Prabhudas Lilladher has maintained 'Accumulate' on Cipla with the stock broker fixed price target to Rs 781.

Cipla acquired Invagen Pharma and Exelan Pharma (sister concerns of Hetero Drugs) at US$550m with a valuation of 2.4x of sales. The combined revenues of the two acquired companies are US$200m in CY14 and US$225m in trailing twelve months June 2015.

Commenting on the investment rationale, the stock broker said, ''With 30 pending ANDAs including 5 FTFs, Cipla's payment of 2.4x sales is highly comparable and favourable bargain in US. The valuation of Invagen and Exelan is much cheaper when compared with Lupin's acquisition of Gavis Pharma at 9.2x of sales."

"The acquisition will increase Cipla's visibility in US generics with its own product portfolio. With our estimates of USD 130 million incremental US revenues in FY16E, we believe the acquisition will increase the company's US revenues to USD 470 million in FY17E from USD 140 million in FY15. With sizeable products from captive and acquired portfolio and revenues of USD 500 million, Cipla's negotiation strength with leading wholesalers/distributors will increase before approval of its major products from its captive R&D pipeline in FY17E onwards. We maintain 'Accumulate' with target price at Rs 781,'' it added.

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