For 2QFY2016, Cadila Healthcare (Cadila) posted better than expected on the
OPM front. Sales came in at Rs2,374cr (V/s our estimate of Rs2,500cr), a yoy
growth of 15.0%. In terms of geographies, US, India and Emerging Markets grew
by 25.2%, 10.3% and 34.9% yoy, respectively. On the operating front, the GPM
came in at 66.0% V/s 60.2% in 2QFY2015, leading the OPM to come in at
22.6% V/s 18.2% in 2QFY2015. This was against our expectation of an OPM of
20.3%. The expansion in the OPM was lesser than in the GPM owing to a
significant rise in R&D expenditure, which rose by 46.7% yoy. Thus, the net profit
came in at Rs391cr (V/s our estimate of Rs367cr), ie a yoy growth of 40.7%. We
maintain our Neutral stance on the stock.
Results better than expected at the OPM level: The company posted better than
expected results on the OPM front, for the quarter. Sales came in at Rs2,374cr (V/s
our estimate of Rs2,500cr), a yoy growth of 15.0%. In terms of geographies, US,
India and Emerging Markets grew by 25.2%, 10.3% and 34.9% yoy, respectively.
On the operating front, the GPM came in at 66.0% V/s 60.2% in 2QFY2015,
leading the OPM to come in at 22.6% V/s 18.2% in 2QFY2015. This was against
our expectation of an OPM of 20.3%. The expansion in the OPM was lesser than
in the GPM owing to a significant rise in R&D expenditure, which rose by 46.7%
yoy. The R&D expenditure as a % of sales came in at 7.3% V/s 5.7% in
2QFY2015. This led the net profit to come in at Rs391cr (V/s our estimate of
Rs367cr), a yoy growth of 40.7%.
Outlook and valuation: We expect Cadila’s net sales to post an 18.0% CAGR
to Rs11,840cr and EPS to report a 24.6% CAGR to Rs17.6 over FY2015–17E.
We maintain our Neutral rating on the stock.
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