Buy Cadila Healthcare; target of Rs 866: Angel Broking

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Buy Cadila Healthcare; target of Rs 866: Angel Broking

Angel Broking is bullish on Cadila Healthcare and has recommended buy rating on the stock with a target of Rs 866 in its February 7, 2012 research report.

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Angel Broking is bullish on Cadila Healthcare and has recommended buy rating on the stock with a target of Rs 866 in its February 7, 2012 research report.

"Cadila Healthcare (Cadila) reported lower-than-expected numbers for 3QFY2012, except on the sales front. The company's sales for the quarter were mostly in-line at ~Rs 1,352cr. However, higher R&D expense during the quarter resulted in depression in the operating margin, which came in at 17.1%. This coupled with forex losses during the quarter resulted in higher dip in net profit during the quarter. The stock is trading at 20.1x FY2012E and 15.6x FY2013E earnings."

"Lower-than-expected set of numbers: For 3QFY2012, Cadila reported net sales of Rs 1,352cr, up 19.2% yoy and higher than our estimate of Rs 1,278cr, driven by exports. On the domestic front, net sales grew by 8.4% yoy to Rs 606cr. The company's gross margin declined by 66.6% during the quarter. The company's OPM also declined to 17.1%, majorly due to higher employee expenses and R&D expenses, which grew by 35.1% and 108.3% yoy, respectively. Net profit for the quarter declined by 7.8% yoy to Rs 149cr (Rs 162cr). Adjusted for forex loss of Rs 34.3cr, the company posted net profit growth of almost 9.0% yoy, still lower than our estimate of 19.1% yoy growth. We expect Cadila's net sales to post a 17.8% CAGR to Rs 6,196cr and EPS to report an 11.7% CAGR to Rs 43.3 over FY2011-13E. We recommend Buy on the stock with a revised target price of Rs 866," says Angel Broking research report.

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To read the full report click on the attachment