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Cadila Healthcare 2QFY2013 performance highlights and results update

Contributed by Angel Broking

Cadila Healthcare (Cadila) reported just-in-line expected numbers for 2QFY2013. The company’s sales for the quarter were just-in-line with estimates at Rs.1,513cr. On the operating front, the gross and operating margins reported a dip on a yoy basis. This along with a higher tax expense during the quarter resulted in net profit coming in a tad lower than expectations. Overall, the adjusted net profit came in at Rs.158cr, a dip of 9.5%. The management expects the company to be a US$3bn company by 2015. We recommend an Accumulate on the stock.

Sales just in line with expectations: For 2QFY2013, Cadila reported net sales of Rs.1,513cr, up 24.0% yoy, just-in-line with our estimate of Rs.1,544cr. This was driven by a 25.2% yoy domestic market growth, while exports on the other hand grew strongly by 17.5% yoy during the period. During the quarter, the company’s gross margin dipped to 62.2%, a contraction of 574bps. This lead to the OPM contracting to 17.9% (24.0%), a contraction of 605bps. This along with the higher tax expense during the quarter, led the adjusted net profit to decline by 9.5% yoy to Rs.158cr (Rs.174cr), almost in line with our estimate of Rs.167cr.

Outlook and valuation: We expect Cadila’s net sales to post a 17.3% CAGR to Rs.7,386cr and EPS to report an 18.7% CAGR to Rs.44.8 over FY2012–14E. We recommend an Accumulate on the stock.