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Lupin & Cadila: Prescribed For Your Portfolio

| 6/28/2012 9:04 PM Thursday

Pharma peers Lupin and Cadila Healthcare are two companies that are growing strongly and providing investors with rewarding opportunities. Shrikant Akolkar gives you a comparative picture of their stellar performance.

Key Points

  • Both the companies have are looking at USD 3 billion in revenues by 2015, for which Lupin is required to grow by 21 per cent while Cadila is required to grow by 31 per cent.
  • Both the firms operate in emerging as well as advanced markets, and have continued investing strongly in their research and manufacturing capabilities.
  • On the financial front, both are in a high growth phase, with similar product lines.



In a country where lower industrial output and higher inflation are burning issues, two drug companies; Lupin and Cadila Healthcare caught our attention for their ambitious growth intent of getting to USD 3 billion in revenues by 2015. Simply going by their revenue guidance (in CAGR terms – base year FY12), Lupin is required to grow by 21 per cent while Cadila is required to grow by 31 per cent.

What do these two companies have in common? For one, they both have been in the business for quite some time now, with Cadila being around for nearly 60 years and Lupin for almost 44 years. Both of these companies are focusing on organic as well as inorganic growth and a few joint ventures in place are also adding to their overall growth. In the last 10 years, they have taken more than half a dozen firms into their fold in their quest for growth. Both of them have their feet firmly set in different geographical markets, and have continued investing strongly in their research and manufacturing capabilities. Here is an objective analysis of the strengths that these two companies have on offer which makes not one but both of them ideal candidates for a portfolio today.

Lupin and Cadila show nearly identical growth rates. Lupin has registered a five year compounded annual growth rate (CAGR) of 26 per cent, while Cadila’s revenues have been growing at 24 per cent. The operating profit margins for both the companies during this period too have remained within a band of around 20-21 per cent. In terms of profitability also, the two offer very little scope for differentiation. Their EPS has been growing at an identical rate of 21 per cent during this period. Surprised? Well there’s more. Recently, the two companies have posted sales in excess of USD 1 billion, joining top pharma companies like Ranbaxy and Dr Reddy’s Labs.

Investors would wonder if there is anything at all to differentiate these two businesses. Well, the growth rates may look the same over the recent past, but it should be said that Lupin has managed to achieve this growth in a shorter time period than Cadila.

 

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