Angel Broking neutral on Cadila Healthcare

Angel Broking's report on Cadila Healthcare

For 1QFY2016, Cadila Healthcare (Cadila) posted results lower than expected. The company posted sales of `2,378cr (V/s an expected `2,451cr), a yoy growth of 17.7%, driven by exports. Domestic formulations (`742cr) grew by 9.9% yoy, while exports (`1,249cr) grew by 27.9% yoy. On the operating front, the gross margin came in at 64.3% V/s 64.2% expected and V/s 59.7% in 1QFY2015. The OPM came in at 20.1% (V/s 20.5% expected), a yoy expansion of 304bp. The  company posted an Adj net profit of `352cr for the quarter (V/s `372cr expected), a yoy growth of 50.1%. We recommend a Neutral rating on the stock.

Results lower than expected: The company posted sales of `2,378cr for the quarter (V/s `2,451cr expected) a yoy growth of 17.7%, driven by exports. Domestic formulations (`742cr) grew by 9.9% yoy, while exports (`1,249cr) grew by 27.9% yoy. The key export markets to post a robust growth were the US (37.5% yoy growth), and Emerging Markets Formulations (19.5% yoy growth). On the operating front, the gross margins came in 64.3% V/s 64.2% expected and V/s 59.7% in 1QFY2015. The OPM came in at 20.1% (V/s 20.5% expected), a yoy expansion of 304bp. The company posted an Adj. net profit of `352cr (V/s`372cr expected), a yoy growth of 50.1%.

Outlook and valuation: We expect Cadila’s net sales to post an 18.0% CAGR to `11,840cr and EPS to report a 23.0% CAGR to `85.6 over FY2015–17E. We maintain our Neutral rating on the stock, says Angel Broking research report.

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