'Buy' maintained on Cadila Healthcare – TP hiked to Rs.1053 - Geojit BNP Paribas

- Buy rating on Cadila Healthcare is reiterated with an increased target price of Rs.1053 over one year. Earlier target price was Rs.976 and the stock is currently available at Rs.865 range.

- Cadila Healthcare's P/E (private equity) expansion over the last two years has been a function of its ability to develop high-entry-barrier products such as transdermals.

- This product category holds significance in Cadila's quest to achieve USD1b sales in the US by FY16.

- In this note we analyse the transdermals opportunity and why USD150m-200m sales is achievable.

- Transdermals require detailed studies on different skin colours and temperature zones.

- The studies can take 4-6 months and the average cost per product is USD3m-4m.

- Consequently, there are fewer participants and pricing is more attractive vs oral products.

- Cadila has filed two/ developing five products for the US, with first launch due at end-FY14.

- Earnings of the company is expected to grow at 23% CAGR over 2012-15.

- It is the top pick in the mid-cap Indian space.

- Risks to the target price - Delays in approvals from the US FDA and greater-than-estimated hit from the drug pricing policy that is yet to be implemented.

Source : Equity Bulls

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