSTS' CORNER

Refco Research has recommended a buy on Cipla. It states that the recent global consolidation has resulted in Cipla's tie-ups with leading generic companies like Teva, Sandoz and Watson.

It has expanded its generic pipeline to about 160 products to be commercialised over next few years. Cipla's partners have filed 55 ANDAs and the company expects 35 filings in FY06E.

The report adds, "We believe that this is one of the strongest generic pipelines amongst Indian companies. We expect these products to start contributing from FY06E onwards. Cipla is targeting overall sales growth of 12-15 per cent for FY06E. While the management has denied any plans of stake sale, we believe that Cipla is a long-term sellout candidate due to the absence of a clear strategy on succession planning. Cipla trades at 23x FY06E and 16x FY07E earnings. The company's bottomline is expected to grow 16 per cent in FY06E and 44 per cent in FY07E."

Glaxo Pharma: peppy sales growth

Enam Securities rates Glaxo Smithkline Pharma as neutral, relative to the sector. The report states that the management has guided towards high single-digit sales growth and a bottomline growth of 10-12 per cent (pre-exceptionals) for the next two years.

However, retail sales by the domestic pharma industry were flat during first half of 2005. They are expected to grow by 5-6 per cent during second half. Despite this slowdown in the industry, the report expects the company to report about 6-7 per cent topline growth on a full-year basis.

The growth is likely to be driven by power brands, which are expected to show double-digit growth, while sales of non-promoted brands are expected to be flat. Going forward, growth will be driven by launches of in-licensed brands and products from its own pipeline.

GE Shipping: driven by offshore revenues

ABN Amro Research recommends a buy on GE Shipping. The report states that the company's offshore business is among the largest in the country, with revenues of Rs 350 crore in FY05 and EBITDA of Rs 170 crore. Key drivers of this division are drilling rigs and offshore support vessels (OSVs).

The report adds, "We estimate combined growth of 25 per cent for these two businesses in FY07F. Growth should be aided by both, repricing of charter rates and higher operating days from new deliveries. We value the offshore business conservatively at 7.5x FY06F EV/EBITDA. However, its domestic peers trade on valuations of 9x FY06F EV/EBITDA. GE reported record earnings for June 05 quarter due to gains from the sale of asset. The company has taken advantage of high asset prices. However, freight rates remain weak and have declined 50 per cent plus since early 2005. Gross tanker additions are expected to be 8.8 per cent per annum over the next three years. On FY06F earnings, the stock trades at a 4.6x P/E with a dividend yield of 4.4 per cent."