Maintain Buy on Cadila Healthcare - Motilal Oswal

CADILA 3QFY11: In-line; Expect 23% EPS CAGR led by US, Consumer business & Hospira ramp-up

Topline growth was led by formulation exports (up 19.6% YoY) on the back of strong growth in North America, Latin America and Japan

Domestic formulations sales grew 16.8% YoY to Rs4b, Consumer business grew by 20.8% YoY to Rs908m while animal health & others grew by 12.2%.

EBITDA was in-line with estimates at Rs2.56b (up 22% YoY) while EBITDA margins improved by 80bp YoY to 22% (vs est 22.5%).

Adjusted PAT at Rs1.62b was in-line with estimates and was partly boosted by lower interest and depreciation charges. Depreciation at Rs334m was flat YoY.

Cadila's future growth will be led by increased traction in its international businesses, ramp-up in supplies to Hospira and sustained double-digit growth in domestic formulations & consumer businesses. We forecast EPS CAGR of 23% over FY10-12 and 24% for FY11-13. Cadila is currently valued at 25x FY11E, 20.2x FY12E and 16.3x FY13E EPS with RoE of ~30%. Maintain Buy with target price of Rs1,028 (22x FY13E EPS).

Source : Equity Bulls

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