ICICI Direct result update report on Cadila Healthcare:
Q1 revenues grew 4.1% YoY to Rs. 3640 crore (I-direct estimate: Rs. 3584 crore). US sales grew a robust 18.7% YoY to Rs. 1623 crore. Domestic formulations de-grew 11.2% YoY to Rs. 829 crore.
Wellness segment de-grew 12.3% YoY to Rs. 532 crore. API segment grew 89.2% YoY to 131 crore. EBITDA margins expanded 433 bps YoY to 22.4% (I-direct estimate: 19.4%) due to better gross margin performance and lower other expenses. Subsequently, EBITDA grew 29.0% YoY to Rs. 815 crore (I-direct estimate: Rs. 697 crore). PAT grew 49.4% YoY to Rs. 454 crore (I-direct estimates: Rs. 365 crore). Delta vis-à-vis EBITDA was mainly due to lower interest cost.
Valuation & Outlook:
Q1 revenues were in line with I-direct estimates whereas profitability was better-than-expected due to lower marketing, promotional expenses and higher gross margins. On the US front, the company plans to venture into complex injectables (45 filed ANDAs + 14 in-licensed products), which is likely to provide meaningful traction from FY23-24 onwards. Similarly, addition of biosimilars (like Trastuzumab, Adalimumab, Pegfilgrastim, Bevacizumab, etc.) for Emerging markets (like LatAm, MENA markets and South East Asia) are expected to provide growth impetus, going ahead.
The wellness segment performance hinges upon the company’s marketing & distribution prowess besides effective product positioning. India formulations business, after recent restructuring, is likely to stabilise. Both wellness, India formulations are likely to deliver steady growth in FY22. Overall, balance sheet reduction, Moraiya warning letter resolution, US base business performance in tough times are some important aspects to watch. We arrive at our target price of Rs. 470 based on 22x FY22E EPS of Rs. 21.3. (Share Manthan, 6th August 2020)
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