KRChoksey is bullish on Cadila Healthcare and has recommended accumulate rating on the stock with a target of Rs 1220 in its July 31, 2014 research report.
"Cadila Healthcare, net sales grew by 25.7% YoY to Rs2020crs driven by improved traction in US business & Emerging markets. EBIDTA excluding forex impact grew by 42.3% YoY to Rs371crs & EBITDA margins stood at 18.1% due to lower operating cost. The company has changed depreciation charge based on the revised remaining useful lives of assets from this quarter as per Schedule II of companies' act 2013. Due to this, depreciation amount is higher. However, since it will continue from this quarter we have not adjusted the depreciation amount. Reported PAT grew by 22.8% to Rs240crs. After adjusting forex impact, APAT grew by 37.8% YoY to Rs235crs.
"Domestic formulation business is still struggling showing single digit growth of 8.0% YoY during the quarter. Cadila has launched 19 new products including line extensions out of which 6 were first in India launches. We expect company's domestic formulation segment to recover in FY15E and show around 13% CAGR over FY14-16E. Its key segments like GI, Gynaec, respiratory, women healthcare & Derma continues to do well while it needs to focus on CVS & CNS segments. Vaccines & biologics will be the future growth drivers. Wellness segment has shown degrowth of 6.5% YoY during the quarter on account of stiff competition in Everyuth face wash but maintains leadership position in Everyuth peel off. Company also maintains its leadership position in Sugarfree (94% mkt share). Company is undergoing distribution restructuring exercise in order to expand its reach both in rural and urban markets."
"We expect Wellness segment to recover in FY15 & FY16. Animal Healthcare business showed growth of 30% YoY. At CMP of Rs1158 the stock is trading at 23.3xFY15E & 19xFY16E EPS. Going ahead, we believe domestic business to recover & US business to show strong growth on back of niche launches. We recommend Accumulate rating with the target price of Rs1220 at 20XFY16E EPS of Rs60.9," says KRChoksey research report.
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