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7/29/2019 Cadila Healthcare, 12th February 2013
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Please refer to important disclosures at the end of this report 1
Other income 60 42 44.5 49 22.7
Gross profit 1023 941 8.7 290 252.5
Operating profit 212 271 (21.9) 231 (8.2)
Source: Company, Angel Research
Cadila Healthcare (Cadila) reported below-expected numbers for 3QFY2013,
except on the sales front. The companys sales for the quarter at `1,561cr, were
just-in-line with our estimates. On the operating front, the gross and operating
margins came in below our expectations. This along with a higher tax expense
during the quarter resulted in the net profit coming in a tad lower than
expectations. Overall, the adjusted net profit came in at `103cr, a dip of 31.0%
yoy. The Management expects the company to be a US$3bn one, by FY2016.
: For 3QFY2013, Cadila reported net sales of `1,561cr,
up 15.4% yoy, just-in-line with our estimate of `1,559cr. Sales were driven by a
21.8% yoy growth in the domestic markets, while exports grew only by 12.9% yoy
during the period. During the quarter, the companys gross margin dipped to65.5%, a contraction of 104bp. This led to the OPM to contract to 13.6% (17.1%
in 3QFY2012), ie by 349bp yoy. This along with the higher tax expense during
the quarter, led the adjusted net profit to decline by 31.0% yoy to `103cr (`149cr
in 3QFY2012), below our estimate of `182cr.
: We expect Cadilas net sales to post a 17.3% CAGR to
`7,386cr and EPS to report an 11.5% CAGR to `39.5 over FY201214.
% chg 24.9 14.0 20.8 20.1
% chg 39.6 (8.6) (17.1) 49.9
EBITDA margin (%) 19.3 17.9 16.0 18.0
P/E (x) 22.8 24.9 30.0 20.0
RoE (%) 37.4 27.4 19.6 24.8
RoCE (%) 22.9 17.3 13.7 17.2
P/BV (x) 7.5 6.3 5.5 4.5
EV/Sales (x) 3.8 3.5 3.0 2.4
EV/EBITDA (x) 19.6 19.6 18.6 13.6
Source: Company, Angel Research
CMP 791
Target Price -
Investment Period -
Stock Info
Sector
Bloomberg Code
Shareholding Pattern (%)
Promoters 74.8
MF / Banks / Indian Fls 15.2
FII / NRIs / OCBs 5.1
Indian Public / Others 4.9
Abs.(%) 3m 1yr 3yr
Sensex 3.4 10.0 22.3
Cadila (4.6) 19.2 68.9
5
19,485
5,904
CADI.BO
CDH@IN
Pharmaceutical
Avg. Daily Volume
Market Cap (`cr)
Beta
52 Week High / Low
16,202
0.3
964 / 661
14,349
Net debt (`cr) 1,944
Face Value (`)
BSE Sensex
Nifty
Reuters Code
+91 22 39357600 Ext: 6806
Performance Highlights
3QFY2013 Result Update | Pharmaceutical
February 8, 2013
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Cadila Healthcare | 3QFY2013 Result Update
February 8, 2013 2
Exhibit 1:3QFY2013 performance (Consolidated)
Other Income 60 42 44.5 49 22.7 190 155 22.1
Gross profit 1023 941 8.7 900 13.6 2967 2541 16.8
Operating profit 212 271 (21.9) 231 (8.2) 686 681 0.7
Financial Cost 48 41 18.2 59 (19.3) 146 147 (1.2)
Depreciation 50 43 14.8 47 6.6 136 119 14.7
PBT 175 229 (23.8) 174 0.3 594 570 4.1
Provision for taxation 63 71 (11.7) 17 263.1 178 69 156.1
Exceptional 0 53 0 0 0
Minority 9 9 (2.4) 7 24 19
Source: Company, Angel Research
Exhibit 2:3QFY2013 Actual vs Angel estimates
Other income 60 28 116.2
Operating profit 212 279 (24.0)
Tax 49 50 (1.2)
Source: Company, Angel Research
Revenue up 15.4% yoy, just-in-line with estimates
For 3QFY2013, Cadila reported net sales of `1,561cr, up 15.4% yoy and higher
than our estimate of `1,559cr, driven by domestic markets, which grew by 25.3%
yoy. Organic growth during the quarter in domestic formulations has been around
18% yoy. Exports on the other hand grew by 12.9% yoy during the period. The
growth in exports came on the back of formulation exports, which grew by 13.5%
yoy during the period, impacted by slow growth in the US region, which grew by
14.1% yoy growth.
Europe and Japan, the other key geographies, posted a yoy growth of 25.9% and
17.0%, respectively. Brazil and other Emerging markets grew by (15.9%) yoy and
31.8% yoy respectively.
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Cadila Healthcare | 3QFY2013 Result Update
February 8, 2013 3
Exhibit 3:Sales trend in the US and Europe
344 353359 367
392
8971
85 76
112
0
40
80
120
160
200
240
280
320360
400
440
3QFY2012 4QFY2012 1QFY2013 2QFY2013 3QFY2013
US Europe
(`
cr)
Source: Company, Angel Research
For 3QFY2013, the domestic segment reported a 21.8% yoy growth, with the
formulations segment registering a 21.4% yoy growth. In the consumer healthcare
division, Cadila continued to post a growth of 27.8% in 2QFY2013. Animal
healthcare, on the other hand, grew by 21.4% yoy.
During the quarter, Cadila launched 15 new products, including line extensions in
domestic markets, of which 4 were for the first time in India.
Exhibit 4:Sales trend in domestic formulation and consumer divisions
469499
582 602 570
80 86103 97 102
0
100
200
300
400
500
600
700
3QFY2012 4QFY2012 1QFY2013 2QFY2013 3QFY2013
Domestic Formulation Consumer division
(`
cr)
Source: Company, Angel Research
On the CRAMS front, the company generated sales of `126cr (`121cr in
3QFY2012), reporting a growth of 4.2% yoy. For FY2013, the company guided for
a double digit growth in the CRAMS segment.
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Cadila Healthcare | 3QFY2013 Result Update
February 8, 2013 4
The companys gross margin dipped to 62.2%, a contraction of 574bp. This led
the OPM to contract to 13.6% (17.1% in 3QFY2012), ie a decline of 349bp.During the quarter, R&D expenditure was ~8.8% of net sales vs 8.2% of net sales
during 3QFY2012.
Exhibit 5:OPM trend
17.1 17.0 16.917.9
13.6
0
2
4
6
8
10
12
14
16
18
20
3QFY2012 4QFY2012 1QFY2013 2QFY2013 3QFY2013
(%
)
Source: Company, Angel Research
The adjusted net profit declined by 31.0%
yoy to `103cr (`149cr), lower than our estimate of `182cr.This was on account ofa higher tax expense during the quarter. Tax expenses during the quarter were at
`63cr (`17cr in 3QFY2012). Reported net profit came in at `103cr vs `149cr in
3QFY2012.
Exhibit 6:Adjusted Net profit trend
149
171
195
149
103
0
50
100
150
200
250
3QFY2012 4QFY2012 1QFY2013 2QFY2013 3QFY2013
(`cr)
Source: Company, Angel Research
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Cadila Healthcare | 3QFY2013 Result Update
February 8, 2013 5
Concall takeaways
The Management maintained its vision of the company being a US$3bn
company by FY2016. The key growth drivers for the same would be the US
and Indian markets.
The Management guided for an 18% growth in the domestic business in
FY2013 on the back of Biochems acquisition and new product launches.
The company has filed 18 new ANDAs in 3QFY2013.
For FY2014, the company will launch 19 orals and 1 transdermal.
The company expects a double-digit growth in its consumer healthcare
business in FY2013, with OPM of around 25%.
Operating margin is expected to improve to 18-19% in FY2014.
The Management has guided for capex of `500cr-650cr for FY2014.
Recommendation rationale
: Cadila is the fifth largest player in the domestic market,
with sales of about `2,454cr in FY2012, contributing 47% to its top-line. The
company enjoys a leadership position in the CVS, GI, women healthcare and
respiratory segments, with a sales force of 4,500. The company, on an aggressive
front, launched more than 40 new products in FY2012, including line extensions,
of which 10 were for the first time. During FY2008-12, the company reported an
~13% CAGR in its top-line in the domestic formulation business. Going forward,
the company expects the segment to grow at an above-industry average rate of
1518% on the back of new product launches and field force expansion.
Further, the company has a strong consumer division through its stake in Zydus
Wellness, which has premium brands such as Sugarfree, Everyuth and Nutralite,
under its umbrella. This segment which contributes ~7% of sales, posted a dip in
sales during the quarter but is expected to post a double digit growth in FY2013.
: Cadila has a two-fold focus on exports, wherein it is
targeting developed as well as emerging markets, which contributed around 53%
to its FY2012 top-line. The company has developed a formidable presence in thedeveloped markets of US, Europe (France and Spain) and Japan. In the US, the
company achieved a critical scale of US$241mn on the sales front in FY2012,
primarily driven by market share gains in the US, as some key competitors had
manufacturing constraints due to the USFDA issue. In Europe, the companys
growth going forward would be driven by new product launches and improvement
in margin by product transfer to Indian facilities. In emerging markets, Cadila is
aggressively targeting Brazil and the CIS region.
Outlook and valuation
We expect Cadilas net sales to post a 17.3% CAGR to`7
,386cr and EPS to reportan 11.5% CAGR to `39.5 over FY201214.
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Cadila Healthcare | 3QFY2013 Result Update
February 8, 2013 6
Exhibit 7:Key Assumptions
Sales growth (%) 20.8 20.1
Growth in employee expenses (%) 14.6 26.6
Operating margins (excl tech. know-how fees) (%) 16.0 18.0
Capex (` cr) 614 650
Source: Company, Angel Research
Exhibit 8:One-year forward PE band
-
100
200
300
400
500
600
Apr-06
Jul-06
Oct-06
Jan-07
Apr-07
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
(`)
Price 10x 15x 20x 25x
Source: Company, Angel Research
Company background: Cadila Healthcares operations range from API to
formulations, animal health products and cosmeceuticals. The group has global
operations in four continents spread across USA, Europe, Japan, Brazil, South
Africa and 25 other emerging markets. Having already achieved the US$1bn mark
in 2011, the company aims at achieving sales of over US$3bn by 2015 and be a
research-driven pharmaceutical company by 2020.
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Cadila Healthcare | 3QFY2013 Result Update
February 8, 2013 7
Exhibit 9:Recommendation Summary
Alembic Pharma. Buy 74 95 28.4 7.8 0.9 5.0 17.1 29.4 30.2Aurobindo Pharma Accumulate 184 208 13.0 13.1 1.3 8.9 69.7 10.7 17.8
Cipla Accumulate 381 419 9.9 17.6 3.1 12.6 23.2 19.1 17.6
Dr Reddy's Neutral 1,857 - - 20.0 2.8 13.4 2.3 15.1 20.8
Dishman Pharma Buy 99 145 46.5 7.3 1.1 5.5 26.6 8.7 11.0
GSK Pharma* Neutral 2,093 - - 25.4 5.0 16.0 8.7 38.9 29.0
Indoco Remedies Buy 61 78 27.9 7.8 0.9 6.0 24.8 14.6 15.6
Ipca labs Buy 482 559 15.9 12.9 1.9 9.1 30.6 25.7 26.4
Lupin Accumulate 598 655 9.5 19.0 2.7 12.4 27.2 24.9 25.2
Ranbaxy* Neutral 429 - 13.3 1.5 9.3 50.3 29.7 16.1
Sanofi India* Neutral 2,292 - - 26.1 2.9 17.3 2.7 12.5 14.8
Sun Pharma Neutral 744 - - 25.0 5.0 11.7 0.1 27.6 19.2
Source: Company, Angel Research; Note: *December year ending
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Cadila Healthcare | 3QFY2013 Result Update
February 8, 2013 8
Profit & Loss statement (Consolidated)
Less: Excise duty 55 40 56 91 69 75
Other operating income 65 113 166 173 144 144
% chg 26.0 25.9 25.6 13.7 19.5 19.7
Total expenditure 2,322 2,881 3,604 4,179 5,163 6,059
Net raw materials 957 1,178 1,475 1,679 2,090 2,437
Other mfg costs 122 150 162 320 386 464
Personnel 311 393 549 751 861 1,090
Other 933 1,159 1,417 1,429 1,826 2,068
% chg 34.7 28.3 24.1 5.8 8.2 34.7
(% of Net Sales) 18.9 19.4 19.3 17.9 16.0 18.0
Depreciation& amortisation 112 134 127 158 240 293
% chg 40.9 30.5 31.1 2.6 (1.1) 38.8
(% of Net Sales) 15.0 15.7 16.4 14.8 12.1 14.0
Interest & other charges 121 82 70 185 175 175
Other income 20 16 13 53 43 43
(% of PBT) 5 3 2 7 6 4
% chg 19.3 53.9 39.0 (5.7) (4.7) 38.2
Extraordinary expense/(Inc.) 24 5 - 3 - -
Tax 66.6 74.1 106.4 113.0 189.2 209.2
(% of PBT) 18.0 12.3 12.6 14.2 25.0 20.0
Less: Minority interest (MI) (0.1) 22.9 25.1 28.6 28.6 28.6
% chg 23.8 55.5 39.6 (8.6) (17.1) 49.9
(% of Net Sales) 10.6 14.1 15.9 12.8 8.8 10.9
% chg 14.0 55.5 (7.0) (8.6) (17.1) 49.9
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Cadila Healthcare | 3QFY2013 Result Update
February 8, 2013 9
Balance Sheet (Consolidated)
Equity share capital 68 68 102 102 102 102Reserves & Surplus 1,167 1,560 2,069 2,471 2,835 3,468
Total loans 1,267 1,091 1,092 2,289 2,500 2,500
Other Long Term Liabilities 19 43 43 43
Long Term Provisions 62 79 76 76
Deferred tax liability 132 114 113 119 119 119
Gross block 1,809 2,074 2,317 3,008 3,858 4,508
Less: Acc. depreciation 757 873 969 1,175 1,415 1,708
Capital Work-in-Progress 189 248 431 484 248 248
Goodwill 478 484 484 1,015 1,015 1,015
Long Term Loans and Adv. 201 263 260 314
Current assets 1,605 1,775 2,125 2,760 2,872 3,692
Cash 252 251 295 467 168 426
Loans & advances 297 307 411 275 266 337
Other 1,056 1,217 1,420 2,019 2,438 2,929
Current liabilities 692 866 1,087 1,186 1,186 1,755
Mis. Exp. not written off - 10 - - - -
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Cadila Healthcare | 3QFY2013 Result Update
February 8, 2013 10
Cash Flow Statement (Consolidated)
Profit before tax 370 602 842 794 757 1,046
Depreciation 112 134 127 158 240 293(Inc)/Dec in Working Capital (137) 3 (286) (365) (411) 6
Less: Other income 20 16 13 53 43 43
Direct taxes paid 49 77 106 113 189 209
(Inc.)/Dec.in Fixed Assets (388) (299) (291) (743) (614) (650)
(Inc.)/Dec. in Investments (1) (84) (0) (4) - -
Other income 20 16 13 53 43 43
Issue of Equity - - - - - -
Inc./(Dec.) in loans 421 (177) 7 1,238 208 -
Dividend Paid (Incl. Tax) (71) 75 (176) (175) (175) (175)
Others (98) (177) (72) (619) (114) (53)
Inc./(Dec.) in Cash 159 (1) 45 171 (299) 258
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Cadila Healthcare | 3QFY2013 Result Update
February 8, 2013 11
Key Ratios
P/E (on FDEPS) 33.0 21.2 22.8 24.9 30.0 20.0P/CEPS 39.0 25.3 19.3 20.0 20.8 14.7
P/BV 13.1 9.9 7.5 6.3 5.5 4.5
Dividend yield (%) 0.4 0.6 0.8 1.0 1.0 1.0
EV/Sales 6.0 4.8 3.8 3.5 3.0 2.4
EV/EBITDA 31.8 24.5 19.6 19.6 18.6 13.6
EV / Total Assets 6.5 5.9 4.8 3.4 3.2 2.8
EPS (Basic) 24.0 37.3 34.7 31.7 26.3 39.5
EPS (fully diluted) 24.0 37.3 34.7 31.7 26.3 39.5
Cash EPS 20.3 31.2 40.9 39.6 38.1 53.8
DPS 3.0 5.0 6.0 8.0 8.0 8.0
Book Value 60.4 79.7 106.1 125.7 143.5 174.5
EBIT margin 15.0 15.7 16.4 14.8 12.1 14.0
Tax retention ratio 82.0 87.7 87.4 85.8 75.0 80.0
Asset turnover (x) 1.3 1.5 1.6 1.3 1.2 1.3
ROIC (Post-tax) 16.5 20.1 22.7 16.8 11.2 14.8
Cost of Debt (Post Tax) 9.4 6.1 5.6 9.4 5.5 5.6
Leverage (x) 0.8 0.7 0.4 0.5 0.8 0.7
Operating ROE 21.9 29.5 30.3 20.8 15.4 21.1
ROCE (Pre-tax) 18.3 20.2 22.9 17.3 13.7 17.2
Angel ROIC (Pre-tax) 26.3 30.9 34.9 27.2 19.9 23.2
ROE 28.5 35.6 37.4 27.4 19.6 24.8
Asset Turnover (Gross Block) 1.7 1.9 2.1 2.0 1.8 1.8
Inventory / Sales (days) 67 67 62 66 57 61
Receivables (days) 52 47 49 57 50 54
Payables (days) 70 72 80 136 61 77
WC cycle (ex-cash) (days) 74 65 55 64 76 73
Net debt to equity 0.8 0.5 0.4 0.7 0.8 0.6
Net debt to EBITDA 1.9 1.2 0.9 2.0 2.4 1.6
Int. Coverage (EBIT / Int.) 3.6 6.8 10.5 4.1 4.3 5.9
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Cadila Healthcare | 3QFY2013 Result Update
February 8 2013 12
Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com
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risks of such an investment.
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Disclosure of Interest Statement Cadila
1. Analyst ownership of the stock No
2. Angel and its Group companies ownership of the stock No
3. Angel and its Group companies' Directors ownership of the stock No
4. Broking relationship with company covered No
Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)Reduce (-5% to 15%) Sell (< -15%)
Note: We have not considered any Exposure below `1 lakh for Angel, its Group companies and Directors