Dolat Capital Market has given Buy recommendation for Cadila Healthcare with a target price of Rs. 701 in its research report issued on May 28, 2021

Dolat Capital Market’s research report on Cadila Healthcare

Cadila reported beat on the operating performance in 4Q as domestic formulations offset the subdued US (pricing pressure and lower offtake in Asacol HD). Revenue grew 4% YoY, an improved product mix (15% YoY growth in India formulations offset the US sales at $207mn, down $13mn QoQ) aided operating performance at 22% (our estimate 20%). Adjusted for write-off in Levarphanol and higher deferred tax, PAT grew 7% YoY at Rs4.4bn, in-line with expectation. Net debt halved to Rs35bn, with net debt/EBITDA at 0.8x, lowest in last 5 years. Management guided for sustenance in EBITDA margins over next 2 years; US to remain subdued in 1Q whereas; India to see higher sales from COVID n lower SGA spend.

Outlook

However, due to lack of clarity on approval and pricing, we value the COVID portfolio as optionality. Maintain Buy with a target price of Rs700 (24x PE valuing the base business and Rs140 as optionality of R&D initiatives).

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