Cadila Healthcare hits 10% UPPER Circuit; expert says buy for target of Rs 540-Rs 555

Cadila Healthcare share price today's is Rs 517.75, up Rs 47.05 or 10%. The market capital of Cadila Healthcare is over Rs 53000 cr. Many Market Analysts believe that with vaccine shortage now, it is a good time to look at Cadila Healthcare as they need approvals to roll out vaccines. 

Morgan Stanley says that Cadila Healthcare expects continuing improvement across its business segments in the ensuing quarters. In the domestic market, chronic continues to do well while acute is gradually recovering from Covid-19 impact. Morgan Stanley says that New launches, market share gains and digital initiatives are its prime focus. Growth for the US formulations should be driven by upcoming flu season, in-licensing opportunities, new launches, transdermal approvals and injectables (US$150-200mn in sales in 3-4 years). API and Animal businesses should both grow in double digits.

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Technical Analysis on Cadila Healthcare:  

Technical Analyst Simi Bhaumik said that the stock has seen a strong breakout and looks good for next week as well. The stock should be bought with a target of Rs 540 – Rs 555 with stop-loss of Rs 500 or just below. Simi said that the stock has been consolidating in tight range and has broken out of the range today indicating further upside from here on.

Emkay says that Cadila Healthcare announced the settlement of the Revlimid patent suit with the innovator Celgene (BMS). As part of the settlement, Cadila is enjoined from marketing generic lenalidomide before the expiration of the patents-in-suit, except as provided for in the settlement. The settlement terms are not disclosed yet.

Emkay highlights that while this is positive news for the company, it is difficult to quantify the positive impact of the settlement given the confidential nature of the settlement. Our estimates suggest that gRevlimid could represent a stock price upside of Rs 20 – Rs 40, depending on the settlement terms.

Emkay’s base-case upside of Rs20/share assumes low-single digit volume share in FY23E, with it gradually increasing to mid-single digit in FY26E. The bull-case of Rs 40/share assumes settlement terms similar to Alvogen and mid-single digit volume share in FY23E, with it increasing to high-single digit in FY26.

Emkay says that given the lack of clarity on settlement terms and approval time, it views this as an option upside to the target price of Rs 655. Emkay reiterates Buy rating on the stock as they believe that the company's innovation efforts continue to remain underappreciated.