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Hold Cadila Healthcare; target of Rs 260: ICICI Direct

November 15
18:24 2019

ICICI Direct’s research report on Cadila Healthcare

Q2FY20 revenues grew 13.7% YoY to Rs 3366.6 crore (I-direct estimate: Rs 3579.8 crore) mainly due to consolidation of the craft portfolio in the wellness segment. US revenues grew 9.7% YoY to Rs 1448.4 crore (I-direct estimate: Rs 1432.1 crore). Domestic formulations grew 9.5% YoY to Rs 977.8 crore (I-direct estimate: Rs 955.7 crore). EBITDA margins contracted 464 bps to 18.6% (I-direct estimate: 21.9%), mainly on account of higher other expenditure. EBITDA de-grew 9.0% YoY to Rs 625.6 crore (I-direct estimate: Rs 784.0 crore). Adjusted PAT (excluding net impairment charges of Rs 209.9 crore) de-grew 24.0% YoY to Rs 317.1 crore (I-direct estimate: Rs 420.7 crore). The delta vis-à-vis EBITDA was due to higher interest cost.

Outlook

Overall, the balance sheet reduction, Moraiya warning letter resolution and US base business performance in tough times are some important aspects to watch out for. Our new target price is Rs 260 based on 14x FY22E EPS of Rs 18.7.

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