As per reports, Cipla has successfully addressed all the nine manufacturing deficiencies pointed out by the US FDA at its Bangalore manufacturing plant.
The company is said to have received an official communication from the regulator, about the approval of the plant.
In April this year, the regulator had issued form FDA 483s, an inspection report pointing out deviations from the US cGMP, and listed nine deficiencies.
We view this development as positive, as Cipla is among the few Indian pharma companies which have been able to successfully address the US FDA concerns and is likely to command a valuation premium as compared to its peers.
On the back of this development, we raise our target multiple to 18x, from 16x FY2011E earnings, and upgrade the stock to NEUTRAL from Reduce.
At Rs271, the stock is trading at 20.0x its FY2010E earnings and 18.2x its FY2011E earnings.