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Buy Cadila Healthcare - STOCK UPDATE - Sharekhan
Posted On : 2011-12-22 21:07:15( TIMEZONE : IST )
Cadila Healthcare
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs970
Current market price: Rs702
Cadila Healthcare acquires Biochem pharma
Cadila Healthcare acquires Biochem Pharma: Cadila Healthcare (Cadila Health) has acquired 100% stake in Mumbai-based pharmaceutical company known as Biochem Pharmaceutical Industries (Biochem Pharma). Biochem Pharma is among the top 40 pharmaceutical (pharma) companies in India and has annual sales of Rs264 crore. Though the details of the deal have not been disclosed but it is clear that the deal is strategically positive for Cadila Health.
Strategic fit for Cadila Health: The acquisition of Biochem Pharma will help Cadila Health to strengthen its branded portfolio especially in the anti-biotic, cardiovascular, anti-diabetic and oncology segments. Cadila Health does not have a significant presence in India's anti-diabetic and oncology segments and will find new products to supplement its product basket. Even in the cardiac and anti-biotic segments, where Cadila Health already has a strong presence, the acquisition will help to consolidate its position. The acquisition will add 600 sales persons to its current field force of 4,500 persons.
Focus on inorganic expansion: This is the third acquisition for Cadila Health (along with its subsidiaries) in the current fiscal (ie FY2012). Earlier, it had acquired assets of Nesher Pharmaceutical Inc in the USA during June and Bermer Pharma GmbH in Germany during July to strengthen its position in the controlled substance based products and animal health related products respectively. We believe these acquisitions would help Cadila Health to get better synergies in operations and achieve a revenue goal of $3 billion by 2015.
Maintain Buy: The acquisition of Biochem Pharma is expected to increase the consolidated revenue by 5% in FY2013. However, in the absence of any detailed information relating to the cost of the acquisition, we keep our earnings estimates intact with a positive outlook. We maintain our Buy recommendation on the stock with a price target of Rs970 (20x FY2013E earnings per share [EPS]).
