Pharmaceutical Technical Analysis

Objective

• To do financial ratio analysis on the pharmaceutical industry.
• To calculate the stock price of the share by conducting technical analysis and using trend projection analysis.
• To calculate Stock Intrinsic Value for the pharmaceutical firms.
• To compare the prices of share obtained from technical and fundamental analysis.

Introduction

We have identified the Pharmaceutical sector in India (Pharmaceuticals - Indian - Bulk Drugs & Formln Lrg as per the CapitaLine E-database) as the target sector, selected 7 prominent companies from that sector, and collected financial data for the last 5 years for each one of them and submitted a detailed report on the analysis of the Financial Statements. The report includes a qualitative analysis of financial reporting, interpretation of the ratios, industry wide comparison and significant accounting practices for each selected firm.

The seven companies that we have selected are:

1. Cadila Healthcare Ltd

1. Piramal Health Ltd.
2. Ranbaxy Laboratories Ltd
3. Sun Pharmaceuticals Industries Ltd
4. Wockhardt Ltd
   

The companies are chosen on the basis of the market capitalisation value. The market capitalisation value of all the 7 firms together is more than 80% of the total market capitalisation value of the pharmaceutical industry.

Overview of Pharmaceutical Industry

India is one of the fastest-growing pharmaceutical markets in the world, and its market size has nearly doubled since 2005. The Indian pharmaceutical market is expected to reach US$ 20 billion by 2015, growing at a compound annual growth rate (CAGR) of 11.7 per cent during 2005–2015 and establish its presence among the world’s leading 10 markets. India is also the third-largest market in the world in terms of volume and fourteenth in terms of value.

India accounts for 8 per cent of global pharmaceutical production. Indian firms produce about 60,000 generic brands across 60 therapeutic categories. In addition, Indian firms manufacture approximately 500 different active pharmaceutical ingredients (APIs). Production costs in India are approximately 35 to 40 per cent of those in the US due to low installation and low manufacturing costs.

Some key characteristics of the Indian Pharmaceutical industry are

• Highly Regulate: The industry faces price regulation, quality regulation and patent regulation.
• Research Oriented: The industry is highly research driven having to regularly invent novel drug delivery system (NDDS), discover new molecules, and invent innovative production processes.
• Low Price Elasticity: Being a necessity, consumers are less sensitive to price movements for most products; substitutes can however make a difference in certain segments.
• Limited consumer choice: Consumers are not decision makers; Doctors and medical representative play an important role.
• Highly dependent on development of health infrastructure: the presence of hospitals and other health facilities and medical practitioners play a key role in driving consumption

About the Companies

Cipla

Cipla Ltd. (Cipla) is a pharmaceutical company. The company offers various drugs and healthcare products. It manufactures and sells various OTC products, prescription products, flavours and fragrances, pesticides, and animal products. They are offered in the form of tablets, capsules, injection, suspension, and syrup. The company exports its products to 180 countries across the globe. The company’s products are certified by various recognized regulatory authorities namely Food and Drug Administration (FDA), USA; Medicines and Healthcare products Regulatory Agency (MHRA), UK and so on. It operates manufacturing facilities and R&D centres located across India. The company is headquartered in Mumbai, Maharastra, India.