The final result for CIPLA Valuation using fundamental analysis.

1. SAPM PROJECT REPORT
Stock Valuation of CIPLA
By:
P. Chandraneel ……………………………2012A3PS209G
Aakarsh Shukla ……………………………2013A3PS162G
B. Jayadeep Sai .…………………………..2013B3PS642G
Abhinav Sai ……………………………2014B3A4499G
Joy Stephen .…………………………..2014B3A1533G

2. CIPLA FUNDAMENTAL ANALYSIS:
Assumptions:
1) Sales Growth:
We have taken into consideration that the growth from the year 2016 the combined growth in revenues
shall be 8% for the FY 2016-FY 2013.
2) Operating Margin:
The operating margin shall be 82% adjusted to the inflation for the coming FY.
3) Tax:
Analysis of the previous 5 years suggest that the taxation is of the range 20-25% .Hence we have taken
25% to be the tax rate
4) Capex:
For simplistic consideration we have taken that each year the company shall invest equal amounts of Rs
1000 cr for the next 8 FY’s since the previous year’s value is in that range.
5) Depreciation:
A straight line depreciation method has been assumed for the capex with a life time of 10 years. For the
previous investments as well we had to compute them from here on using straight line depreciation.
Previous the Indian Subsidiaries used to evaluate at WDV Method but since they contribute minor part
of it. We assumed them to depreciate linearly.
6) Debt Scheduling:
We have adjusted the interest expense to the inflation considering inflation to be 2%
In the FY 2018 Rs 14 cr has to be repayed and that has been taken care of. Similarly in FY 2019 the debt
of 287 cr has to repayed.
After the debt has been repaid there was a loss in the foreign transactions which had contributed about
95.29 cr. Hence from the FY 2019 the DEBT shall be 0 and the foreign loss has been adjusted to inflation.
7) Discount rate:
From the FY 2016-2019 the WACC computed discount rate of 15.2% is used. But since all the debt is
repaid and that no new debt has been taken. From FY 2020-FY 2023 The cost of equity of 15.15% is
considered.
8) Long Term Growth rate:
A long term growth rate of 4% is considered for the finding the terminal value.

3. 9) NWC:
The net working capital is supposed to be increased at the same rate as that of the sales.
Hence NWC is assumed to be increasing at 8% for all the FY.
10) Outstanding shares:
A total of 803 cr were assumed to stay constant and that there shall be now new issuing for shares or
splitting for the considered evaluation time period.
RESULTS:
After Calculating the FCFE, terminal Value and making a table of the same we have the following:
FCFE 15.2% 15.15%
Year FCFE Factor PV
1 5,504.49 0.868405 4780.1257
2 5,780.67 0.754128 4359.363
3 6,083.75 0.654889 3984.1815
4 6,288.30 0.568709 3576.2131
5 6,898.67 0.493956 3407.642
6 7,339.42 0.428969 3148.385
7 7,829.52 0.372532 2916.7487
8 8,372.92 0.32352 2708.812
Terminal 81074.77 0.32352 26229.346
NPV 55110.817
Enterprise value=55110.82 cr
Equity Value=EV-Debt=55110.82-349.86=54760.96
After Computing the Intrinsic Value we get it as
Intrinsic Value= Rs 681.9971
The CMP is Rs 537.5 per share.
Margin of Safety=Rs 144.5
Hence It is UNDERPRICED and BUY Rating.
Value of Equity 54761.0
Shares Outstanding 80.295
Intrinsic Value 681.9971
Using PE Multiples Method
Average Industry P/E 30.96
EPS (TTM) 19.63
P/E Multiples Estimate 607.7448