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17.7x FY2012E
CMP : Rs710
RECO : ACCUMULATE
TP : Rs720
Investment Rationale
§ Cadlila Healthcare emerges our top pick given its strong growth prospects (22% CAGR over FY10-12E), wide
geographical reach and foray into difficult to manufacture generics such as transdermal patches, bio-similar and
vaccines.
§ Expect international business to grow at a CAGR of 28% over FY10-12E
§ Hospira ramp-up to allay concerns around Nycomed JV (expect Rs2550mn contribution from Hospira in FY12E)
§ Aiming to attain revenue of US$3bn by 2016
§ Has six molecules in human clinical trial stage; Spent around 7% of revenue on R&D
§ Healthy return ratios (RoE- 33.5% and RoCE- 32.3% in FY12E)
Valuations
§ We expect an earnings CAGR of 31% over FY10-12E
§ At CMP, the stock is trading at 22.7xFY11E EPS of Rs31.3 and 17.7xFY12E EPS of Rs40.
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