Indian shines but US slowdown persists…

About the stock: Cadila is a leading pharma company with a presence across the value chain of innovating, manufacturing, marketing & selling finished dosage human formulations (generics, branded generics & specialty formulations, including biosimilars & vaccines), APIs, animal healthcare & consumer wellness products.

* It has a global presence and sells its products in the US, India, Europe & emerging markets including countries in LatAm, Asia Pacific & Africa.

* Cadila is the fourth largest pharma company in India with 14 brands among Top 300 pharma brands in India & nine with | 100 crore+ sales.

Q1FY22 Results: Cadila reported steady Q1FY22 results.

* Sales were up 14.5% YoY to | 4025.4 crore

* EBITDA in Q1FY22 was at | 933 crore, up 35% YoY with margins at 23.2%

* Consequent adjusted PAT was at | 564.8 crore (up 71.8% YoY)

What should investors do?

Cadila’s share price has grown by ~1.6x over the past five years (from ~| 352 in July 2016 to ~| 586 levels in July 2021).

* We maintain HOLD rating

Target Price and Valuation: We value Cadila at | 583 (base business of | 483 at 22x P/E on FY23E EPS + NPV of | 99.9 for vaccine & gRevlimid opportunity).

Key triggers for future price performance:

* Cadila plans to venture into complex injectable in US. However, it is likely to provide meaningful traction only from FY23-24 onwards.

* US pipeline of 412 filed ANDAs, 317 final approvals is promising but cGMP issues at Moraiya, slowdown in base are main near term headwinds

* India formulations business is likely to stabilise as the company has optically initiated restructuring of business by rationalising slow moving SKUs

Alternate Stock Idea: Apart from Cadila, in our healthcare coverage we like Cipla

* Cipla is a global pharma company with over 1,500+ products in 65 therapeutic categories, with over 50 dosage forms.

* BUY with a target price of | 1205

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