Emkay Global Financial is bullish on Cadila Healthcare has recommended buy rating on the stock with a target price of Rs 655 in its research report dated January 22, 2021.
Broker Research
January 25, 2021 / 05:01 PM IST
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Emkay Global Financial’s report on Cadila Healthcare
Our bullish view is based on 1) consistent double-digit revenue growth in the core business, coupled with 200bps EBITDA margin expansion during FY20-23E; 2) upside from Saroglitazar in PBC and NASH; and 3) potential success of Covid-19 vaccine, ZyCoV-D. In our view, the current share price ascribes NIL success probability to innovation efforts due to the lack of precedents for in-house new chemical entity (NCE) and vaccine development, and also in view of Sun Pharma’s initial challenges in specialty. In our SOTP, the core business contributes 80% (Rs520/share, valued by us at 20x forward P/E), PBC/NASH add 14% (Rs90, NPV) and ZyCov-D accounts for the remaining 7% (Rs45, NPV). Our bull case scenario yields a fair value of Rs835/share, assuming higher market share in PBC and NASH, favorable gRevlimid settlement and Covid-19 vaccine becoming an annual shot. Key downside risks are: 1) Higher-than-expected competition in Mesalamine franchise; 2) Adverse regulatory outcome on plants; 3) Failure to get FDA approval for Saroglitazar.
Outlook
We upgrade Cadila to Buy from Hold and raise the TP to Rs655 from Rs 430.
For all recommendations report, click here
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