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Gladiator Stocks - Cadila Healthcare - ICICI Direct

Posted On: 2021-05-06 12:38:54 (Time Zone: UTC)


Strategy

Buy Cadila Healthcare in the range of Rs. 575.00-590.00 for target price of Rs. 685.00 with stop loss of Rs. 515.00. Time Frame: Six months

Technical View

- The share price of Cadila Healthcare has relatively outperformed the pharma space over past two months. Currently, stock has witnessed breakout from 2017 high of Rs. 560 backed by highest ever monthly volumes, highlighting rejuvenation of upward momentum. Thereby offering fresh entry opportunity to ride next leg of up move.

- We expect the stock to resolve higher and head towards Rs. 685 as it is 138.2% external retracement of past 32 month's decline (Rs. 560-202)

- Key point to highlight is that, the stock has registered a faster pace of retracement as it retraced past 32 months decline (Rs. 560-202) in 14 months, signaling structural turnaround on long term charts that bodes well for acceleration of upward momentum.

- The stock has support around Rs. 520 levels as it is the 50% retracement of recent up move (Rs. 422-605). Also, as per change of polarity concept January 2021 high Rs. 510 would now act as strong support

Fundamental View

- Cadila is one of the old generation family owned pedigree companies which, after establishing a strong base in domestic formulations, shifted focus to the exports markets

- US (44% of FY20 revenues) grew at ~12% CAGR in FY16-20 backed by aggressive filings, product launches. Launch of authorised generics also contributed to overall growth. US pipeline (cumulative) comprises 410 filed ANDAs, 312 having final approvals. However, resurfacing of cGMP issues at Moraiya, imminent slowdown in base are main near term headwinds. We expect US sales to grow at 5.6% CAGR in FY20-23E to Rs. 7361 crore

- With a market share of 4.2%, Cadila is the fifth largest player in the domestic formulations market, as per AIOCD September 2020. The acute: chronic: sub-chronic ratio for the company is 53:32:15. Domestic formulation grew at a CAGR of 5.7% in FY16-20 backed by new launches and acquisition of Biochem. Recently, the company optically initiated restructuring of business by rationalising slow moving SKUs. We expect Indian formulations to grow at a CAGR of ~11% in FY20-23E to Rs. 5040 crore

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_GladiatorStocks_CadilaHealth_Apr21.pdf

Shares of CADILA HEALTHCARE LTD. was last trading in BSE at Rs.601.8 as compared to the previous close of Rs. 601.55. The total number of shares traded during the day was 570659 in over 10089 trades.

The stock hit an intraday high of Rs. 610.85 and intraday low of 592.95. The net turnover during the day was Rs. 342646573.


Source: Equity Bulls

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