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Cadila Healthcare
Cadila Healthcare (Cadila) reported its 3QFY2011 results, which were slightly below our
estimates. Net sales came in at `1,135cr (`965cr), up by 17.5%, majorly driven by 17%
growth in the domestic formulations segment, consumer healthcare segment (21% growth,
`90.8cr) and growth of 33% each in the North American and Latin American markets. The
contract manufacturing JVs – Zydus Hospira and Zydus Nycomed – also posted strong
growth of 97% and 103%, respectively. On the operating front, the company posted flat
gross margins of 68.5%. However, OPM increased to 19.7% (19.1%), despite a 52.2%
increase in R&D expenses at `52.8cr (6% of sales) vis-à-vis `34.7cr (3.6% of sales) during
the last corresponding period, on the back of 10.5% growth in other expenses at `358.6cr
(`324.6cr). Employee expenses grew by 19.7% to `142.1cr (`118.7cr). Net profit grew by
24.9% at `162cr (`130cr), lower than our estimates of `173cr on the back of higher tax
outgo of 17.8% of PBT v/s estimated 12.0% of PBT during the period. The stock is currently
trading at 25x FY2011E and 19.3x FY2012E earnings. We remain Neutral on the stock.
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