Zydus Lifesciences Ltd. share price target

Margins decline on lower domestic revenues and Androgel Ag: Cadila's revenues increased by 9.8% on a YoY basis to Rs 35.8 bn (our estimate ofRs 35.4 bn) during the quarter. Operating margins increased to 23.5% (lower than our estimates of 25.4%) compared to 26.3% in Q3FY19 due to lower gross margins, higher staff cost and R & D expenses.

7 February 2019 Cadila Healthcares (CDH) revenue grew ~10% YoY to INR35.8b (v/s our est. of INR31b), largely led by 22% YoY growth in the US business (55% of sales) and strong ~84% YoY growth in Emerging Markets (~6% of sales). This was partially offset by ~8% YoY decline in domestic business domestic formulations (DF) (~24% of sales). Gross margin declined by ~340bp YoY and ~430bp QoQ to 62.2%, mainly due to change in the product mix and lower DF sales. EBITDA margin also contracted by ~250bp due to lower GM and higher R&D; spend (up ~100bp YoY as % of sales), which was partially offset by lower other expense (~220bp). Absolute EBITDA remained flat YoY at INR8.4b (v/s est. PAT declined by ~6% YoY to INR5.1b (v/s est. of INR4.2b) due to higher interest cost. For 9MFY19, sales stood at INR94.

Profits aided by better margins: Cadila's revenues decreased by 8.1% on a YoY basis to Rs 29.6bn (our estimateof Rs 29.8 bn) during the quarter. Operating margins increased to 23.2% (higher than our estimates of 21.1%) compared to 26.5% in Q2FY19 due to lower revenues, higher staff cost and other expenses.

Cadila's (CDH) Q2FY19 results were below our expectations. Sales/EBITDA/PAT were at Rs28.4bn/Rs5.7bn/Rs4.2bnn respectively. EBITDA margins were at 20.1% Vs. our estimates of 23.9% due to 1) lower off-take of Tamiflu given 7 players, 2) shift of AG to own ANDA in gAsacol not picked up in margins as the refection of only 1 month and 3) overall 2% QoQ price erosion in the US business. We expect domestic growth to be...

Maintain BUY with a revised TP of Rs 475 (22x Sep-20E EPS). Cadila (CDH) reported a muted quarter in 2QFY19 with revenue at Rs 29.6bn, down 8%YoY/ up 2%QoQ (in-line). Despite recovering 7%QoQ, the US business was down 20%YoY as it witnessed competition in gLialda. Margin at 23.2% was down 338bps YoY and up 94 bps QoQ (110bps miss) on account of higher forex loss at Rs 578mn (v/s Rs 135mn in 2QFY18) and increased R&D; spend of Rs 2.7bn, 9% of sales.

Q2FY19 results were stronger-than-expected on the operational front likely due to slower-than-expected price erosion in gLialda (ulcerative colitis). Revenues were in line with I-direct estimates Revenues de-grew 8.4% YoY to | 2961.2 crore (I-direct estimate: | 2986.6 crore) mainly due to high base of gLialda (ulcerative colitis), exclusivity in the US in Q2FY18 EBITDA margins contracted 323 bps to 23.2% (I-direct estimate: 20.5%), mainly on account of higher employee cost. EBITDA de-grew...

4 November 2018 CDHs revenue declined ~8% YoY to INR29.6b (our (-20% YoY) and flat growth in domestic formulation (DF) business. Gross margin expanded by ~50bp YoY/QoQ to 66.5%. EBITDA margin contracted by ~320bp (+100bp QoQ) to 23.2% due to higher employee expense (+340bp as % of sales) and other expenditure (+260bp). PAT declined ~17% YoY to INR4.2b (in-line). For 1HFY19, sales stood at INR56.1b (+6% YoY), EBITDA at INR13.3b (+17% YoY) and PAT at INR8.8b (+37% YoY). (1) CDH launched g-Asacol HD from its in-house manufacturing facility, which drove some improvement in margin. (2) CDH launched authorized generic version (AG) of g-Androgel in October 2018. (3) CDH has been able to maintain g-Lialda sales as competitor was not able to gain market share.

Revenue fell by 12.18% to Rs. 2768.7 Cr in Q1FY19 when compared to the previous quarter. Cadila Healthcare Ltd Q1FY19 results Comment

With a revised TP of 495 (24x on FY20E EPS), we maintain BUY. Cadila (CDH) continues to be at pace with double-digit YoY growth which started in 2QFY18. In 1QFY19, CDH reported revenue at Rs 28.9bn showing a growth of 32%YoY. EBITDA at Rs 6.4bn and PAT at Rs 4.6bn were up 133% and 233% YoY respectively. EBITDA margin came in at 22.3%, improving ~1000bpsYoY. This growth was primarily driven by the US and India businesses which were up 27% and 40% YoY respectively. Other major segments including LATAM and ROW markets and consumer wellness, animal health, and API businesses also saw double digit growth.

Cadila's (CDH) Q1FY19 results were mixed, sales were below by 3.4% while APAT was 9.8% above our expectations. We believe the miss at the margins were purely due to the erosion at gLialda and less off-take of Tamiflu. Sales grew by 29.6% YoY backed by strong growth in US formulations, India and LATAM regions. EBITDA margins were at 18.8% vs our estimates of 22% due to the sales mix. We expect domestic growth to be ahead of industry at 14-15%, while continuous launches in the US business to support growth. CDH plans to acquire 51% stake in Dehradunbased Windlas Healthcare Private Limited (WHPL) which will help ramp up the operations and increase our...