Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Cadila Healthcare
3QFY11 Results Update
Cadila's 3QFY11 operational performance was in line with our estimates. Key highlights are:
Cadila reported 3QFY11 revenue growth of 17.7% YoY at Rs11.67b (against our estimate of Rs11.59b) and adjusted
PAT growth of 24% YoY at Rs1.62b (against our estimate of Rs1.64b). Topline growth was led by formulation exports
(up 19.6% YoY) due to strong growth in North America (up 33% YoY), Latin America (up 33% YoY) and Japan (up
21.5% YoY).
The growth momentum in exports to the US continued, led by new launches and market share gains in existing
products. While the domestic formulations revenue grew by 16.8% YoY to Rs4b, consumer and other businesses
grew 20.8% YoY to Rs908m.
EBITDA was in line with estimates at Rs2.56b (up 22% YoY) and EBITDA margins improved by 80bp YoY to 22%
(against our estimate of 22.5%).
Adjusted PAT of Rs1.62b was in line with estimates and partly boosted by lower interest and depreciation charges.
Cadila's growth will be led by increased traction in its international businesses, ramp-up in supplies to Hospira and
sustained double-digit growth in the domestic formulations and consumer businesses. Besides, a de-risked business
model should ensure good long-term potential. We estimate 17.3% revenue and 23% earnings CAGR over FY10-12 led
by 23% CAGR for Cadila's US operations and 26% CAGR in domestic consumer revenue, coupled with a ramp-up in
supplies to Hospira. We expect RoE of more than 30% over two years. We expect EPS of Rs30.5 in FY11 (up 22.5%),
Rs37.6 in FY12 (up 23.3%) and Rs46.7 in FY13 (up 24.3%) implying 23% EPS CAGR over FY10-12 and 24% over FY11-
13. Cadila is valued at 25.1x FY11E, 20.4x FY12E and 16.4x FY13E consolidated earnings. Our estimates do not
include upsides from the supply agreement with Abbott. Maintain Buy with a target price of Rs1,028 (22x FY13E EPS),
revised from the earlier Rs827 (22x FY12E EPS).
Revenue growth led by formulation exports
Cadila's 3QFY11 operational performance was in line with our estimates with revenue
growth of 17.7% YoY at Rs11.67b (against our estimate of Rs11.59b) and adjusted PAT
growth of 24% YoY at Rs1.62b (against our estimate of Rs1.64b).
Topline growth was led by formulation exports (up 19.6% YoY) due to strong growth in
North America (up 33% YoY), Latin America (up 33% YoY) and Japan (up 21.5% YoY)
on a low base. European revenue declined by 15% and exports to emerging markets were
flat at Rs499m. The growth momentum in exports to the US continued with revenue
growing 33% YoY, led by new launches and market share gains in existing products.
The domestic formulations revenue in 3QFY11 grew by 16.8% YoY to Rs4b, the consumer
business grew by 20.8% YoY to Rs908m and animal health and others grew by 12.2% to
Rs362m.
Reported EBITDA in line with estimates at Rs2.56b, up 22% YoY
EBITDA was in line with estimates at Rs2.56b (up 22% YoY) and EBITDA margins
improved by 80bp YoY to 22% (against our estimate of 22.5%). Adjusted PAT of Rs1.62b
was in line with estimates and partly boosted by lower interest and depreciation charges.
Depreciation of Rs334m was flat YoY due to declining intangible amortization of the animal
health business in India and a favorable impact of the rupee's appreciation against the
euro for the French operations.
New launches to drive growth in US market
Cadila has 59 ANDAs pending approval and has received 59 ANDA approvals so far
(including tentative approvals). It expects to file 15-20 ANDAs with the US FDA every
year and get 8-10 approvals each year. There is increased traction in Cadila's US business
due to the absence of some competitors (due to US FDA issues) and new product launches.
We expect Cadila to post Rs9b sales in FY11 against Rs6.7b in FY10. We expect this
business to grow at 23% CAGR over FY10-12. Cadila has also started development and
filing of potential low-competition products with delivery advantages (such as trans-dermal
patches and respiratory products) and is focusing on developing such niche products (likely
to be commercialized after FY12).
Hospira supplies to ramp up from FY12
Cadila's started supplies to Hospira in FY10, recording Rs839m in revenue from supplies
to Europe. We expect a ramp-up in this business in FY12, led by commercialization of
more products and the possibility of commencement of supplies to the US. Cadila posted
revenue of Rs818m as its share of the Hospira JV in 9mFY11 and we expect full-year
revenue of Rs1.13b and Rs1.78b from this partnership in FY11 and FY12 respectively.
Our FY11 estimates do not include upsides from supplies to the US, which we have
factored-in for FY12 estimates. The management indicated it did not expect significant
delays in Taxotere supplies (one of the products covered in the supply agreement) to
Hospira since the latter indicated that final approval for the products had been delayed by
labeling issues, which are likely to be resolved in the near future.
Domestic branded business to post double-digit growth led by new product
launches
After the correction in its distribution channel, undertaken in FY09 (which temporarily
impacted growth), Cadila's growth in the domestic formulations business recovered partly
in FY10, posting 12.2% growth, which was still lower than the average industry growth of
~17%. In 9mFY11, it posted 17.7% growth. We believe a ramp-up in the growth of this
business is imperative to support Cadila's initiatives in other markets as it is a high cash
generating business. In 3QFY11 Cadila launched nine new products in the domestic
formulations market. The management had, in the past, guided for 15% growth of this
business in FY11 and Cadila expects to launch 45 new products through the business in
FY11.
Consumer business showing strong traction
Cadila's consumer business (~8% of revenue) has a leadership position in niche consumer
healthcare segments of sugar substitutes, butter substitutes and facial care. The business
has been growing rapidly due to strong growth in their respective product categories and
dominant market share in the segments (more than 50% market share). The company
posted 37% growth in this business in FY10 and 9mFY11 growth was 26%. We expect
revenue of 26% CAGR over FY10-12.
Europe, emerging markets had an adverse quarter
Cadila's European operations posted 15% de-growth and emerging market revenues
(excluding Latam) were flat in 3QFY11. European revenue growth suffered due to lower
Clopidogrel supplies YoY and a depreciating euro. We expect this business to post 9%
revenue CAGR over FY10-12. Emerging market revenue was flat due to supply issues in
South Africa and lack of new approvals.
Outlook and valuation
Cadila's growth will be led by increased traction in its international businesses, ramp-up in
supplies to Hospira and sustained double-digit growth in domestic formulations and consumer
businesses. Besides, a de-risked business model should ensure good long-term potential.
We estimate 17.3% revenue and 23% earnings CAGR over FY10-12 led by 23% CAGR
for the US operations and 26% CAGR in domestic consumer revenue coupled with a
ramp-up in supplies to Hospira. We expect RoE of more than 30% over the next two
years. We expect FY11 EPS of Rs30.5 (up 22.5%), Rs37.6 in FY12 (up 23.3%) and
Rs46.7 in FY13 (up 24.3%) implying 23% EPS CAGR over FY10-12 and 24% over
FY11-13. Cadila is valued at 25.1x FY11E, 20.4x FY12E and 16.4x FY13E consolidated
earnings. Our estimates do not include upsides from the supply agreement with Abbott.
Maintain Buy with a target price of Rs1,028 (22x FY13 EPS), revised from the earlier
Rs827 (22x FY12 EPS).
Cadila Healthcare: an investment profile
Company description
Cadila is one of the largest domestic pharmaceutical
companies in India with a strong focus on the global generics
opportunity. The company is gradually building its presence
in regulated generic markets beginning with the US and
France. It also plans to tap opportunities through its JVs
with Altana, Hospira and Bharat Serums.
Key investment arguments
Efforts to step up the number of filings in regulated
markets and focus on partnerships in overseas markets
will help build critical scale over 2-3 years.
A de-risked strategy, with less focus on patent
challenges and expensive acquisitions.
Key investment risks
Cadila is a late entrant in the international generics space
and hence lags its peers in terms of global footprint and
underlying product basket.
Recent development
Entered into a supply agreement with Abbott to supply
24 branded generic products to meet Abbott's
requirements in 15 emerging markets.
Valuation and view
We expect EPS of Rs30.5 in FY11 (up 22.5% YoY),
Rs37.6 in FY12 (up 23.3% YoY) and Rs46.7 in FY13
leading to 24% EPS CAGR over FY10-13. Cadila is
valued at 25.1x FY11E, 20.4x FY12E and 16.4x FY13E
consolidated earnings.
Increased traction based on improvement in domestic
and international businesses coupled with de-risked
strategy. Maintain Buy.
Sector view
Regulated markets will be the key sales and profit
drivers in the medium term. Europe is expected to
emerge as the next growth driver.
We are Overweight on companies that are nearing the
end of the investment phase.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Cadila Healthcare
3QFY11 Results Update
Cadila's 3QFY11 operational performance was in line with our estimates. Key highlights are:
Cadila reported 3QFY11 revenue growth of 17.7% YoY at Rs11.67b (against our estimate of Rs11.59b) and adjusted
PAT growth of 24% YoY at Rs1.62b (against our estimate of Rs1.64b). Topline growth was led by formulation exports
(up 19.6% YoY) due to strong growth in North America (up 33% YoY), Latin America (up 33% YoY) and Japan (up
21.5% YoY).
The growth momentum in exports to the US continued, led by new launches and market share gains in existing
products. While the domestic formulations revenue grew by 16.8% YoY to Rs4b, consumer and other businesses
grew 20.8% YoY to Rs908m.
EBITDA was in line with estimates at Rs2.56b (up 22% YoY) and EBITDA margins improved by 80bp YoY to 22%
(against our estimate of 22.5%).
Adjusted PAT of Rs1.62b was in line with estimates and partly boosted by lower interest and depreciation charges.
Cadila's growth will be led by increased traction in its international businesses, ramp-up in supplies to Hospira and
sustained double-digit growth in the domestic formulations and consumer businesses. Besides, a de-risked business
model should ensure good long-term potential. We estimate 17.3% revenue and 23% earnings CAGR over FY10-12 led
by 23% CAGR for Cadila's US operations and 26% CAGR in domestic consumer revenue, coupled with a ramp-up in
supplies to Hospira. We expect RoE of more than 30% over two years. We expect EPS of Rs30.5 in FY11 (up 22.5%),
Rs37.6 in FY12 (up 23.3%) and Rs46.7 in FY13 (up 24.3%) implying 23% EPS CAGR over FY10-12 and 24% over FY11-
13. Cadila is valued at 25.1x FY11E, 20.4x FY12E and 16.4x FY13E consolidated earnings. Our estimates do not
include upsides from the supply agreement with Abbott. Maintain Buy with a target price of Rs1,028 (22x FY13E EPS),
revised from the earlier Rs827 (22x FY12E EPS).
Revenue growth led by formulation exports
Cadila's 3QFY11 operational performance was in line with our estimates with revenue
growth of 17.7% YoY at Rs11.67b (against our estimate of Rs11.59b) and adjusted PAT
growth of 24% YoY at Rs1.62b (against our estimate of Rs1.64b).
Topline growth was led by formulation exports (up 19.6% YoY) due to strong growth in
North America (up 33% YoY), Latin America (up 33% YoY) and Japan (up 21.5% YoY)
on a low base. European revenue declined by 15% and exports to emerging markets were
flat at Rs499m. The growth momentum in exports to the US continued with revenue
growing 33% YoY, led by new launches and market share gains in existing products.
The domestic formulations revenue in 3QFY11 grew by 16.8% YoY to Rs4b, the consumer
business grew by 20.8% YoY to Rs908m and animal health and others grew by 12.2% to
Rs362m.
Reported EBITDA in line with estimates at Rs2.56b, up 22% YoY
EBITDA was in line with estimates at Rs2.56b (up 22% YoY) and EBITDA margins
improved by 80bp YoY to 22% (against our estimate of 22.5%). Adjusted PAT of Rs1.62b
was in line with estimates and partly boosted by lower interest and depreciation charges.
Depreciation of Rs334m was flat YoY due to declining intangible amortization of the animal
health business in India and a favorable impact of the rupee's appreciation against the
euro for the French operations.
New launches to drive growth in US market
Cadila has 59 ANDAs pending approval and has received 59 ANDA approvals so far
(including tentative approvals). It expects to file 15-20 ANDAs with the US FDA every
year and get 8-10 approvals each year. There is increased traction in Cadila's US business
due to the absence of some competitors (due to US FDA issues) and new product launches.
We expect Cadila to post Rs9b sales in FY11 against Rs6.7b in FY10. We expect this
business to grow at 23% CAGR over FY10-12. Cadila has also started development and
filing of potential low-competition products with delivery advantages (such as trans-dermal
patches and respiratory products) and is focusing on developing such niche products (likely
to be commercialized after FY12).
Hospira supplies to ramp up from FY12
Cadila's started supplies to Hospira in FY10, recording Rs839m in revenue from supplies
to Europe. We expect a ramp-up in this business in FY12, led by commercialization of
more products and the possibility of commencement of supplies to the US. Cadila posted
revenue of Rs818m as its share of the Hospira JV in 9mFY11 and we expect full-year
revenue of Rs1.13b and Rs1.78b from this partnership in FY11 and FY12 respectively.
Our FY11 estimates do not include upsides from supplies to the US, which we have
factored-in for FY12 estimates. The management indicated it did not expect significant
delays in Taxotere supplies (one of the products covered in the supply agreement) to
Hospira since the latter indicated that final approval for the products had been delayed by
labeling issues, which are likely to be resolved in the near future.
Domestic branded business to post double-digit growth led by new product
launches
After the correction in its distribution channel, undertaken in FY09 (which temporarily
impacted growth), Cadila's growth in the domestic formulations business recovered partly
in FY10, posting 12.2% growth, which was still lower than the average industry growth of
~17%. In 9mFY11, it posted 17.7% growth. We believe a ramp-up in the growth of this
business is imperative to support Cadila's initiatives in other markets as it is a high cash
generating business. In 3QFY11 Cadila launched nine new products in the domestic
formulations market. The management had, in the past, guided for 15% growth of this
business in FY11 and Cadila expects to launch 45 new products through the business in
FY11.
Consumer business showing strong traction
Cadila's consumer business (~8% of revenue) has a leadership position in niche consumer
healthcare segments of sugar substitutes, butter substitutes and facial care. The business
has been growing rapidly due to strong growth in their respective product categories and
dominant market share in the segments (more than 50% market share). The company
posted 37% growth in this business in FY10 and 9mFY11 growth was 26%. We expect
revenue of 26% CAGR over FY10-12.
Europe, emerging markets had an adverse quarter
Cadila's European operations posted 15% de-growth and emerging market revenues
(excluding Latam) were flat in 3QFY11. European revenue growth suffered due to lower
Clopidogrel supplies YoY and a depreciating euro. We expect this business to post 9%
revenue CAGR over FY10-12. Emerging market revenue was flat due to supply issues in
South Africa and lack of new approvals.
Outlook and valuation
Cadila's growth will be led by increased traction in its international businesses, ramp-up in
supplies to Hospira and sustained double-digit growth in domestic formulations and consumer
businesses. Besides, a de-risked business model should ensure good long-term potential.
We estimate 17.3% revenue and 23% earnings CAGR over FY10-12 led by 23% CAGR
for the US operations and 26% CAGR in domestic consumer revenue coupled with a
ramp-up in supplies to Hospira. We expect RoE of more than 30% over the next two
years. We expect FY11 EPS of Rs30.5 (up 22.5%), Rs37.6 in FY12 (up 23.3%) and
Rs46.7 in FY13 (up 24.3%) implying 23% EPS CAGR over FY10-12 and 24% over
FY11-13. Cadila is valued at 25.1x FY11E, 20.4x FY12E and 16.4x FY13E consolidated
earnings. Our estimates do not include upsides from the supply agreement with Abbott.
Maintain Buy with a target price of Rs1,028 (22x FY13 EPS), revised from the earlier
Rs827 (22x FY12 EPS).
Cadila Healthcare: an investment profile
Company description
Cadila is one of the largest domestic pharmaceutical
companies in India with a strong focus on the global generics
opportunity. The company is gradually building its presence
in regulated generic markets beginning with the US and
France. It also plans to tap opportunities through its JVs
with Altana, Hospira and Bharat Serums.
Key investment arguments
Efforts to step up the number of filings in regulated
markets and focus on partnerships in overseas markets
will help build critical scale over 2-3 years.
A de-risked strategy, with less focus on patent
challenges and expensive acquisitions.
Key investment risks
Cadila is a late entrant in the international generics space
and hence lags its peers in terms of global footprint and
underlying product basket.
Recent development
Entered into a supply agreement with Abbott to supply
24 branded generic products to meet Abbott's
requirements in 15 emerging markets.
Valuation and view
We expect EPS of Rs30.5 in FY11 (up 22.5% YoY),
Rs37.6 in FY12 (up 23.3% YoY) and Rs46.7 in FY13
leading to 24% EPS CAGR over FY10-13. Cadila is
valued at 25.1x FY11E, 20.4x FY12E and 16.4x FY13E
consolidated earnings.
Increased traction based on improvement in domestic
and international businesses coupled with de-risked
strategy. Maintain Buy.
Sector view
Regulated markets will be the key sales and profit
drivers in the medium term. Europe is expected to
emerge as the next growth driver.
We are Overweight on companies that are nearing the
end of the investment phase.
No comments:
Post a Comment