03 September, 2014 12:36 IST
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`Buy` Cadila Healthcare; target Rs 866: Angel Broking
Source: IRIS Exclusive (09-FEB-12)
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Angel Broking  has recommended `Buy` on Cadila Healthcare with a revised price target of Rs 866 as against the current market price (CMP) of Rs 674 in its report dated Feb. 7, 2012. The broking house gave the following rationale:

Cadila Healthcare (Cadila) reported lower-than-expected numbers for 3QFY2012, except on the sales front. The company`s sales for the quarter were mostly in-line at ~Rs 13.52 billion. However, higher R&D expense during the quarter resulted in depression in the operating margin, which came in at 17.1%. This coupled with forex losses during the quarter resulted in higher dip in net profit during the quarter. The stock is trading at 20.1x FY2012E and 15.6x FY2013E earnings. We recommend Buy on the stock. 

Lower-than-expected set of numbers: For 3QFY2012, Cadila reported net sales of Rs 13.52 billion, up 19.2% yoy and higher than our estimate of  Rs 12.78 billion, driven by exports. On the domestic front, net sales grew by 8.4% yoy to  Rs 6.06 billion. The company`s gross margin declined by 66.6% during the quarter. The company`s OPM also declined to 17.1%, majorly due to higher employee expenses and R&D expenses, which grew by 35.1% and 108.3% yoy, respectively. Net profit for the quarter declined by 7.8% yoy to  Rs 1.49 billion (Rs 1.62 billion). Adjusted for forex loss of Rs 343 million, the company posted net profit growth of almost 9.0% yoy, still lower than our estimate of 19.1% yoy growth.

Outlook and valuation: We expect Cadila`s net sales to post a 17.8% CAGR to Rs 61.96 billion and EPS to report an 11.7% CAGR to  Rs 43.3 over FY2011-13E. We recommend Buy on the stock with a revised target price of Rs 866.

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Cadila Healthcare Limited   (Q,N,C,F)*


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