Emkay Global Financial's report on Cadila Healthcare
Cadila beat EBITDA estimates by 10%, helped by a steep cut in opex (down 340bps qoq). Revenue growth was in line as a sharp miss in the US was negated by strong growth in the API segment. EBITDA margins stood at 22.3% vs. the estimate of 20%. India business declined by 12.5% yoy, higher than the industry average, owing to portfolio skew toward acute therapies. The Wellness business fell 12% yoy in a seasonally strong quarter. The US decline (US$215mn vs. est. of US$235mn) was sharper than expected. CDH’s execution in non-US regions remains weak and we await signs of better execution, before turning constructive. Even within the US, it runs the risk of high profit concentration, with gAsacol HD (going off patent in Nov-21) accounting for 20-25% of profits.
We raise FY21/22/23E EPS by 16%/5%/5% on better margins. We retain Hold and UW in EAP, with a TP of Rs402, valuing the company at 23x June’22E EPS (vs. 20x Mar’20 EPS earlier) to factor in the strong near-term growth trajectory.