CADILLA HEALTHCARE

Cadilla Healthcare was deep in the red after it posted a set of dismal number for Q3FY13. A 20% (YoY) surge in operating expenses and a whopping 270% jump in tax outgo for the quarter pulled down the bottomline. On a consolidates basis, the company posted a 15% rise in net sales at Rs.1561 crore but post all these expenses, mainly tax, net profit at Rs.103 crore was down 31%. Yet, sequentially, it was up 8.5%. EBITDA margin fell 349 bps and this can be blamed on the higher R&D cost incurred on ANDA fillings and marketing expenditure for Zydus Wellness was also up. What also did not go in favor of the margins was the lack of new product launches in USA. The lower sales in Brazil were due to a month long strike by its regulatory authority ANVISA, which in turn affected clearance of goods imported.

Its 39% of the topline comes from Indian formulation business and this YoY, showed a growth of 21%. This was thanks to the 15 new launches including line-extensions. USA contributes 24% to the topline and this sector grew 14%. At the end of FY13, the company hopes to launch 4 products out of which 3 are control substance. It has a total 90 ANDA (55 oral) pending including control manufacturing. It is commence commercial supply to Abbott for out-licensing deal of more than 30 products in the emerging markets from Q4 FY13. For 9MFY13, consolidated net profit was at Rs.399 crore and this is far away from FY12 net of Rs.652 crore. So unless the company has an exceptional Q4, it could end FY13 on a subdued note. Various brokerages have downgraded the stock post the Q3 numbers. Credit Suisse downgraded the stock to "neutral" from "outperform", citing delay in contribution from higher margin products.