Cadila Healthcare

Cadila Healthcare is targeting revenues of US$1 bn in FY2011E versus revenues of US$620 mn reported in FY2009. CDH is ranked fifth in India by revenue. International generic sales accounted for a third of the company’s FY2009 revenues. The company has a presence in niche consumer segments in India. CDH has invested in NCE research in three segments but benefits from these investments are not yet visible.

Some updates on the Company:

Cadila Healthcare has created multiple platforms to ensure stable growth over the medium term. France,US and Japan are expected to drive revenues in the near term. Despite the Rupee appreciation and higher R&D costs in FY2010-11E, the margins are expected to be stable.

The Indian finished dosage remains the most important segment in valuating the company. This is followed by the US market and consumer/animal healthcare business.Early success in the transdermal and oncology segments can drive the price even higher.

Key risks :

Regulatory risks in the form of price controls by the government are the most important. Other industry risks relate to (1) pricing reforms in Europe, (2) increasing consolidation of the global generics industry, (3) global generics players using India’s manufacturing cost advantage, and (4) continuing volatility of the Indian Rupee against the US Dollar.

The EPS for FY09 is Rs.22 and is expected EPS for FY10 is Rs.33. At current market price of Rs.650, the stock is trading at forward p/e of 19. The stock is worth looking at during sharp declines.

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