Hold Cadila Healthcare; target of Rs 285: ICICI Direct

ICICI Direct's research report on Cadila Healthcare

Q3FY20 revenues grew 1.7% YoY to Rs 3638.1 crore (I-direct estimate: Rs 3439.7 crore). Consolidation of Craft Portfolio was largely offset by 13.4% YoY decline in the US to Rs 1675.3 crore. Domestic formulations grew 7.6% YoY to Rs 910.3 crore. EBITDA margins contracted 441 bps YoY to 19.1% (I-direct estimate: 18.8%), mainly on account of higher employee and other expenditure. EBITDA de-grew 17.4% YoY to Rs 693.2 crore (I-direct estimate: Rs 646.7 crore). PAT de-grew 26.5% YoY to Rs 375.2 crore (I-direct estimates: Rs 331.4 crore). Delta vis-à-vis EBITDA was due to lower tax rate partially offset by higher depreciation.

Outlook

Overall, balance sheet reduction, Moraiya warning letter resolution and US base business performance in tough times are some of the important aspects to watch. We arrive at our target price of Rs 285 based on 15x FY22E EPS of Rs 19.