Cadila’s YTD performance for FY09 has been impressive amid concerns of forex losses, higher debt levels, FDA warnings and ban on some drugs, and debtor default risk faced by front-line pharma companies.
Over the years, Cadila has emerged as one of the largest players in domestic formulation market, and is growing its presence in international markets through acquisitions.
Further, the company is set to gain from its contract manufacturing contracts with Nycomed FY10E onwards. Besides, it is among the few domestic companies with a good pipeline of Novel Drug Discovery (NDD) projects.
We expect earnings to grow at 28% CAGR over FY08-11E. At the CMP of Rs253, the stock trades at P/E of 7x FY10E EPS. We recommend BUY with price target of Rs378.