Cadila Healthcare Ltd. results are below our expectations. Though, year on year basis sales have grown by 6.5% (expected 10.5%), it has infact showed a negative growth (2.7%) on a sequential basis. Operating margins have dipped from 18% in Q3FY01 to a paltry 5.9% in Q4FY01. The sudden drop in operating margins is unexplained at this point of time. Thanks to substantial reduction in interest cost and income from parking of IPO funds, bottomline showed an apparent growth of 64%.
Operating Profit (EBDIT)
Operating Profit Margin (%)
Profit before Tax
Profit after Tax/(Loss)
Net profit margin (%)
No. of Shares (eoy) (m)
Diluted Earnings per share*
P/E (at current price)
**- Sequential Growth
In a related development , the company recently acquired a 27.7% stake in German Remedies at a cost of Rs 1.49 bn. The acquisition was effectively valued at 2.4 times German Remedies sales. It also acquired perpetual rights to market five leading brands from Asta (one of the promoter of German Remedies). The financing of the same would be done through a mix of debt (Rs 2,000 m) and internal accruals. The company expects to leverage this acquisition to enter high margin therapeutic segments like respiratory, gynaecology and oncology, where German Remedies has a strong presence.
Sales (In Rs. Mn)
Operating Profit Margins
P/e (FY 2001) (x)
Market Capitalisation (In Rs Mn)
Market Cap/Sales (x)
At the current market price of Rs 101, the stock is valued at 9.3 times its FY01 earnings and 1.2 times its current market capitalisation to sales. The prospects of the company would depend on how fast the ambitious acquisitions pays off. The company also needs to gear up growth, particularly given the fact that its peers like Sun Pharma are growing at much faster rates.
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