Cadila,In-line results, Sept 2010 qtr Kotak Sec,

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In-line results, on track to achieve FY2011E US$1 bn sales target. PAT was 2%
higher than our estimate due to better-than-expected operating margin at 21% despite
higher R&D and staff cost versus our estimate. Sales were in line with our estimate,
marked by recovery in Latin America and strong growth continuing in domestic
business (up 19% yoy). We leave our estimates largely unchanged. At current price,
Cadila is trading at 18X FY2012E earnings. We maintain REDUCE rating due to rich
valuations, PT at Rs600.


Sales at Rs11 bn were in line with estimates marked by outperformance in India and US
Sales were in line with our estimate marked by (1) 19% yoy in India branded business, higher than
17% seen in 1QFY11. India growth rate has picked up YTD due to marketing push and benefits
from added field force (400 MRs added in FY2010) in cardiovascular, respiratory (30% of sales),
(2) US sales of US$48 mn, flat qoq and likely to ramp up in 2HFY11E on account of new product
launches, (3) 26% yoy sales growth in Latin America post weak IQFY11 and (4) 50% yoy increase
in Hospira JV sales on account of Docetaxel supplies.
PAT was Rs1.7 bn, 2% higher than our estimate
PAT was 2% higher than our estimate due to higher EBITDA margin at 21%, 40 bps higher than
our estimate despite higher R&D expenses and staff costs this quarter. Materials cost at 32% was
100 bps lower than our estimate due to strong growth in the high-margin segment of domestic
formulations while other expenses at 28% was 200 bps lower than our estimate.
Cadila on track to FY2011E sales guidance of US$1 bn
We forecast net sales growth of 22% in FY2011E with margin expanding 200 bps. We believe
Cadila is very close to attaining its sales guidance for FY2011E with sales of Rs44 bn in FY2011E.
We leave our estimates largely unchanged.
We maintain REDUCE due to rich valuations with PT at Rs600 (was Rs580)
At current price, Cadila is trading at 18X FY2012E earnings. We maintain REDUCE rating due to
rich valuations, PT at Rs600 (15.5X FY2012E est.).