Cipla (CIPLA)

FairStock Score: 61/100 — STEADY

Score breakdown: P/E: 1/3 · ROCE: 1/2 · Growth: 0/2 · Dividend: 0/1

Key Financials

Strengths

• Fortress-like balance sheet: D/E at 0.01 and Altman Z-score of 3.90 indicate minimal bankruptcy risk.
• High ROCE of 22.72% and ROE of 14.57% show efficient capital allocation.
• Strong free cash flow of ₹1,323 Cr provides internal funding and dividend support.
• Piotroski F-score of 7/9 suggests decent fundamental health despite the profit dip.
• Established pharmaceutical franchise with a 5-year revenue CAGR of 7.53%.

Concerns

• Profit growth is negative at -8.96% even while sales grew 5.08%, signaling margin pressure.
• Valuation offers no margin of safety: P/E is 22.90 and P/B is 3.38, while Graham Number is ₹699.53 and margin of safety is -92.73%.
• Given DCF intrinsic value of ₹16.73 is far below the market price, the stock is priced for very optimistic growth.
• Promoter holding of 29.22% is moderate and dividend yield of 0.96% is thin.

AI Analysis

Looking at Cipla, I see a business I can respect but not one I can buy at today's price. The balance sheet is fortress-like: debt/equity of 0.01, ROCE of 22.72%, and free cash flow of ₹1,323 crore. A Piotroski score of 7 and Altman Z of 3.90 reinforce financial health. This is a steady operator, not a broken business. But investing is about price, and here the price disobeys the first rule of value: margin of safety. With the stock at ₹1,305.90, the P/E is 22.90 while profits fell 8.96% and revenue grew only 5.08%. A 5-year revenue CAGR of 7.53% belongs to a slow grower, not a growth premium payer. Book value is ₹386.16, so the market pays 3.38 times book. Graham's number works out to ₹699.53, roughly half the present price. The DCF value provided is even worse at ₹16.73. I don't need to rely on that number to know there is no cushion; if my estimates are wrong, I would lose capital. The latest quarter did show net profit of ₹674 crore on sales of ₹7,074 crore, and the dividend yield of 0.96% is thin. Promoter holding at 29.22% is not the 50%-plus comfort I prefer in Indian pharma. If I owned Cipla, I would continue to hold, monitoring whether it can turn profit growth positive. But as a prospective buyer, I wait. Ben Graham taught that a great company can still be a bad investment if bought at too high a price. Wait for a better price or a clearer growth rebound.

Data from BSE/NSE filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer