Cadila Healthcare June Quarter Result And Conference Call Update

Ahmadabad based Pharma Company, Cadila Healthcare has posted 30 per cent rise in its top line to Rs 1546 crore. Total income rose by 28 per cent to Rs 1594 crore. Due to the sharp rupee depreciation, higher tax charges and increased interest payments, the net profit declined by 14 per cent to Rs 201 crore. We however believe that it has posted very good numbers indicating that it is well on path to achieve the guided USD 3 billion sales in next 3-4 years.

On the business front, the growth has been good across all the segments. Domestic revenues were up 27 per cent to Rs 581 crore. Company, during the quarter launched 37 new products. In the last fiscal Cadila acquired Pharma Company Biochem. This also pushed the domestic revenues up. Excluding the Biochem numbers, the domestic growth has been 16 per cent.

The US market grew by 50 per cent to Rs 359 crore. In Brazil where Indian companies are facing some regulatory pressure in terms of delay in approvals, the growth has been 37 per cent to Rs 64 crore. The emerging markets grew by whooping 84 per cent to Rs 72 crore. Overall all the markets have performed well.

Cadila’s OTC business, Zydus Wellness posted 13% rise in the revenues to Rs 103 crore  . Its net profit was up 60% to Rs 13.5 crore. The Animal Health business posted robust 58 per cent growth to Rs 59 crore on the back of an acquisition in Germany last fiscal.

In the June quarter of last fiscal company had forex gain as well as one time income, excluding which company has posted rise in the EBITDA margins from 21.2 per cent to Rs 22 per cent. Company in this quarter had incurred forex loss of Rs 11.6 crore compared profit of Rs 11.5 crore in the corresponding quarter last fiscal.

Interest expenses during the quarter rose sharply from Rs 11.15 crore to Rs 45.39 crore. The effective tax rate was also up to 24.6 per cent which saw total taxes going up from Rs 28 crore to Rs 65 crore. These two numbers draw the net profit down by 14 per cent to Rs 201 crore.

1. Company expects to file about 10 products in US this year. The approvals will flow after the USFDA approval of Moraiya facility.
2. The tax rate during the full year will remain in the range of 22-24 per cent.
3. The margins in Biochem have risen but company has not disclosed it. It also expects the margin expansion going ahead in this year.
4. Management is also expecting 100 basis pints rise in the EBITDA margins of overall business on consolidated level
5. The competition in OTC segment is strong but Zydus Wellness is adapting to the competition and is on path of recovery.
6. Company is also reviewing its Hedging policy; currently it has a position of USD 80 million hedges expiring by end of this calendar year.
7. Debt to equity ratio is at 0.7x which is well above its comfortable level of 0.5x. Company has said that it will not raise more debt. In case it goes for acquisition then it will use other means of financing. Equity dilution will be the last preferred option in that case.
8. We understand that company will monetize some products from its First To File portfolio.
9. It also expects to add more products in its Joint Ventures with Bayer and Hospira.

With the high confidence the management has, we see that the growth story will continue. We have already covered this company in our magazine with a ‘Buy’ call on it. We reiterate the same and advice our readers to buy the stock on every dip.