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Cadila Healthcare 4QFY2014 performance highlights and results update

May 20, 2014, Tuesday, 07:23 GMT | 02:23 EST | 10:53 IST | 13:23 SGT
Contributed by Angel Broking


For 4QFY2014, Cadila Healthcare (Cadila) posted lower-than-expected numbers on the sales and OPM front, while the net profit came in higher than expected. The company posted a 22.4% yoy growth in net sales to Rs.1,916cr (lower than our expectation of Rs.1,979cr). Exports grew by 38.3% yoy, driven by US markets, which grew by 74.7% yoy. Other markets posted a lackluster growth during the period. The Indian formulations market grew by 9.4% yoy. The OPM for the quarter stood at 16.0% (V/s an expected 17.0%), expanding by 63bp yoy; a dip in R&D expenses by 25.0% yoy aided operating margin expansion during the period. The gross margin dipped by 100bp yoy. The adjusted net profit came in at Rs.251cr V/s an expected Rs.198cr, on back of lower-than-expected tax and depreciation expense. We maintain our Buy recommendation with a price target of Rs.1,080.

Net profit better than expectation: Cadila’s net profit for the quarter came in higher than expected while sales and OPM came in lower than expected. The company posted a strong quarter with a 22.4% yoy growth in net sales to Rs.1,916cr V/s an expected Rs.1,979cr. Exports grew by 38.3% yoy, driven by the US markets, which grew by 74.7% yoy. Other markets posted a lackluster growth during the period. The Indian formulations market grew by 9.4% yoy. The OPM for the quarter stood at 16.0% V/s an expected 17.0%, expanding by 63bp yoy; a dip in R&D expenses by 25.0% yoy aided operating margin expansion during the period. Gross margins dipped by 100bp yoy. The adj. net profit came in at Rs.251cr V/s an expected Rs.198cr, on back of lower-than-expected tax and depreciation expense.

Outlook and valuation: We expect Cadila’s net sales to post an 18.4% CAGR to Rs.9,905cr and EPS to report a 16.2% CAGR to Rs.54.0 over FY2014–16E. The stock is currently trading at a discount to its peers, even after factoring a conservative expansion in the OPM. Hence, we maintain Buy on the stock with a price target of Rs.1,080.