Domestic mkt buoys Cadila in Q1 while it eyes approval for covid vax
Premium- Pricing pressure in some of Cadila’s products and supply issues in the US have led to a sequential contraction
Cadila Healthcare Ltd’s June quarter (Q1FY22) earnings were lifted by its domestic operations. India sales at ₹1,357 crore were up 64% year-on-year (y-o-y) and 33% sequentially. This was largely driven by the covid treatment portfolio, though its mainstay business also showed decent performance.
Cadila gained market share in anti-diabetic, anti-infective and nutraceuticals therapeutic areas on a y-o-y basis. Excluding covid-related sales, domestic formulation sales grew 35% y-o-y in Q1. The firm derived more than a third contributions from India business during Q1, and here the outlook remains strong. Moreover, the company is awaiting approval of its covid-19 vaccine, which would be closely watched by the Street.
“While Cadila’s continued delivery on cost optimization offers comfort on the margin front (guidance of 80-100 bps margin improvement), the expected authorization for ZyCoV-D will remain a key driver of the stock price with near-term earnings delivery remaining contingent on the vaccine opportunity and domestic performance," analysts at Motilal Oswal Financial Services wrote in a note.
The flipside for Cadila is the lacklustre performance in the US due to pricing pressures. US sales were down 4% sequentially and 11% y-o-y. Pricing pressure in some of its products and supply issues in the US led to limited one-time buy opportunities, causing a sequential contraction. Despite stiff competition, US generics business volumes continue to grow and the firm has a strong generics pipeline with about 92 products pending approval. Along with 30 launches planned this year, analysts believe that the business will pick up. Meanwhile, Cadila is eyeing growth to be led by the injectables portfolio and aims to achieve $250 million revenues from the region. “We remain positive on Cadila on account of robust launch momentum in the US and domestic formulations, build-up of the complex product pipeline of own/in-licensed products, and completion of remediation at Moraiya in Gujarat," said the Motilal Oswal report.
Analysts at JM Financial Institutional Securities said that “Cadila’s Q1FY22 results were operationally in line with a weak US print being offset by a much stronger-than-expected domestic performance." Revenue grew 9% sequentially and 15% y-o-y . Tight cost controls and strong domestic growth aided growth of earnings before interest, taxes, depreciation and amortization (Ebitda) growth of 16% sequentially and 18% y-o-y. Ebitda margin improved by 70 basis points y-o-y to 23.2% despite the contraction in gross margin. Shares of Cadila have dropped more than 5% in the last two trading sessions because of the disappointing US growth.
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