Prabhudas Lilladher recommended accumulate rating on Cadila Healthcare with a target price of Rs 438 in its research report dated May 26, 2018.
Prabhudas Lilladher's research report on Cadila Healthcare
Result in line; gLialda, gTamiflu susp, integration of MSD's brands lead growth: With 27% YoY GST adj. growth in India formulations, seasonal benefits of Tamiflu suspensions and gLialda, Cadila's (CDH) revenues, adj. EBITDA and PAT grew by 28%, 92% and 53% YoY, respectively, slightly ahead of our estimates by 5%, 3% and 6% respectively in Q4FY18. The strong traction of gLialda and volume growth in US generics as well as additional sales from six brands acquired from MSD in India led to the strong performance. With successful FDA resolution on Moraya and 150 pending ANDAs, CDH guided for 15-20 launches in FY19. Adj. EBITD margin increased by 30bps QoQ on account of better product mix and rationalisation of cost centers. While there is improvement in re-stocking of inventory from channel partners, CDH guided for further room for improvement in FY19E. Tax rate was guided to be less than 25% in FY19E Vs tax rate of 24% in FY18E.
Outlook
Maintain 'Accumulate, reduce TP at Rs438: Management guided double digit growth in India formulations and mainatained growth in US generics in FY19E. Ebitda margin post adjustment of one-off beenfits in revenues (gLialda, gTamiflu) to improve by 100bps in FY19E. CDH trades at PER of 19.6x (FY19E) and 17.5x (FY20E). With downward revision of PERs of the industry, we are reducing our assigned PER to 20x from 22x of FY20E. We maintain our 'Accumulate' with reduced TP of Rs438.
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