Motilal Oswal is bullish on Cadila Health has recommended buy rating on the stock with a target price of Rs 345 in its research report dated May 29, 2019.
Motilal Oswal's research report on Cadila Health
Sales at INR37.3b (our est. INR34.9b) were up 15% YoY, largely led by the addition of the Consumer Wellness business (sales at INR4b v/s INR1.3b YoY). US sales at INR18b were up 9.3% YoY. EM formulation sales grew 7% YoY to INR2b. Animal Health business grew 11% YoY to INR1.3b. India sales were muted, growing 2% YoY to INR9b for the quarter. Gross margin stood at 62.9% and contracted 380bp YoY on high base of past year. EBITDA margin at 21.4%, contracted 540bp YoY, largely due to change in product mix and higher other expenses as % of sales (+130bp YoY). Absolute EBITDA at INR8b (our est. INR7.2b) was down 8% YoY. PAT came in at INR4.6b (our est. INR3.9b), down 24% YoY. In FY19, sales/EBITDA/PAT stood at INR131b/INR30b/INR18.7b up 10%/5%/4% YoY.
We value Cadila at a revised P/E multiple of 18x 12M forward earnings to factor increased competition in US generics and gradual downtrend in long term growth rate of domestic formulation industry. Maintain Buy with a revised TP of 345.
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