Zydus Lifesciences Ltd. share price target

COVID related products to share more focus in FY21E. 1QFY21 revenue was in-line with our estimate but EBITDA and EBITDAM were beat due to decline of SG&A; 17% YoY. We believe its foray into COVID related products has diverted its focus from core business when its top revenue contributors (India, US Gx) have been lacking consistency. With HCQ already...

Cadila Healthcare has emerged at the forefront of India's battle to fight against COVID-19. Company is one of the world's largest producer of anti-malarial drug hydroxychloroquine which is widely used as a prophylactic drug to prevent COVID-19 infections. Apart from that, to offer treatment options for COVID 19, company is now exploring multiple options from its portfolio of biological products and based on the available evidence, has selected the long-acting biological therapy, Pegylated Interferon alpha-2b as a potential treatment. It may be noted that Zydus Cadila has been commercially manufacturing Pegylated Interferon Alpha-2b under the...

Valuation and Risks: We reduce our Revenues for FY21E / FY22E by 1.6% / 2.5% due to downgrade across revenue segments with the exception of US and EU.

Q4FY20 earnings were higher than our estimate considering 1) US growth of 5% QoQ (PLe 7% decline QoQ) due to stock-up and seasonality effect of Tamiflu 2) Consumer Wellness reported a growth of 21% YoY, while adjusted growth would have been 10%YoY. We change our rating to REDUCE (earlier SELL) and derive a new TP of Rs329 (Rs263) based on 18x PE (earlier 15x) of FY22E. We upgrade CDH on the back of 1) improved guidance for US market led by new products 2) biosimilar launch in India and EM's 3) resolution of...

US (44% of revenues) grew at ~12% CAGR in FY16-20 backed by aggressive filings, product launches. Launches of authorised generics also contributed to overall growth. US pipeline (cumulative) consists of 390 filed ANDAs, 99 pending final approvals. However, resurfacing of cGMP issues at Moraiya and an imminent slowdown in base are main near term headwinds. We expect US sales to grow at ~9.5% CAGR in FY20-22E to | 7502 crore. Our growth assumptions model near term Hydroxychloroquine opportunity in the US but besides this no significant meaningful launches....

20 June 2020 by regrouping it into the Mass and Specialty segments and b) differentiated launches in US Generics. We maintain our EPS estimates for FY21/FY22E and continue to value CDH at 21x 12M forward earnings to arrive at TP of INR420. We remain positive on CDH on account of better prospects in DF (encouraged by changed strategy), a healthy ANDA pipeline (including injectables and transdermals) in the US market, and regulatory works at Moraiya nearing completion. Maintain Buy. CDHs sales at INR37.5b (in-line) for 4QFY20 stood largely flat YoY. US sales (47% of sales) fell 1.9% YoY to INR17.6b. The India Branded Formulations business (24% of sales) was INR8.9b, almost flat YoY. EM and LATAM (5% of sales) revenue was down 17% YoY to INR1.7b, while API registered strong growth of 21% YoY, with sales of INR1.2b. The Consumer Wellness business grew 21.

The Q4FY20 results of Cadila Healthcare Limited (Cadila) were a mixed bag and reflected the impact of Covid-19. The sales at Rs 3752 cr were flat on a y-o-y basis, but missed estimates. Revenues amounting to Rs 250 cr were deferred due to supply chain / logistics issues, which the management expects to recoup in the current quarter. The gross margins for the quarter improved by 350 bps y-o-y but an increase in the employee cost and higher other expenses wiped out the gains, leading to a 60 bps y-o-y contraction in Operating Margins. OPM's stood at 21.1% while operating profit stood at Rs 791 crdeclining by 2.4% y-o-y,...

On the business front, despite the nationwide lockdown, domestic growth is expected to remain more or less stable. Exports growth, barring for one or two months due to congestion in all major ports globally, is also expected to remain strong due to 1) currency benefit, 2) slowdown in competition due to delay in new approvals that will be beneficial for existing players and 3) expected demand continuum across the world despite Covid-19. Some windfall is also expected in some critical productsa case in point is Hydroxychloroquine, a malaria drug that is likely to be repurposed as a prophylaxis for Covid-19 treatment in some cases....

Cadila Heathcare (Cadila HC) post its reorganization and productivity initiatives indomestic formulations space

Cadila Healthcare is India's leading vertically integrated pharmaceutical company. With its presence across the value chain, it manufactures finished dosage forms, active pharmaceutical ingredients, animal healthcare...