Pharma Giant Cadila Heathcare will Soon Start to Show its Power of Innovation

Cadila Healthcare is the 4th largest player in the Indian pharma market. with a strong focus on a niche segment in the US market. Cadila Healthcare Limited engages in the manufacturing, research, marketing,  development,  and distribution of pharmaceutical products. It offers finished dosage human formulations comprising generics, branded generics, and specialty formulations, including biosimilars and vaccines; active pharmaceutical ingredients; animal healthcare products; and consumer wellness products. The company offers products in the therapeutic areas of cardiovascular, gastrointestinal, respiratory, gynecology, pain management, dermatology, anti-infective, women's healthcare, and others

It also provides consumer wellness products, such as Sugar-Free, a low-calorie sugar substitute; EverYuth, a range of skincare products; and Nutralite, a cholesterol-free table spread. In addition, the company is developing 21 biosimilars and 6 novel products; and new drugs in cardio-metabolic disorder, inflammation, pain, and oncology and infectious diseases. Further, it engages in the retail pharmacy, and manpower supply and administration activities. Cadila Healthcare Limited was founded in 1952 and is based in Ahmedabad, India.

Cadila has 17 facilities for formulations, four for bulk drugs, three for vaccines, three for biologics, three for consumer wellness and two for animal health across India, the US, Brazil, and Germany.

Zydus aspires to be a research-based pharmaceutical company by 2020.

Key Attributes

 #  15 of the group’s brands feature amongst the top 300 pharma brands in
     India.

 #  World class manufacturing facilities comprising state-of-the-art
     manufacturing plants for APIs and formulations, including novel dosage
     forms . Of these, 5 are USFDA inspected.

# Robust regulatory pipeline – 260 ANDAs have            been filed of which 99  have been approved.
 

# The first Indian pharma company to launch an NCE in the market with 

    Lipaglyn, the world’s first drug to treat diabetic dyslipidemia.

# Launched the world’s first biosimilar of                         Adalimumab  ‘Exemptia’ to treat inflammatory             arthritis.It will be significant in the  product portfolio 
   in two years, focusing on the emerging market as       of  now.

# Robust innovation pipeline with over 1200                   researchers working across 5 R&D centers of             excellence focused on small molecules, 
   biologics, vaccines, formulation development and API process research.

# Partner of Choice for research-driven pharma majors like Abbott, Hospira,
   Bayer, Takeda, IDRI, Pieris AG, Prolong Pharmaceuticals and the World
   Health Organization to name a few.

# Heniz deal provides excellent brands COMPLAN,GLUCON-D, 
NYCIL,SOMPRITI BUTTER, will auger the stable growth for the company

CMP : Rs.338    Market Cap:Rs.34592 Cr.     EPS-Rs.  19.34      Face Value- Rs 1

MAR’18     YEARLY
Net Sales (Cr)		(Profit Before Tax)PBT (Cr)				(Profit After Tax)PAT (Cr)
Mar’18  : 11936		Mar’18  : 2331				Mar’18  :1766
Mar’17  : 9572		Mar’17  : 1615				Mar’17  :1485
Change  : 24% (Up)		Change  :  44% (Up)			Change  :19 % (Up)
DEC’18     QUATERLY
NET SALES (Cr)		(Profit Before Tax)PBT (Cr)			(Profit After Tax)PAT (Cr)
Dec’18  :3578		Dec’18  :671.7			Dec’18  :513
Dec’17  :3260		Dec’17  :724			Dec’17  : 543
Change : 9.7% (UP)		Change :7.18%(Down)			Change : 5.5% (Down) (High Material Cost & paid Interest increased than previous Qtr.)
DEC’18     9 MONTHLY
NET SALES (Cr)		(Profit Before Tax) PBT (Cr)					(Profit After Tax) PAT (Cr)
Dec’18  :9829		Dec’18  :1892					Dec’18  :1373
Dec’17  :8482		Dec’17  :1664					Dec’17  :1168
Change: 15.8%(UP)		Change : 13.7%(UP)					Change : 17.5%(UP)
52 weeks High / Low Ratio	434.05/314.40 =1.38		<2.2 is Good
Current Ratio	22.32		> 1.25 is Good,		A liquidity ratio that measures a company's ability to pay short-term obligations. The higher the current ratio, the more capable the company is of paying its obligations.
Quick Ratio (x)	1.49		> 1 is Good,		The quick ratio measures a company's ability to meet its short-term obligations with its most liquid assets. For this reason, the ratio excludes inventories from current assets
Sales growth	14 –17%		CAGR >15% for last 7-10 years		Growth should be a consistent year on year. Ignore companies where a sudden spurt of sales in one year is confounding the 10 years performance. Very high growth rates of >50% are unsustainable.
Sustainable Growth Rate (SSGR) Vs. Past sales Growth rate	14 –22% > 14 –17%		SSGR>Past sales Growth Is Good		If companies having Self Sustainable Growth Rate (SSGR) higher than the current growth rate, then they can keep on growing without raising debt and provide good long-term investment opportunities for investors.
Price to Sales ratio (P/S ratio)	2.72 (Last 3 years range is 3.3—4.9)		< 1.5 is Good		James O’Shaughnessy: Buy if P/S ratio is < 1.5 and sell if >3
Price to Book value Ratio(P/B Ratio)	3.88		For a Good Company 3 – 6 is Ok		A stock is termed as undervalued if it has a lower P/B ratio. A low P/B ratio may also mean a company has some problems with its fundamentals.
Return On Asset (%)	13.95		> 5% is Good, < 5% is Not Good		An indicator of how efficient management is at using its assets to generate earnings. Calculated by dividing a company’s annual earnings by its total assets
Return On Equity (%)	22.64%		> 10% is Good,		Also called Return on net worth, it measures a company’s profitability by revealing how much profit a company generates with the money shareholders have invested, it is calculated by dividing the net profit after tax by shareholder's fund For high growth companies you should expect a higher ROE.
Cash Flow from Operation	919 Cr		CFO>0		Positive CFO necessary
Tax Payout	24% Lat 10 Years Pays 8 to 24%		>30% Good		The tax rate should be near the general corporate tax rate unless some specific tax incentives are applicable for the company.
Profitability (Net profit Margin)	15%		>8 is Good		Look for companies with sustained operating profit & net profit margins over the years
P/E ratio	17.44 Industry P/E 26.53		<Industry P/E is Good.		P/E ratio is the most widely used parameter to analyze whether the stock of any company is overvalued or undervalued at any point in time. It is calculated by dividing the current market price (CMP) of stock by profit/earnings per share (EPS).
Dividend Yield (%)	1.09% (From 2011 company pays dividends continuously)		> 0 is Good, Higher is better		A financial ratio that shows how much a company pays out in dividends each year relative to its share price. The dividend yield is calculated as annual dividends per share divided by market price per share.
P/E to Growth ratio (PEG ratio)	0.79		<1 is Good		The price/earnings to growth ratio (PEG ratio) is a stock's price-to-earnings (P/E) ratio divided by the growth rate of its earnings for a specified time period. The PEG ratio is used to determine a stock's value while taking the company's earnings growth into account and is considered to provide a more complete picture than the P/E ratio.
Promoter shareholding	Promoter-74.79% Corporate-1.41% Public- 5.6% FII-3.68% DII-5.46% Others-9.06%		> 30% (Must for Promoter)		Higher the better
Interest Coverage Ratio	32.85		> 2 is Good, (For Banks & NBFC this is not Valid)		It is used to determine how easily a company can pay interest on outstanding debt. It is calculated by dividing a company's EBIT by the interest expenses.
Debt Equity Ratio	0.58		< 1 is Good, (For Banks & NBFC this is not Valid)		A measure of a company's financial leverage calculated by dividing its total liabilities by stockholders equity. The debt/equity ratio also depends on the industry in which the company operates.
FUTURE GROWTH ESTIMATION
Crore	FY 2019 (E)			FY 2020 (E)				FY 2021 (E)
Revenue	12965			14648				15903
Net Profit	1944			2197				2350
Earning/Share	19.05			21.75				22.9

  

REMARKS:
1) Financial Health  Analysis :
 The company maintains a very clean balance sheet where no equity dilution from 2011 & remains 102 crore, Reserves increased last 10 years decently(from 1,167 cr. to  8642 cr), Borrowings remained very little till 2016 @ 2500 cr but due to HEINZ acquisition deal debt increased to 5400 cr. but still below its Networth 7445 cr, which is easily manageable. one thing investor should watch out about share % of HEINZ between Zydus wellness & Cadila Healthcare which is not clear now.

2) Profit & Loss Analysis :

Company's Sales gradually increased the last 10 years, from 2,862 cr to 11900 cr. Profit increased from 500cr to 1734 cr. Recently interest increased due to Heinz deal &  Various research-based new product launching & we noticed that every day they get approved products from US-FDA which is encouraging.

3) Technical Price Analysis :

Chart Shows that @ 300--290 very strong & good support, Break this support may go 220 which is a very rare chance except for heavy market crash. above 337 target is 360 & 400.

4) Fundamental Price Analysis :

The following Price to sales Model, EV/EBITDA Model, Return/Profit Valuation Model, Monish Pabrai Dhandho Model, One Year Conservative Target will be Rs.404.

Happy Investing & enjoy HOLI. Friend to encourage & support me, pl. share this to your Kith & Kin so that I can continue this effort.

Disclaimer: I am not a SEBI registered analyst. My view is only to Educate retail investor to invest in the stock market Safely & wisely. This is not any recommendation, only for Education purpose. Before investing contact your financial advisor.