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Summary
of Contents
STOCK UPDATE
Cadila
Healthcare
Cluster: Emerging
Star
Recommendation: Buy
Price target: Rs425
Current market
price: Rs326
Liva acquisition, US
approvals strengthen Cadila
Key points
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Zydus Cadila (Cadila)
has acquired a 97.5% stake in Mumbai-based Liva Healthcare (Liva),
a mid-sized Indian pharma company, in an all-cash deal. The
all-cash transaction will be funded through cash accruals and
debt. The size of the deal has not been disclosed.
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The acquisition of
Liva will enable Cadila to foray into the Rs1,500-crore
dermatology segment in India and thus strengthen its domestic
product portfolio, allowing it to offer a more comprehensive
product range. With Liva's 325-people sales force, which already
has established relationships and strong brand equity amongst the
dermatologists, cosmetologists and beauticians, Cadila will be
able to make fast in-roads into this rapidly growing segment.
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Cadila has received
three product approvals from the US Food and Drug Authority (US
FDA) in quick succession. The company has received the final
approval to market Azathioprine tablets of 50mg strength and has
received tentative approvals for Divalproex Sodium Extended
Release tablets in strengths of 250mg and 500mg, and Venlafaxine
Hydrochloride tablets in strengths of 25mg, 37.5mg, 50mg, 75mg and
100mg.
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We estimate the above
three products would together contribute $13.1 million
(approximately Rs40.5 crore) in FY2008E and $15.4 million
(approximately Rs69 crore) in FY2009E to Cadila's total revenues.
The same three products are likely to contribute approximately
Rs0.90 to Cadila's FY2008E earnings and Rs1.10 to its FY2009E
earnings.
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At the current market
price of Rs326, Cadila is trading at 14.8x its estimated FY2008
earnings and at 12.2x its estimated FY2009 earnings. The stock has
underperformed the market in recent times, but we believe that as
Cadila's international efforts start translating into gains and
growth in the domestic market rebounds, the stock's performance
would improve. Considering the strong growth momentum of the
company, we maintain our Buy recommendation on the stock with a
price target of Rs425.
VIEWPOINT
DS Kulkarni Developers
Strong project
pipeline
At present,
the company has residential and commercial projects at various
locations in Pune (94%), Mumbai (4%) and Bangalore (2%). These
cumulatively amount to 17.5 million sf of saleable area that is
targeted for development over the next five to seven years. It
includes the planned special economic zone (SEZ) project across 250
acre located at the outskirts of Pune on the Pune-Solhapur highway.
The company is also planning a 130-acre township project close to
its SEZ
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