Cadila Healthcare - Long Term Stock Pick
Cadila Healthcare (Zydus Cadila) is an innovative global pharmaceutical company that discovers, develops, manufactures and markets a broad range of healthcare products. The group’s operations range from API to formulations, animal health products and cosmeceuticals. Headquartered in the city of Ahmedabad in India, the group has global operations in four continents spread across USA, Europe, Japan, Brazil, South Africa and 25 other emerging markets.
Zydus Cadila Healthcare has over 10,000 employees worldwide, a world-class research and development centre dedicated to discovery research and eight state-of-the-art manufacturing plants.
This is a rare stock that gave 60% returns in the last recession period when all the others are strugging not to lose. This is a defensive stock with good growth prospects. It stock is a must have for long term investors. This is one of the best performers in the last bull run of the market.
Future Estimates:
FY 2009-2010
- EPS: 35-36
- Targets: Normal Conditions: 690; Bull Market: 725; Bear Market: 600
FY 2010-2011
- EPS: 45-47
- Targets: Normal Conditions: 840; Bull Market: 1040; Bear Market: 760
FY 2011-2012
- EPS: 58-60
- Targets: Normal Conditions: 1100; Bull Market: 1350; Bear Market: 990
This company consistently beat the market expectation over the past several quarters. Just have look at the following data.
| Quarter | Estimated Sales | Reported Sales | |
| Q3 2008-2009 | 663 crore | 736 crore | +11% |
| Q4 2008-2009 | 687 crore | 702 crore | +2.2% |
| Q1 2009-2010 | 788 crore | 880 crore | +11.7% |
| Q2 2009-2010 | 923.3 crore | 912.6 crore | - 1.16% |
| Q3 2009-2010 | 887.5 crore | 965.4 crore | +8.8% |
Concerns:
The main concern with this company is that Cadila Health is now has big debt. It current has over 65% debt/equity ratio and this should impact the company if there is any hike in interest rates etc.
Strong Points:
- Cadila has 70% stake in Zydus Wellness which is showing spectacular performance in recent quarters
- Cadila’s JV with US based Hospila is expected to grow 50-60% in USA sales.
- Cadila is a strong player in domestic health market
- Cadila recently got approval for its swine flu vaccine to start clinical trails
- Cadila has good and committed management
- Cadila is consistently giving good returns and track record is very good
Verdict:
- Cadila Healthcare is expected to command a price of Rs 1200 to 1250 by March 2012. We can reasonably expect returns of around 70% with in two years.
I am not responsible for your investment decisions. Shown below are just the views of the author based on his understanding and research.
