Motilal Oswal has given Buy recommendation for Cadila Healthcare recommended buy rating on the stock with a target price of Rs 670 in its research r with a target price of Rs. 670 in its research report issued on Aug 11, 2021

Motilal Oswal’s research report on Cadila Healthcare

CDH’s 1QFY22 performance was in line with our expectations, led by strong growth in Domestic Formulations (DF), owing to its COVID-related product portfolio, but was offset to some extent by higher than expected price erosion in the US. Its in-licensing and niche product portfolio for the US are shaping up well, with benefits expected to accrue from FY23. We reduce our FY22E/FY23E EPS estimate by 5%/6% to reflect: a) higher price erosion in the US, b) expected competition in Mesalamine products, and c) margin expansion aided by cost optimization. We value CDH at 25x its 12-month forward earnings to arrive at our TP of INR670. We remain positive on CDH on account of: a) robust launch momentum in the US and DF, b) build-up of the complex product pipeline of own/in-licensed products, and c) completion of remediation at Moraiya. We maintain our Buy rating. The vaccine opportunity in India is not built into our estimates and can provide a further upside, post approval. We continue to value CDH at 25x its 12-month forward earnings to arrive at our TP of INR670. –

Outlook

We expect 12% earnings CAGR on the back of 16% sales CAGR in DF (considering the muted growth in FY21) and steady US sales (despite increased competition), aided by an 110bp margin expansion from new initiatives in manufacturing, and reduced financial leverage. The vaccine opportunity in India is not built into our estimates and can provide a further upside, post approval. We maintain our Buy rating.

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