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Research
Cadila Healthcare - 1QFY2013 Result Update - Motilal Oswal
Posted On : 2012-08-08 19:55:37( TIMEZONE : IST )
Cadila's 1QFY13 performance was above our estimates. Key highlights:
- Core revenues grew 38% YoY to INR15.48b (v/s est of INR14.75b), core EBITDA grew 77% YoY to INR3.42b (v/s est of INR3.1b) while Adj PAT grew 36% YoY to INR1.95b (v/s est of INR931m). Reported revenues grew 24% YoY while reported EBITDA grew 13% YoY. Reported PAT declined by 15% due to absence of one-offs, forex losses and significant increase in tax rate.
- Core EBITDA grew 77% YoY to INR3.42b (v/s est of INR3.1b) driven mainly by richer product-mix leading to better gross margins. Core EBITDA margins at 22.1% were above estimate of 21%. Despite core EBITDA growth of 77%, Adj PAT grew by 36% due to forex losses of INR116m and a significant increase in tax rate from 10.9% to 24.5% YoY (driven by imposition of MAT on partnership firms).
- Guidance - Mgmt has reiterated its long-term topline guidance of USD3b by FY16 (implied CAGR of 26%) to be driven mainly by organic initiatives. Mgmt has also raised its tax rate guidance for FY13 from 20% to 22-24% considering the impact of application of MAT on partnership firms.
Valuation and view: Based on better than estimated 1QFY13 result, we have upgraded our FY13 & FY14 topline estimates by 2-3% and EBITDA estimates by 3-5%. However, our earnings estimates have not changed due to the increase in tax rate. We estimate strong 37% EPS CAGR for FY12-14 for the core operations excluding one-offs and RoCE of 25% and RoE of ~28% over the next two years. Sustaining double-digit growth without diluting return ratios has been CDH's key USP over the past few years. The company has chalked out a detailed plan to achieve USD3b in revenues in FY16. We believe it will be a difficult target to achieve this organically. Yet, expect strong earnings growth trajectory given (1) the strong product pipeline which includes many niche therapeutic categories, (2) presence in key geographies, and (3) strong growth expected in revenue from various JVs. The stock trades at 21.9x FY13E and 17.1x FY14E consolidated EPS. Maintain Buy with a target price of INR1,035 (20x FY14E EPS).
