Domestic formulations to post above industry growth rate
Domestic formulations faced hurdles during Q1FY14 on account of inventory adjustment
pre-implementation of pricing policy and trade related concerns but growth will be
normalized from Q3FY14. Its key segments like GI, Gynaec, respiratory & Derma
continues to do well while it needs to focus on CVS & CNS segments. We expect
company’s domestic formulation segment to show a CAGR of 14% over FY13-15E on back
of new launches.
Expect strong growth in Wellness segment
After posting muted growth in Wellness segment in FY12 due to stiff competition, growth
came back on track in FY13 with 19% growth on account of huge promotional spending.
Company maintains its leadership position in Sugarfree (92% mkt share) & revamped
entre everyuth brand version. We expect Wellness segment to show 16% CAGR over
FY13-15E.
US business to see traction by FY15 backed by niche pipeline
Cadila is the fastest growing company in US which showed 39% CAGR over FY08-13.
However growth will be impacted in FY14 due to delay in new approvals & price erosion
in existing products. Management expects only 5-8 approvals in FY14. However shortfall
in FY14 will be covered in FY15 where we will see traction in business as the company has
strong pipeline in US. Cumulatively ANDA filings stand at 179 out of which 78 are
approved. Total filings include 4 topicals, 5 nasal sprays & 26 injectables (19- through
patners & 7-owned) out of which 8 injectables (7 through patners & 1 owned) are
approved with 6 launches (5 through partners & 1owned). Since Moraiya facility received
USFDA clearance in July 2012, growth in US is expected to be strong as it has done
injectable filings & nasal sprays from this facility. Cadila has also started filing for
transdermals (3 filed) & expecting approval in FY15 which will be the next long term
growth driver for the US market. Nesher acquisition will also prove beneficial in the long
run as it is in a niche segment of controlled substances. Till date it has launched 2
products & likely to launch 2 products (1 controlled substances) in 2013. We expect
revenue CAGR of 18% over FY13-15E.
Emerging markets to continue to show momentum
Company has filed cumulatively 102 dossiers in Brazil out of which 40 are approved.
Company has filed 6 dossiers with regulatory authority in Mexico taking cumulative filings
to 20. We expect Cadila to post steady growth in emerging markets like South Africa,
Brazil & Asia Pacific.
Retain Outperform rating with the target price of `1011
At CMP of `708 the stock is trading at 17.2xFY14E & 13.3xFY15E EPS. Going ahead, we
believe domestic growth will be normalized from Q3FY14 and will be able to grow above
industry growth rate in FY15 & US business to see lower growth in FY14 due to delay in
approvals but it will ramp up in FY15. We continue to remain positive on stock &
maintain Outperform rating with thetarget price of `1011 at 19XFY15E of `53.2
��
Domestic formulations faced hurdles during Q1FY14 on account of inventory adjustment
pre-implementation of pricing policy and trade related concerns but growth will be
normalized from Q3FY14. Its key segments like GI, Gynaec, respiratory & Derma
continues to do well while it needs to focus on CVS & CNS segments. We expect
company’s domestic formulation segment to show a CAGR of 14% over FY13-15E on back
of new launches.
Expect strong growth in Wellness segment
After posting muted growth in Wellness segment in FY12 due to stiff competition, growth
came back on track in FY13 with 19% growth on account of huge promotional spending.
Company maintains its leadership position in Sugarfree (92% mkt share) & revamped
entre everyuth brand version. We expect Wellness segment to show 16% CAGR over
FY13-15E.
US business to see traction by FY15 backed by niche pipeline
Cadila is the fastest growing company in US which showed 39% CAGR over FY08-13.
However growth will be impacted in FY14 due to delay in new approvals & price erosion
in existing products. Management expects only 5-8 approvals in FY14. However shortfall
in FY14 will be covered in FY15 where we will see traction in business as the company has
strong pipeline in US. Cumulatively ANDA filings stand at 179 out of which 78 are
approved. Total filings include 4 topicals, 5 nasal sprays & 26 injectables (19- through
patners & 7-owned) out of which 8 injectables (7 through patners & 1 owned) are
approved with 6 launches (5 through partners & 1owned). Since Moraiya facility received
USFDA clearance in July 2012, growth in US is expected to be strong as it has done
injectable filings & nasal sprays from this facility. Cadila has also started filing for
transdermals (3 filed) & expecting approval in FY15 which will be the next long term
growth driver for the US market. Nesher acquisition will also prove beneficial in the long
run as it is in a niche segment of controlled substances. Till date it has launched 2
products & likely to launch 2 products (1 controlled substances) in 2013. We expect
revenue CAGR of 18% over FY13-15E.
Emerging markets to continue to show momentum
Company has filed cumulatively 102 dossiers in Brazil out of which 40 are approved.
Company has filed 6 dossiers with regulatory authority in Mexico taking cumulative filings
to 20. We expect Cadila to post steady growth in emerging markets like South Africa,
Brazil & Asia Pacific.
Retain Outperform rating with the target price of `1011
At CMP of `708 the stock is trading at 17.2xFY14E & 13.3xFY15E EPS. Going ahead, we
believe domestic growth will be normalized from Q3FY14 and will be able to grow above
industry growth rate in FY15 & US business to see lower growth in FY14 due to delay in
approvals but it will ramp up in FY15. We continue to remain positive on stock &
maintain Outperform rating with thetarget price of `1011 at 19XFY15E of `53.2
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