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Cadila Healthcare: Base Price Erosion in US Markets Impact Profits - Views on News from Equitymaster
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  • Jul 6, 2017 - Cadila Healthcare: Base Price Erosion in US Markets Impact Profits

Cadila Healthcare: Base Price Erosion in US Markets Impact Profits
Jul 6, 2017

Cadila healthcare announced its 4QFY17 results. Sales increased by 5.8% YoY while net profits declined by 31.4% YoY. Here is our analysis of the results.

Performance summary
  • Net sales for the quarter for the quarter were up by 5.8% YoY. The top line was largely impacted due to sharp decline in its US business. This was on the back of pricing pressures in its base business, increase in competition for its key products vis buporion and HCQS in US and lack of new approvals for the US market.US business was down by 9.9% in FY17 over FY16. Domestic formulations segment witnessed growth of 8.9% in FY17 Y-o-Y. According to AWACS MAT March 2017 data, Anti-infectives was the largest contributor to the india business with a 14.8% share of its India revenues.
  • The US business witnessed pricing pressures, which in turn impacted the operating margins. On YoY basis, operating margins declined by 470 bps and stood at 18.4% for the quarter.
  • On the back of poor operating performance, net profits declined by 31.4% YoY.

    Financial performance: A snapshot
    (Rs m) 4QFY16 4QFY17 Change FY16 FY17 Change
    Net sales 23,228 24,642 6.1% 92,619 94,156 1.7%
    Other operating income 643 607 -5.6% 3,551 2,097  
    Total Sales 23,871 25,249 5.8% 96,170 96,253  
    Expenditure 18,369 20,613 12.2% 72,865 77,217 6.0%
    Operating profit (EBDITA) 5,502 4,636 -15.7% 23,305 19,036 -18.3%
    EBDITA margin (%) 23.0% 18.4%   24.2% 19.8%  
    Other income 393.0 731.0 86.0% 1,156 1,286 11.2%
    Interest (net) 158.0 99.0 -37.3% 528 450 -14.8%
    Depreciation 764.0 1,145.0 49.9% 2,921 3,750 28.4%
    Profit before tax 4,973 4,123 -17.1% 21,012 16,122 -23.3%
    Exceptional Items -8 0   25 0  
    Tax -627 19 -103.0% 1,774 1,289 -27.3%
    Share of Profit/(loss) of joint ventures 112 -179   430 338  
    Minority Interest       0 0  
    Profit after tax/(loss) 5,720 3,925 -31.4% 19,643 15,171 -22.8%
    Net profit margin (%) 24.6% 15.9%   21.2% 16.1%  
    No. of shares (m) 1,024 1,024   1,024 1,024  
    Diluted earnings per share (Rs) 5.59 3.83     14.8  
    Price to earnings ratio (x)*         35.4  

    *based on trailing 12 months earnings

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