Buy Cadila Healthcare; target of Rs 506: Geojit Research

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26 Aug, 2025 12:21

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Geojit Research's report on Cadila Healthcare

Cadila Healthcare (Cadila) is India’s leading vertically integrated pharmaceutical company. With its presence across the value chain, it manufactures finished dosage forms, active pharmaceutical ingredients, animal healthcare products and wellness products. Revenue fell 4.5% YoY in Q1FY18 primarily due to decline in Indian formulations’ sales and Emerging markets business. Indian formulation sales (contributing 29% to sales) fell ~19% YoY impacted by destocking of inventory ahead of GST implementation. Despite pricing pressure, US sales rose by robust 14% YoY supported by inorganic growth (Sentynl acquisition) and key drug launches. EBITDA margin came in at 12.6% (down 1030 bps YoY), mainly due to lower sales and rise in the employee and R&D expenses. We increase our EBITDA margin estimate by 100 bps in FY18E considering key exclusive launches, thereby increasing our PAT estimate by 5.5%. Given strong growth prospects backed by healthy product pipeline and resolution of Moraiya facility, we maintain ‘BUY’ rating on the stock with a revised TP of Rs. 506 (Rs. 491 earlier) based on 22xFY19PE.

Outlook

We project revenue/PAT to grow at a CAGR of 20%/26% over FY17-19E driven by new drug launches in the US and normalisation of Indian business post GST led disruption. We increase our EPS estimates by 5.8%/3.1% for FY18E/FY19E to mainly factor in strong expansion in EBITDA margin going ahead. With strong growth prospects backed by healthy product pipeline with focus on Para IV filings & speciality products and expected pick-up in launch momentum from the Moraiya facility, we maintain ‘BUY’ rating on the stock with a revised TP of Rs. 506 (Rs. 491 earlier) based on 22x FY19PE.

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