Analyst Corner – Cadila Healthcare: ‘Buy’ with combined TP of Rs 670/share

By: |
August 28, 2021 5:30 AM

We arrive at an NPV of ~Rs 12/share for the opportunity arising from the Covid-19 vaccine. We continue to value CDH’s base business at 25x its 12-month forward earnings to arrive at our TP of Rs 658.

We arrive at a combined TP of Rs 670/share. We maintain ‘buy’ rating. We arrive at a combined TP of Rs 670/share. We maintain ‘buy’ rating.

Vaccine approval adds a new dimension to the domestic business: CDH has received emergency use authorisation (EUA) for its plasmid DNA Covid-19 vaccine ZyCoV-D. The latter is the first Covid-19 vaccine approved in India for adolescents in the 12-18 years age group. The management expects to start supplying the vaccine in India from Oct’21. Based on our conservative estimates, we expect CDH to ramp-up production to ~40million doses from Oct’21. We expect a 75:25 split between the government and private channel and a blended price of ~Rs 320/dose for FY22. We factor in an opportunity (NPV of Rs 12/share) from the Covid vaccine in our estimates for CDH. We continue to value CDH’s base business at 25x its 12-month forward P/E. We arrive at a combined TP of Rs 670/share. We maintain ‘buy’ rating.

ZyCoV-D – First DNA vaccine in the world, approved for adolescents too: CDH has received an EUA from DCGI (Drug Controller General of India) for its Covid-19 vaccine ZyCoV-D – the world’s first DNA vaccine to be approved for humans. It is also the first Covid-19 vaccine to be approved for adolescents in the 12-18 years age group in India. It is a three dose regimen vaccine to be taken on the 0th, 28th, and 56th day and is administered through a needle-free device. CDH has also applied for a two-dose regiment of ZyCoV-D and is in discussions with the regulator on a future course of action. Interim efficacy of ZyCoV-D is 66.6% as tested on 81 patients. The final efficacy will be based on a data of 158 patients. ZyCoV-D has shown 100% efficacy against moderate and severe disease after the second vaccine dose. It is to be stored at 2-8°C, but is also stable at 25°C for three months.

Valuation and view: We arrive at an NPV of ~Rs 12/share for the opportunity arising from the Covid-19 vaccine. We continue to value CDH’s base business at 25x its 12-month forward earnings to arrive at our TP of Rs 658.

We arrive at a TP of Rs 670, including the vaccine opportunity and maintain our ‘buy’ rating.

Vaccine scenario in India: To date, 456million people (~50% of adults) have received at least one dose of the Covid-19 vaccine. The estimated population in the 12-18 years age group is ~250million. ZyCoV-D is the sixth vaccine to receive EUA in India, after Covaxin, Covishield, Sputnik V, Moderna and J&J. The GoI expects 2.2billion Covid-19 vaccines to be available by CY21-end.

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