Cadila: Aggressive move

Cadila has also received 3 USFDA approvals recently for its medications in diverse product segments

Cadila Healthcare has sought to make an aggressive entry into the fast growing Rs 1,500 crore domestic dermatology market via an acquisition of a privately held Live Healthcare, for an undisclosed amount.

It is understood that Live Healthcare also has a presence in the respiratory segment, and Cadila management is expected to focus on realising synergies with its existing medications for the respiratory segments.

Cadila is funding this acquisition through internal accruals and debt "" its cash flow (net profit plus depreciation) amounted to Rs 261.4 crore in the first nine months of FY07.

Apart from this acquisition, Cadila has also received three USFDA approvals recently for its medications in diverse product segments, like anti-convulsant, anti-depressants and immuno-suppressants.

These approvals are expected to further strengthen Cadila's export turnover "" analysts highlight that in the first nine months of FY07, the company's exports had grown 74 per cent y-o-y, and accounted for 31 per cent of its consolidated total income from operations of Rs 1,393.1 crore.

Meanwhile, Cadila's operating profit grew 12.3 per cent y-o-y to Rs 82.3 crore in the December 2006 quarter, as compared to a 25 per cent growth in its total income from operations to Rs 472.4 crore. Its operating profit margin also declined 200 basis points y-o-y to 17.4 per cent in the last quarter.

This pressure on margins was due to other expenditure jumping 46.95 per cent y-o-y to Rs 169.9 crore and analysts say this was largely due to surging R&D expenses.

The company's exports in the last quarter grew an impressive 67.5 per cent y-o-y to Rs 121.2 crore, helped by improved formulation exports.

Over the past three months, the stock has moved broadly in tune with the market - it has declined 4 per cent during this period, as compared to a 4.8 per cent fall in the Sensex.

Considering the company's growth prospects, the Cadila stock trades at a reasonable 14.5 times estimated FY08 earnings ( excluding the latest acquisition).