Technology

For 4QFY2016, Cadila Healthcare (Cadila) posted a robust performance on the
net profit front while sales came in lower than expected. Sales came in at
Rs2,376cr (V/s Rs2,400cr expected), growing by 5.7% yoy. On the operating front,
the OPM came in at 21.4% V/s 21.1% expected and V/s 20.2% in 4QFY2015.
The expansion in the OPM was driven by expansion in the GPM to 65.4% (V/s
64.3% in 4QFY2015) despite increase in staff expenditure and other expenditure
by 13.7% yoy 3.8% yoy respectively. R&D expenditure during the quarter came in
at 7.6% V/s 8.4% of sales in 4QFY2015. The Adj. net profit came in at Rs388cr V/s
Rs373cr expected and V/s Rs351cr in 4QFY2015, ie a yoy growth of 10.6%. We
maintain our Buy on the stock.
Results better than expected at the net profit level: For 4QFY2016, sales came in
at Rs2,342cr (V/s Rs2,400cr expected), growing by 5.7% yoy. On the operating
front, the OPM came in at 21.4% V/s 21.1% expected and V/s 20.2% in
4QFY2015. The expansion in the OPM was driven by expansion in the GPM to
65.4% (V/s 64.3% in 4QFY2015) and despite 13.7% yoy growth in the staff
expenditure and 3.8% yoy rise in other expenditure. R&D expenditure during the
quarter came in at 7.6% V/s 8.4% of sales in 4QFY2015. The Adj. net profit came
in at Rs388cr V/s Rs351cr in 4QFY2015, a yoy growth of 10.6%.
Outlook and valuation: We expect Cadila’s net sales to post a 17.8% CAGR to
Rs13,148cr and EPS to report a 15.8% CAGR to Rs20.0 over FY2016–18E. We
maintain our Buy rating on the stock.

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