Cadila Healthcare Ltd Long Term Buy Call: Abhishek Jain, StocksIdea.com

Cadila Healthcare Ltd Long Term Buy Call: Abhishek Jain, StocksIdea.com Cadila Healthcare Limited is one of the largest Indian companies in the domestic pharmaceutical market. The company is the flagship of the Zydus Cadila group. Its operations include pharmaceuticals, diagnostics, herbal products, skin care products and other over-the-counter products. Company came into current status after the group restructuring in 1995 under which the operations of the group were consolidated. The company also has co-marketing agreement with number of Indian drug companies like E. Merck, Kopran, Nicholas Piramal and Ranbaxy. Further, the company plans to ramp up export of its brands and establish overseas operations in the high margin export markets like the Hong Kong, China, Malaysia, South America and West Africa.

Products & services—

Cadila has more than 80 brands across segments of anti-infective, gastrointestinal, cardiovascular, pain management, biologicals, vaccines and OTC of which many belong to the top 300 India pharma brands. Bulk drugs manufactured by company include Loratidine, Famotidine, Omeprazole, Losartan and Amlodipine. The company also exports both bulk drugs and formulations.

Cadila has overseas operations at Sri Lanka, Kenya, Czechoslovakia, Romania, Mauritius, Myanmar, Cambodia and the Russian markets. The company covers over 1,10,000 retail outlets and have a work force of field over 1500. Company has a technical collaboration under license agreement with Swiss Serum Vaccine Institute (SSVI), Switzerland for the manufacture of human rabies vaccine. It also has a 50:50 research-cum-manufacturing joint venture with the DM 1.76 billion Byk Gulden in India. The German multinational is the global patent holder for pantoprazole, a proton pump inhibitor used to treat various gastrointestinal disorders. The company has subsidiaries include Indon Healthcare Limited, Zydus Pharmaceuticals Limited, Zydus Agrovet Limited, Zoom Properties Private Limited, Zydus International Private Limited, Ireland and Zydus Healthcare S.A (Pty) Ltd., South Africa, Zydus Pharmaceuticals (USA) and Zydus Pharma, Japan.

Company has plans to enter strongly in the biotech business. For this company is building a strong pipeline of biopharmaceuticals in areas like cancer and blood disorders. The company expects to commercialize its bio-pharma products in next few years. The company is exploring options of launching innovative and generic biopharma products.

Valuation—

Company has guided for USD 175 Million of revenue from US in FY11E. Its domestic formulation business was mainly driven by strong growth in CVS and respiratory portfolio and introduction of new products. Management has indicated that the growth in the domestic formulation business is likely to be 15% level in future. Going forward, company expect much higher revenue from Hospira JV on the back of new launches in US market from Q3FY11E onwards and one new product launch in EU market. The management has also reiterated its revenue guidance of US$1bn for FY11E. At CMP, stock is trading at 14.92 P/E multiple of its FY2011 Estimated earnings. We recommend investors to “Buy “Cadila healthcare” with a medium to long-term investment prospective.