Buy Cadila Healthcare; target of Rs 515: Sharekhan

Sharekhan's report on Cadila HealthcareResult synopsis: For Q2FY2016, Cadila Healthcare (Cadila) reported a healthy performance; its revenue grew by 17% YoY to Rs 2,459 crore. The growth was led by the US market, which grew by 25% YoY to Rs 1,004 crore and the same contributed to 41.5% of the total revenue. Its OPM expanded by 468BPS to 24.6% (excluding the one-time income of Rs 20 crore [$3 million], pertaining to sell-off abbreviated new drug applications [ANDAs] in a US subsidiary, the management indicated that it will be nil from next quarter onwards). For the quarter, effective tax rate has increased to 28% (owing to change in invoicing policy for supply of its products to subsidiary) as compared with a normal tax of around 23%, hence earnings for the quarter grew by 40% YoY to Rs 391 crore.Maintain Buy with a revised price target of Rs 515: The management expects 40 filings in the US market during FY2016. We believe with a strong presence in the US market, higher number of product filings and approvals in the subsequent years, the growth in the US market is expected to be strong. We have tweaked our earnings estimates and expect an EPS CAGR of 34.5% over FY2016-18 to Rs 27. We maintain our Buy rating on the stock with a revised price target of Rs 515 (valuing the stock at 21x its average earnings of Rs 24 for FY2017E and FY2018E), 16% upside from the current market price of Rs 443, says Sharekhan research report.For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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