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| Summary of Contents STOCK UPDATE Cadila Healthcare
Recommendation: Buy
Price target: Rs1,200
Current market price: Rs1,010 Price target revised to Rs1,200 Key points - Cadila Healthcare (Cadila) has announced a string of ANDAs in Q4FY2014 (six approvals including a generic version of Cymbalta--a $5 billion drug) and continues to have a very healthy pipeline of pending ANDA filings (over 90 ANDAs for generics). Recently the newsflow related to the growing probability of litigation settlements associated to Lialda (market size $570 million) would further add to its strong growth outlook.
- In Q4FY2014, we expect a strong performance by Cadila on the back of key product approvals in the USA, and better traction in the Indian and emerging market businesses. We expect the revenues to grow by 30% but the earnings are likely to jump by close to 55% (at PBT level), partially aided by the low effect (the margin dented by the European losses in Q4FY2013).
- Given the positive developments, we retain our positive view on the stock with a revised price target of Rs1,200 despite a 28% appreciation in the last three months. We had recommended the stock as one of the preferred mid-cap picks for the year 2014 in the Market Outlook Report in early January 2014.
SHAREKHAN SPECIAL Q4FY2014 Cement earnings preview Key points - The improving demand environment and better realisation in the northern and central regions is expected to help revive the revenue growth in the cement sector in Q4FY2014. However, the continued cost inflation driven pressure on the margins is expected to dent the overall growth in the aggregate earnings.
- Given the signs of a better demand outlook on the revival of the economy (with the firming up of realisations in certain pockets) and discounted down-cycle valuations, the cement stocks, such as UltraTech Cement (UltraTech), Shree Cement, JK Lakshmi Cement (with a presence in the north and central regions) have appreciated considerably. The trend was highlighted in our cement sector note on March 10, 2014.
- After the recent run-up, we believe a lot of positives are already reflected in their valuations while a turnaround in the financial performance is still few quarters away. Thus, we remain Neutral on the sector. We prefer UltraTech (with a strong balance sheet and pan-India presence) and Shree Cement (a presence in the northern region) in the cement sector.
| | | Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article. | |
| Regards,
The Sharekhan Research Team |
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