Accumulate Cadila Healthcare; target of Rs 497: Dolat Capital Market

Dolat Capital Market's research report on Cadila Healthcare

Cadila reported an in-line 2Q driven by strong growth across India, US and the API segment offsetting the muted growth in consumer segment. Revenue grew 16% YoY, an improved product mix (double digit growth in India formulations and US sales at $230mn, up $13mn QoQ) led to healthy gross margins at 64.9%. Impact of MEIS offset lower marketing spends, thereby, restricting EBITDA margins at 22.6%. Adjusting for the one-time charge of Rs1.3bn, for NCD purchase and forex loss, PAT grew 63% YoY at Rs6.2bn. Cadila strengthened its balance sheet by reducing debt of Rs27bn vs its earlier guidance of Rs10bn in FY21 on the back of proceeds from Wellness QIP and internal free cash generation.

Outlook

We incorporate lower interest outgo and upgrade our estimates by 10% for FY22E and introduce FY23E. At 21x FY22E, 18x FY23E earnings, the risk reward becomes favourable. Upgrade to Accumulate with a target price of Rs497 (22x PE valuing the R&D initiatives).

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