Cadila sees Q1 earnings driven by strong domestic performance
Premium- Cadila has entered into a supply and commercialization agreement with TLC, to market Liposomal Amphotericin B, a critical drug to treat Black Fungus or Mucormycosis in India
Cadila Healthcare Ltd, as anticipated, reported strong growth in the domestic arena. The India sales at ₹1,357 crore, grew 64% year-on-year and 33% sequentially. While growth was largely driven by the covid treatment portfolio, the company indicated that base business performance was also strong.
It 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 1QFY22. The company derives significant sales contributions from the domestic formulations business (more than a third during Q1) and the outlook remains strong.
The much-awaited approval of covid-19 vaccine keeps the street eager and analysts upbeat about the future prospects. The company has also entered into a supply and commercialization agreement with TLC, to market Liposomal Amphotericin B, a critical drug to treat Black Fungus or Mucormycosis in India.
However, the US business performance remains weak for the company that faced the heat of pricing pressures. US sales were down 4% sequentially and 11% year-on-year. The company said that the pricing pressure in some of the products and settling of supply issues in the US market resulted in limited one time buy opportunities, which lead to a sequential de-growth.
Despite increased competition, US generics business volumes continue to grow, and the company has a strong generics pipeline with about 92 products pending approval. With about 30 launches planned in the year the street will be watchful on the pick up in US growth, moving forward. Meanwhile, the company is eyeing growth to be led by injectables portfolio and aims to achieve $250 million revenues from the geography.
While weak US sales took away some benefits from strong growth in the domestic markets, emerging markets contributed well, growin in double-digit. At the consolidated level, wellness portfolio performance was satisfactory with 5 out of 7 brands seeing double-digit growth.
Analysts at JM Financial Institutional Securities said that “Cadila’s 1QFY22 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% year-on-year. Tight cost controls and strong domestic growth aided Ebitda growth of 16% sequentially and 18% year-on-year. Ebitda margin improved by 70 bps y-o-y to 23.2% despite US-driven gross margin contraction.
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Analysts at Motilal Oswal Financial Services Ltd said, “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".
“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 & domestic performance," they added.
Owing to disappointment in the US growth, the stock has lost more than 5% in two trading sessions.
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