Nomura remains positive on Cadila Healthcare, as it expects US approvals accompanied by business consolidation to help improve margins and profitability, in a research note on the pharma company
Cadila Healthcare won a favourable Appeals court decision on Prevacid ODT, which could be an interesting low-competition opportunity, reports Nomura in a research note based on management interaction. The company expects to gain approval for Prevacid ODT over the next 12 months, and Nomura believes the product could contribute up to Rs18/sh share annually in the initial period. The other low-competition launches that are possible over the next 12 months include Toprol XL, Asacol HD, Lialda (contingent on litigation outcome), nasal sprays (Azelastine, Desmopressin Acetate), transdermals (clonidine, estradiol weekly) and one Nesher product.
Nomura remains positive on Cadila Healthcare, as it expects US approvals accompanied by business consolidation to help improve margins and profitability. Business consolidation could include moving out of non profitable territories and lowering capex.
The pharma company’s management expects growth to revive in India formulation, consumer and JV businesses in FY15.
According to the Nomura forecast, the 12-month share price target is adjusted to Rs1,103/sh (18x one-year forward EPS of Rs58.6 + Rs47 for Asacol HD exclusivity). The current stock price is supported by expectation of earnings growth in FY16. The stock trades at 21x Nomura’s FY15 EPS estimate and only 13.2x Nomura’s FY16 estimate.
The company’s performance and forecast is captured in the following table:
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