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Cadila Healthcare (CDH)
Pharmaceuticals
Operational PAT lower than expected. Operational PAT at Rs1.95 bn was up 19%
yoy though 11% lower than our estimate due to (1) poor sales growth at 11% across
all geographies except Europe, JV sales; high base effect in 4QFY11 and (2) lower
EBITDA margin at 19.6%, 180 bps lower than our estimate. We reduce our FY2012-
13E estimates by 2-3%. At current levels, Cadila trades at 23X FY12E EPS. Despite poor
quarter, we believe premium valuation should sustain in light of (1) strong management
outlook for 9MFY12E, we estimate 20% PAT growth in line with operational PAT growth
achieved in 1QFY12E, (2) strong PAT growth of 20% in FY2012-14E, (3) best-in-class
ROE of over 30%. Downgrade to ADD (from BUY) with PT at Rs1,090 (down 3%).
Sales at Rs11.7 bn 12% lower than our est., poor show across geographies except JV sales, Europe
Sales growth was unusually poor at 11% versus our estimate of 27% primarily due to strong sales
push in 4QFY11 in key geographies such as US, India, emerging markets whereas consumer
segment grew only 5% yoy in 1QFY12 due to (1) change in distribution policy, (2) Nutralite
production halt, (3) price increases in certain products. However, product launch rates in both
India and US were healthy with 20 and 3 products launched during the quarter, respectively.
Reported PAT 5% higher than estimate while operational PAT was 11% lower
(1) Poor sales growth, (2) lower proportion of sales from profitable domestic business, (3) front
loading of expenses from Sikkim facility which did not add to topline led to lower EBITDA margin
at 19.6%, 180 bps lower than our estimate. Higher other income on account of Abbot income
(not in our estimate) and lower tax at 11% (versus our estimate of 15%) led to higher reported
PAT at Rs2.3 bn, 5% higher than our estimate.
We reduce our FY2012-13E estimates by 2-3%
We reduce our FY2012-13E PAT mainly on account of (1) lower US base business sales to US$264
mn in FY2012E, 25% growth yoy in rupee terms, (2) lower consumer segment sales growth at
20% in FY2012E versus 25% earlier and (3) lower margin at 20.3% in FY2012E. We maintain
overall India sales growth at 16-17% In FY2012-13E, factor in flat margin in FY2012E (adjusted for
one-time bonus expense in FY2011) and 80 bps margin expansion in FY2013E, and include sales
of US$30mn and US$20 mn from Nesher Pharma and Abbott in FY2013E.
We move rating a notch lower to ADD (from BUY) with PT at Rs1,090 (down 3%) 22X FY2013E EPS
Despite rich valuations and poor quarter operationally, we believe underlying growth is intact with
20% estimated PAT growth in FY2012-14E (19% operational PAT growth reported in 1QFY12).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Cadila Healthcare (CDH)
Pharmaceuticals
Operational PAT lower than expected. Operational PAT at Rs1.95 bn was up 19%
yoy though 11% lower than our estimate due to (1) poor sales growth at 11% across
all geographies except Europe, JV sales; high base effect in 4QFY11 and (2) lower
EBITDA margin at 19.6%, 180 bps lower than our estimate. We reduce our FY2012-
13E estimates by 2-3%. At current levels, Cadila trades at 23X FY12E EPS. Despite poor
quarter, we believe premium valuation should sustain in light of (1) strong management
outlook for 9MFY12E, we estimate 20% PAT growth in line with operational PAT growth
achieved in 1QFY12E, (2) strong PAT growth of 20% in FY2012-14E, (3) best-in-class
ROE of over 30%. Downgrade to ADD (from BUY) with PT at Rs1,090 (down 3%).
Sales at Rs11.7 bn 12% lower than our est., poor show across geographies except JV sales, Europe
Sales growth was unusually poor at 11% versus our estimate of 27% primarily due to strong sales
push in 4QFY11 in key geographies such as US, India, emerging markets whereas consumer
segment grew only 5% yoy in 1QFY12 due to (1) change in distribution policy, (2) Nutralite
production halt, (3) price increases in certain products. However, product launch rates in both
India and US were healthy with 20 and 3 products launched during the quarter, respectively.
Reported PAT 5% higher than estimate while operational PAT was 11% lower
(1) Poor sales growth, (2) lower proportion of sales from profitable domestic business, (3) front
loading of expenses from Sikkim facility which did not add to topline led to lower EBITDA margin
at 19.6%, 180 bps lower than our estimate. Higher other income on account of Abbot income
(not in our estimate) and lower tax at 11% (versus our estimate of 15%) led to higher reported
PAT at Rs2.3 bn, 5% higher than our estimate.
We reduce our FY2012-13E estimates by 2-3%
We reduce our FY2012-13E PAT mainly on account of (1) lower US base business sales to US$264
mn in FY2012E, 25% growth yoy in rupee terms, (2) lower consumer segment sales growth at
20% in FY2012E versus 25% earlier and (3) lower margin at 20.3% in FY2012E. We maintain
overall India sales growth at 16-17% In FY2012-13E, factor in flat margin in FY2012E (adjusted for
one-time bonus expense in FY2011) and 80 bps margin expansion in FY2013E, and include sales
of US$30mn and US$20 mn from Nesher Pharma and Abbott in FY2013E.
We move rating a notch lower to ADD (from BUY) with PT at Rs1,090 (down 3%) 22X FY2013E EPS
Despite rich valuations and poor quarter operationally, we believe underlying growth is intact with
20% estimated PAT growth in FY2012-14E (19% operational PAT growth reported in 1QFY12).
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