Cadila Healthcare Q1 PAT down 30% as GST hurts domestic business

Sales grew by 14% to Rs 1,000 cr

Cadila Healthcare (or Zydus Cadila) posted a 30 per cent year on year (Y-o-Y) drop in standalone net profit for the quarter ended June 30, 2017, to Rs 91.4 crore, while its sales grew by 14 per cent to Rs 1,000.4 crore.

For the first quarter of the current financial year, Zydus Standalone sales grew by 14 per cent from Rs 875 crore in the corresponding quarter last fiscal. At the same time, its net profit fell 30 per cent from Rs 130.4 crore in Q1FY17.

On a consolidated basis, the company posted a 4.2 per cent drop in sales to Rs 2,167.2 crore in Q1FY18 from Rs 2,262.4 crore in Q1FY17. Its net profit fell 65 per cent to Rs 138.4 crore in the quarter under review from Rs 398.4 crore in Q1FY17.

Sarabjit Kour Nangra, vice president, research, pharma, Angel Broking felt that the poor numbers are mainly driven by the Indian formulation sales dip. Cadila's key market the US, however, saw a 14 per cent growth.

"Indian formulation sales (Rs 637.4 crore), a YoY dip of 18.9 per cent. Its key market USA (Rs 965 crore), 13.8 per cent Y-o-Y growth. On operating front, the EBITDA margins came in at 10.1 per cent versus 18.4 per cent expected versus 20.4 per cent in Q1FY17, mainly on the back of lower than expected sales during the quarter and a 20 per cent and 25.3 per cent rise in the employee and R&D expenses respectively," she said.

The gross margins came in at 61.2 per cent versus 65.1 per cent in Q1FY17. R&D expenses were 9.5 per cent of sales in Q1FY18 compared to 7.3 per cent in Q1FY17.

HDFC Securities said that the revenues declined 4 per cent, which is 9 per cent below their estimates. "This was largely on account of a 19 per cent decline in the India business, which was sharper than expected. The sub-par performance was largely owing to a strong disruption in the domestic business on account of GST," an analysis by Amey Chalke and Siddhant Mansukhani of HDFC Securities said. While the US business grew 14 per cent YoY during the quarter, it was flat sequentially. In other segments, Zydus wellness, Animal healthcare, active pharmaceutical ingredients (API) and Europe, Rest of the World (RoW) and Latin America declined YoY.

"However, the outlook for Cadila remains strong for FY18E, with the launch of generic Lialda in Q2FY18 under exclusivity and other significant launches planned as well. Growth will be strong on a low base of FY17," the HDFC analysis said.

The shares went up by 3.7 per cent in day's trade to Rs 482.95 a share on the BSE.