HDFC Securities is bullish on Cadila Healthcare has recommended buy rating on the stock with a target price of Rs 265 in its research report dated August 10, 2019.
HDFC Securities' research report on Cadila Healthcare
With in-line revenues and a big miss on EBITDA and PAT, 1QFY20 numbers were largely disappointing. Post the flu season in the US (in 4QFY19), the US revenues declined 23.9% QoQ to Rs 13.7bn in 1QFY20. It missed our estimates by US$ 10mn (4.7% miss). However, with the expectation of single-digit growth in the generics portfolio driven by 25 product launches over the rest of FY20, the ~US$ 800mn revenue target is achievable in FY20.These numbers factor in the impact on account of Moraiya’s warning letter. The India formulations biz at Rs 9.5bn was up 6.2% YoY due to the flat trade generics sales. It remains the most profitable business for CDH. However, due to a high dependence on the slow-growing acute therapies, the growth will be limited to 8% over FY19-21E. n other segments, EU/ROW/Wellness/Animal HC grew at -23/+12/+371/-4% YoY respectively. The jump in the Wellness business was driven by seasonality and Heinz portfolio acquisition. Other segments continue to farepoorly as the management’s focus has largely been on US, India, and novel products. We don’t expect a major revival in these segments over FY20-21E.
We maintain BUY on CDH despite a miss on our estimates due to certain one-time costs. We have cut our FY21 EPS by 6% to accommodate higher interest cost. Our TP is revised to Rs 265 (18x FY21E EPS).
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