Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Cadila Healthcare – 3d growth…!
Cadila’s business model — thrust on export formulations and contract manufacturing, well complemented with
a strong domestic franchise. Strategic acquisitions and front end tie-ups has been key to CHL’s growth trajectory.
CHL entered into several Joint Ventures which has inturn positioned itself as a preferred contract manufacturer
for Big Pharma companies. Sustained cash flows from its flagship segment - domestic formulations (38% of
sales) permits it to augment international operations. After reaching the ‘Healthy Billion’ mark, Cadila Healthcare
is now embarked on the journey to garner USD 3bn in sales by FY15-16E. Future growth opportunities identified
are vaccines, biological & injectables to realise the vision. We also expect CHL to capitalize on the biosimilar
opportunity in key markets having an enriching pipeline of 17 products under development.
Investment Rationale
International formulations ready to run at full throttle
Strategic acquisitions have been a key enabler for CHL to consolidate and expand
its footprint in key regulated and emerging markets.The company’s export
formulations business has grown by 33% CAGR over FY09-11 through its
distribution tie-ups, complex product filings and cost competencies (back-ended
domestic manufacturing). We estimate this division to grow by 20% CAGR over
FY11-14E on the back of higher penetration of existing products and increased
revenue contribution from recently acquired Nesher Pharma (US). The FDA
resolution at its Moraiya plant (post re-inspection concluded in March 2012) is a
near term trigger.
Joint ventures – complementing base business growth
The company has been proactive in identifying and capitalizing on partnership
opportunities since FY07, when it signed the Nycomed JV - one of the most
profitable JV by an Indian player (70%+ net margin) - manufacture pantoprazole
intermediates. With increasing genericization of Protonix, the company offset
the loss in sales through Hospira JV (oncology injectables) and currently sells
five products in EU & three in US under this arrangement. Further growth
momentum will be achieved through the Bayer JV which commenced operations
in May 2011, while Abbott JV will see revenue contribution H2FY13E onwards.
Domestic Formulation business: Cash COW!
CHL owns 3.8% share and has a leading position in key therapies - CVS, gastro,
women health care and respiratory (58% of the portfolio). Despite the initial
slowdown witnessed during H1FY12, the division is now showing stabilization in
sales. We estimate domestic formulation sales to record 16% CAGR over FY11-
14E aided by incremental revenue contribution from Biochem and new launches.
Valuations
Uptick in domestic formulations and traction in formulation exports, along with
the JVs yet to realise full potential, ensure higher revenue visibility. However,
gradual absorption of integration costs on acquired entities will hold back margin
expansion for the near future. Near term trigger is the resolution of the compliance
issues at the Moraiya plant. At CMP, the stock trades at 21.9x FY12E and 20.2x
FY13E earnings. We maintain our Accumulate rating on the stock with a target
price of ` 791 (18x FY14E EPS).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Cadila Healthcare – 3d growth…!
Cadila’s business model — thrust on export formulations and contract manufacturing, well complemented with
a strong domestic franchise. Strategic acquisitions and front end tie-ups has been key to CHL’s growth trajectory.
CHL entered into several Joint Ventures which has inturn positioned itself as a preferred contract manufacturer
for Big Pharma companies. Sustained cash flows from its flagship segment - domestic formulations (38% of
sales) permits it to augment international operations. After reaching the ‘Healthy Billion’ mark, Cadila Healthcare
is now embarked on the journey to garner USD 3bn in sales by FY15-16E. Future growth opportunities identified
are vaccines, biological & injectables to realise the vision. We also expect CHL to capitalize on the biosimilar
opportunity in key markets having an enriching pipeline of 17 products under development.
Investment Rationale
International formulations ready to run at full throttle
Strategic acquisitions have been a key enabler for CHL to consolidate and expand
its footprint in key regulated and emerging markets.The company’s export
formulations business has grown by 33% CAGR over FY09-11 through its
distribution tie-ups, complex product filings and cost competencies (back-ended
domestic manufacturing). We estimate this division to grow by 20% CAGR over
FY11-14E on the back of higher penetration of existing products and increased
revenue contribution from recently acquired Nesher Pharma (US). The FDA
resolution at its Moraiya plant (post re-inspection concluded in March 2012) is a
near term trigger.
Joint ventures – complementing base business growth
The company has been proactive in identifying and capitalizing on partnership
opportunities since FY07, when it signed the Nycomed JV - one of the most
profitable JV by an Indian player (70%+ net margin) - manufacture pantoprazole
intermediates. With increasing genericization of Protonix, the company offset
the loss in sales through Hospira JV (oncology injectables) and currently sells
five products in EU & three in US under this arrangement. Further growth
momentum will be achieved through the Bayer JV which commenced operations
in May 2011, while Abbott JV will see revenue contribution H2FY13E onwards.
Domestic Formulation business: Cash COW!
CHL owns 3.8% share and has a leading position in key therapies - CVS, gastro,
women health care and respiratory (58% of the portfolio). Despite the initial
slowdown witnessed during H1FY12, the division is now showing stabilization in
sales. We estimate domestic formulation sales to record 16% CAGR over FY11-
14E aided by incremental revenue contribution from Biochem and new launches.
Valuations
Uptick in domestic formulations and traction in formulation exports, along with
the JVs yet to realise full potential, ensure higher revenue visibility. However,
gradual absorption of integration costs on acquired entities will hold back margin
expansion for the near future. Near term trigger is the resolution of the compliance
issues at the Moraiya plant. At CMP, the stock trades at 21.9x FY12E and 20.2x
FY13E earnings. We maintain our Accumulate rating on the stock with a target
price of ` 791 (18x FY14E EPS).
No comments:
Post a Comment