Maintain 'buy' on Cadila Healthcare – TP Rs.1002 - Geojit BNP Paribas

- Target price has been reduced marginally from Rs.1053 to Rs.1002 because of the PAT miss in 2QFY13.

- PAT for 2Q missed 9% from the market estimates even after adjusting for the forex loss of Rs.76 crore.

- The miss was due to a 35% decline in sales from Brazil, as the product clearance was affected by a two months strike by the drug regulator, an 80 bps increase in R&D costs, 35% decline in other income and a higher tax rate.

- 2Q US sales were USD 68 million and were flat on qoq on fewer US launches. Company expects at least five new launches in 2H which is expected to lead to a sequential pick up in US sales.

- India formulations sales growth for 1HFY13 was 17% and the momentum of sales growth is expected to sustain in 2H. Yoy Sales growth is expected at 16% yoy.

- Factoring in higher R&D costs and higher effective tax rate of 25% versus 22% over the forecast period, EPS estimates for FY13/FY14/FY15 have been cut by 14%,8% and 3% respectively and the target price has been cut from Rs.1053 to Rs.1002.

- Despite 2QFY13 miss, growth drivers for the next two years appear intact.

- Key risks are delay in US approvals and a greater than estimated hit from the drug pricing policy, which is yet to be implemented.

Source : Equity Bulls

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