Cadila Healthcare - Disappointing Performance, Downgrade to SELL - Karvy

Cadila's revenues increased 16 % YoY to Rs16,041mn as against our expectations of Rs16,743mn. Operating margins were lower by 300bps to 15.9%. Net Profit has shown de-growth of -31%YoY and 8.2%Q-o-Q to Rs. 1029 mn in Q3FY13. We downgrade our earnings and rating to SELL.

Quarter Details: Domestic formulations grew by 21.4 % to Rs 5699mn lower than our estimates of Rs.6100mn due to Biochem, while Exports Formulations grew 13.5% at Rs7825mn as against our estimates of Rs.8323mn. US was above our estimates while Brazil and JVs were disappointing. The Company's EBITDA stood at 15.9% (lower than our expectation of 19.6%) in Q3FY13 and lower than 19% reported in Q3FY12. The Company's net profit stood at Rs. 1029 mn in Q3FY13, as against our estimate of Rs. 1870 mn. (De-growth of -31%YoY and growth of 8.2% QoQ)

Outlook & Valuation:

We downgrade our revenues for FY13 and FY14 by around 2 % on back of Brazil, Domestic formulations and JV sales. We downgrade EDBITAM from 19.8 % to 18.4 % and from 20.4 % to 19.3 % due to lower gross margins and fixed nature of certain costs. We downgrade our EPS by 22.4 % for FY13E to Rs 27.9 and for FY14E by 15.1 % to Rs 38. We downgrade our price target by 17.6% to Rs 722 based on 19x FY 2014E. We downgrade the stock to SELL.

Source : Equity Bulls

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