One stock buzzing a lot this past week is Cadila Healthcare, which has rallied nearly 42 per cent in last one month to top most near-term price targets that different brokerages had set.
The pharma major is also said to be conduction animal testing of a Covid-19 vaccine, which, if successful, can send the stock soaring in the foreseeable future.
Though unproved, US President Donald Trump himself has recommended the drug on record. The government had on April 4 prohibited exports of hydroxychloroquine and its formulations “without any exceptions” in the wake of rising coronavirus cases in India.
However, the US President on Tuesday appealed to India to remove the restrictions, which made the government to lift the ban on exports of the drug on a case-to-case basis.
The government has placed it on the restricted list, which means exports will be allowed for companies that apply and take a no-objection certificate.
Last week, Cadila reported a rampup in HCQ production by nearly 10 times to 30 tonnes (15 crore tablets of 200 mg) per month in view of the spike in demand expected due to rising Covid-19 cases.
The company with over Rs 13,000 crore revenue is helping the government build a stockpile of 10 crore dosages of the drug, TOI quoted Zydus group Chairman Pankaj Patel as saying.
Reports suggest Brazilian President Jair Bolsonaro has also requested India for hydroxychloroquine.
“While Indian pharma stocks consistently underperformed significantly over the past couple of years, the relative favourable positioning of these stocks makes a great investment case,” Phillip Capital said.
The brokerage likes Cadila, among other pharma stocks, and expects Indian pharma companies to see improved export potential and post steady growth in domestic formulation businesses.
CLSA said demand for the pharma sector is unlikely to be affected, and production should continue unabated as drugs are being classified as an essential commodity. The brokerage has increased its price target on Cadila to Rs 350 from Rs 330.
The stock traded at Rs 351 on Wednesday.
“We value Cadila at 19 times forward 12-month EPS, which is 15 per cent lower than its five-year average history. We use a PE-based valuation approach across our universe as we believe it better captures company growth potential and allows investors to easily compare stocks across sub-sectors,” CLSA said.
Cadila’s Patel said there is enough stock in the country and, if need be, it can be scaled up to even 50 tonnes (25 crore tablets). The Ahmedabad-based company has also accelerated research for a Covid-19 vaccine, which has entered the animal-testing stage.
If the results are successful, the company is hopeful of its launch by January next year, TOI reported.
Meanwhile, the drug maker has received tentative nod from the US health regulator to market generic Empagliflozin tablets, used for improvement of blood sugar control in adults with Type 2 diabetes in the American market.
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