Cadila Healthcare share prices surged 111 per cent since February 2020, that is, from the announcement of Covid-19 vaccine development till the regulatory nod for its Emergency Use Authorisation (EUA) on Friday.

Several triggers

The stock, which had rallied to hit a 52-week high of ₹665 during June, has corrected partially tracking the broader market in the past one-two months. It settled at ₹548.20 on the NSE on Monday after the company announced receiving the EUA from the drug regulator for its plasmid DNA vaccine - ZyCoV-D - the world’s first needle-free vaccine that is allowed for adolescent population (12-18 years) besides the adults in India.

Analysts see vaccine development as one of the key triggers that fuelled stock price rally for Cadila, but not the only one. Speaking to BusinessLine , Devarsh Vakil, Deputy Head, Retail Research, HDFC Securities, said, “The vaccines can’t just be the only factor for the rally in the Cadila stock. There are other large businesses that contribute to its overall business. Besides the Covid-19 vaccine, they have developed a whole new business of vaccines over the past couple of years. So, as they scale up the entire business, it will lead to further upside.”

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However, the launch of ZyCoV-D — the second indigenous Covid-19 vaccine — is considered a delayed development amidst a few other players already being in the fray. India has administered over 58 crore doses till now mostly through Serum Institute of India (SII)'s Covishield and Covaxin from Bharat Biotech. This, according to analysts, the pie of adult vaccination is shrinking for Zydus. And in 12-18 years age-group, analysts suspect a hesitancy in absence of final data and global acceptance.

Doubts on margins

“The street is still not decisive about the vaccine price aspect. Profitability from this may not be substantially higher due to royalty pay-out for applicators. This would be a profitable venture for sure, but there are doubts if it would be equally promising business as company’s other businesses, which give EBITDA margins of about 20-22 ,” said Abdul Puranwala, analyst with Anand Rathi Share and Stock Brokers.

From the stock performance, Puranwala sees better levels to come for making fresh entry into Cadila shares.

In its recent report on Cadila, Motilal Oswal Securities noted, “While the pace of vaccination is on the rise, demand remains sufficient enough to aid the business opportunity for Cadila Healthcare. Approval for the two-dose regimen for individuals in the 12-18 year age group will provide a fillip to its Covid-19 vaccine aspirations in India. Vaccine sales could meaningfully elevate domestic sales and margin.”

Cadila shares have corrected by about 18 per cent from its June peak. “We can’t say the share price is completely discounting the vaccine development. There is still room for further upside,” Vakil said.

Meanwhile, shares of global players including J&J (19 per cent), Pfizer (37 per cent), AstraZeneca (22 per cent) and Moderna (1,779 per ent) have also reported healthy gains during the comparable period.

“The MNC players have multiple lines of businesses, which may have contributed towards their share price and not just the vaccines. For companies like Moderna, they are primarily into vaccines so, it is a big deal for them. Hence the phenomenal rally in stock price,” Vakil added.

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