Cadila Healthcare’s (CDH) Q4 results were above our expectations. Revenue recorded a 16% growth y-o-y, 2% above our estimates.
Ebitda was R530 crore (adjusted for forex loss), 8%/14% ahead of our/consensus estimates respectively. Ebitda margin was healthy at 23.7%, recording 480-bps and 240-bps improvement y-o-y and q-o-q, respectively.
We believe the improved pricing environment and market share gains in Hydroxychloroquibe Sulphate (HCQS) in the US were key contributors to improved financial performance.
Reported CDH recorded forex loss of R40 crore in the quarter. Adjusted for forex loss and exceptional items, the net earnings were 15% ahead of our estimates. In terms of segmental performance, US with 44% growth y-o-y and $13-million rise Q-Q was the strongest segment. Growth at most of the other segments was below our estimates.
Lack of product approvals, pricing pressure and adverse currency movement impacted sales growth in ex US segments.
We factor in FY15 results (higher contribution from HCQS), positive management commentary and change in currencies into our estimates. Our earnings estimate for FY16/17 change by 11.5%/9.9%, respectively. We value the base business (ex-Asacol HD) at 19x FY17F EPS of R90.9. We value the Asacol HD opportunity at 8x FY17F EPS of R18.3 to arrive at a valuation of R146/share. US product approvals remain the key catalyst.