REPORT On INTERNET RESEARCH

Submitted in partial fulfillment of the requirements of Master of Business Administration

Submitted by: MRIDUL KHANNA (2012 2014) Enrolment No.: 012012029

AURO University of Hospitality and Management Surat

CADILA HEALTHCARE LIMITED

Cadila Healthcare Limited is one among the leading privately held pharmaceutical companies in India that has been discovering, developing, manufacturing and marketing a broad range of healthcare products in over 50 countries around the world. It was incorporated in May 1995 under the flagship of Zydus Cadila Group and is now headquartered at Ahmedabad, India. It is listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Its current stock price at BSE as on 26 August 2013 is 656.80 and at NSE is 657.45. The following researches have been taken place in the year 2013 that has helped in better understanding of Cadila Healthcare Limited. Sushil Finance studied that Cadila has been facing challenges in the 1st quarter of financial year 14 along with the margin pressure owing to few reasons such as sluggish approval in the countries like US & Brazil, decreasing profitability from joint ventures and a modest growth in the domestic market. Moreover, it is believed that this sluggishness is likely to exist in FY14E. Due to close future outlook that is expected to continue challenging in the company, they have decided to revise their target price to Rs.860, however, they still maintain a BUY rating on the stock because it still provides dignified upside. According to Angel Broking, Cipla is reported to have performed better than expected in its set of results including sales and profitability for 1QFY2014. It is appreciated that the Management has provided a growth in revenue upto 14-15% (excluding Medpro). Furthermore, it is expected that the companys net sales would trigger to 15.5% CAGR to 10,796cr and EPS would be evident at 12.1% CAGR to 23.9 over FY2013-15E. Therefore, BUY is recommended. Motilal Oswal expects Cadila Healthcare to grow at 12.5% yoy in 1QFY14E and the exports is expected to grow upto 16% yoy while domestic formulations is anticipated to grow by 9% yoy. Furthermore, EBITDA is likely to decline by 5% yoy with the growth in adjusted PAT upto 1.3%, supported by lower taxes. They estimate a sturdy 25% EPA CAGR for FY13-15E. The stock should be maintained at BUY according to Motilal Oswal. FY13 was a challenging year for Cadila with pressure on the margins on account of slow approvals in the US, declining profitability from JVs and moderate growth in high margin geographies like Brazil. However, we believe the growth momentum in the domestic formulation space, consumer business & exports markets such as US (with increased approvals, 22 expected in FY14), Europe (driven by new product launches coupled with product transfer to Indian facilities), Emerging markets etc. is likely to pick up going forward. On the other hand, the key to margin expansion would be from increased traction in US, Brazil & cost containment measures (Prisim 2 initiatives) bearing fruit. Even though the near term would remain challenging for the company, we believe FY15E will be a significant year of margin expansion. We thereby introduce FY15E numbers & rollover our target to Rs. 955 (20x its FY15E EPS of Rs.47.8) recommending a buy," says Sushil Finance research report.

Anand Rathi reviewed Cadila and thus expects EBITDA margin to recover in 1QFY14 as numerous one-time expenses and disapproving revenue mix rigorously hit 3QFY13 and 4QFY13. Steady growth is expected in the US and India with an estimated 12.3% yoy growth in revenue. But, its adjusted net profit is estimated to grow merely by 6.4% yoy because of lesser EBITDA margin yoy and greater interest cost. They maintain BUY with a price target of 900. Motilal Oswal evaluated that Cipla had performed poorer than expected in 3QFY13 due to which Motilal Oswal lowered the estimated EBITDA of FY13E/FY14E/15E by 12%/8%/8%. It has been observed that 4 reasons led to the increased pressure on profitability those were: (1) nonrecurring expenses incurred in 3QFY13, (2) the slower than expected ramp-up at Moraiya facility, (3) adverse product mix in its US formulations and (4) continuing pressure in Brazil due to the ANVISA strike. Moreover, earnings approximations have also faced a substantial cut compelled by augmented tax rates and decreased interest rates. Although it has been believed that recovery would be witnessed in FY14, as maximum cost pressures will be absorbed by innovative launches in US, stabilization of processes in Brazil and growth stability in domestic operations. Thus, they suggest maintaining BUY with revised target price of Rs.995. According to Angel Broking, Cadila Healthcare produced below-expected results for 3QFY13 excluding the sales part. The sales were just in line with the expectations while operating margins were below the estimates. The Management has estimated the company to be a US$3BN one, by FY2016. Therefore, Angel Broking has recommended NEUTRAL rating on Cadila stock. In IndiaNiveshs view, after the launch of Cadilas first NCE (New Chemical Entity), Lipaglyn in the domestic market, it would not have major financial impacts in the immediate run. Though utmost outcome is dependent on the drug acceptability by the Physicians but the Management has assumed that this product would contribute Rs.1 billion in subsequent 5 years. Thus, it is expected that the stock will trade at P/E multiple of 20x of FY14E & 16.3x of estimate earnings of FY15E at CMP of Rs.775. Hence, IndiaNivesh recommends BUY rating on the stock having the target price of Rs.913. According to Abhishek Jain, Cadila healthcare earning is expected to grow at a CAGR of above 25% for next 2 to 3 years. At current market price, the stock is trading at 14.6 P/E multiple of FY14 Estimated EPS. Investors are recommended to buy the with medium to long term investment horizon.

REFERENCE
Angel Broking (2013). Buy Cadila Healthcare, Cipla: Angel Broking - Moneycontrol.com. Retrieved from http://www.moneycontrol.com/news/recommendations/buy-cadila-healthcarecipla-angel-broking_939502.html Dion Global Solutions Limited (2013). Cadila Healthcare > Listing Details > Pharmaceuticals > Listing Details of Cadila Healthcare - BSE: 532321, NSE: CADILAHC. Retrieved from http://www.moneycontrol.com/company-facts/cadilahealthcare/listing/CHC#CHC

IndiaNivesh (2013). Cadila announces launch of its first NCE LIPAGLYN into domestic markets - IndiaNivesh : ValueNotes.com. Retrieved from http://www.indianotes.com/InvestmentStrategy/Cadila-announces-launch-of-its-first-NCE-called-LIPAGLYN-into-domesticmarkets/182675/12540403.00/C Jain, A. (2013). Cadila Healthcare: Strong buy - Abhishek Jain : ValueNotes.com. Retrieved from http://www.indianotes.com/Investment-Strategy/Cadila-Healthcare-Strong-

buy/180437/12540403.00/C Motilal Oswal (2013). Cadila Healthcare Q3FY13: Revenues grew 15% YoY - Motilal Oswal : ValueNotes.com. Retrieved from http://www.indianotes.com/Quarterly-Results/Cadila-

Healthcare-Q3FY13-Revenues-grew-15-YoY/180820/12540403.00/C Motilal Oswal (2013). Cadila Healthcare: Adjusted PAT would grow 1.3% y-o-y to Rs1.94b Motilal Oswal : IndiaNotes.com. Retrieved from http://www.indianotes.com/QuarterlyResults/Cadila-Healthcare-Adjusted-PAT-would-grow-13-y-o-y-toRs194b/183284/12540403.00/C Sushil Finance (2013). Buy Cadila Healthcare; target Rs 955: Sushil Finance Moneycontrol.com. Retrieved from http://www.moneycontrol.com/news/recommendations/buycadila-healthcare-target-rs-955-sushil-finance_898253.html Sushil Finance (2013). Cadila Healthcare Q4FY13: Decent set of numbers on revenue front Sushil Finance : ValueNotes.com. Retrieved from http://www.indianotes.com/QuarterlyResults/Cadila-Healthcare-Q4FY13-Decent-set-of-numbers-on-revenuefront/182778/12540403.00/C Sushil Finance (2013). Cadila Healthcare: Reports disappointing set of numbers in Q1FY14 Sushil Finance : IndiaNotes.com. Retrieved from http://www.indianotes.com/QuarterlyResults/Cadila-Healthcare-Reports-disappointing-set-of-numbers-inQ1FY14/183699/12540403.00/C