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Buy Cadila Healthcare, target price Rs 311: Nirmal Bang

. The brokerage maintains its FY21 and FY22 estimates. It has rolled over to FY22 EPS and arrived at a target price of Rs 311 based on a target PE multiple of 20 times.

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Last Updated: Mar 30, 2020, 12.44 PM IST
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Normal Bang has given a buy rating to Cadila Healthcare with a target price of Rs 311, an upside of 21.1 per cent on a CMP of Rs 257. According to the brokerage, Cadila Healthcare’s performance in the fourth quarter of FY20 should be aided by a growth in domestic business and a seasonally stronger wellness business.

The share price of the company moved up by 0.16 per cent from its previous close of Rs 252.70. The last traded price is Rs 253.10. Incorporated in 1995, Cadila Healthcare has a market cap of Rs 25880.21 crore.

Investment Rationale

The wellness business growth may be lower than normal due to demand disruption led by Covid-19 lockdown. In the US - their key products Lialda and Levorphanol witnessed the impact of additional competition which should be offset by volumes in Tamiflu suspension and appreciation in US dollar. The brokerage maintains its FY21 and FY22 estimates. It has rolled over to FY22 EPS and arrived at a target price of Rs 311 based on a target PE multiple of 20 times.

Nirmal Bang expects the fourth quarter FY20 earnings to be monotonous for most pharma companies. It does not see a meaningful adverse impact of Covid-19 lockdown on earnings. With China resuming supplies of raw materials, potential disruption in manufacturing is now no longer a concern.

The India pharma market is expected to show high single digit growth. In the US, marginal benefit could come from dollar appreciation and potential increase in stocking at the wholesaler level which should be offset by currency depreciation in emerging markets due to declining crude prices.

Financials

For the quarter ended December 31, 2019, the company reported consolidated sales of Rs 3534.50 crore, up 8.95 per cent from last quarter sales of Rs 3244.20 crore and up 0.52 per cent from last year's same quarter sales of Rs 3516.10 crore. The company reported net profit after tax of Rs 364.40 crore in the latest quarter.

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