Anda di halaman 1dari 13

Result Update

February 15, 2016

Sun Pharmaceuticals (SUNPHA)

Rating matrix
Rating
Target
Target Period
Potential Upside

:
:
:
:

Hold
| 845
15-18 months
0%

Recovery on track; margins get Taro booster

Whats Changed?
Target
EPS FY16E
EPS FY17E
EPS FY18E
Rating

Changed from | 825 to | 845


Changed from | 19.5 to | 22.7
Changed from | 26.3 to | 28.2
Changed from | 34.4 to | 35.2
Unchanged

Quarterly Performance
Revenue
EBITDA
EBITDA (%)
Adj. Net Profit

Q3FY16
7,082.1
2,169.0
30.6
1,416.6

Q3FY15
6,929.5
2,164.5
31.2
395.3

YoY (%)
2.2
0.2
-61 bps
258.3

Q2FY16 QoQ (%)


6,837.6
3.6
1,933.7
12.2
28.3 235 bps
1,106.7
28.0

Key Financials
(| Crore)
Net Sales
EBITDA
Adj. Profit
Adj. EPS (|)

FY15
27433.4
7866.7
4777.1
19.8

FY16E
28538.4
8540.0
5464.1
22.7

FY17E
32294.9
10201.3
6793.9
28.2

FY15
45.1
42.7
25.5
8.0
18.6
18.8

FY16E
42.8
37.3
22.8
6.8
18.2
19.6

FY17E
30.1
30.0
18.7
5.7
19.1
21.1

FY18E
37976.6
12360.7
8497.6
35.2

Valuation summary
PE (x)
Target PE (x)
EV to EBITDA (x)
Price to book (x)
RoNW (%)
RoCE (%)

FY18E
24.1
24.0
14.9
4.8
19.9
22.7

Stock data
Amount
| 204170 crore
| 8996 crore
| 13734 crore
| 199431 crore
1201/706
| 240.7 crore
|1

Particular
Market Capitalisation
Debt (FY15)
Cash & Cash Equivalents (FY15)
EV (| Cr)
52 week H/L (|)
Equity capital
Face value

Price performance (%)


Sun Pharma
Dr Reddy's
Lupin

1M
6.2
-1.6
5.3

3M
11.2
-14.1
-0.6

| 848

6M
-1.3
-31.7
5.5

1Y
-10.3
-8.5
12.6

Research Analyst
Siddhant Khandekar
siddhant.khandekar@icicisecurities.com
Mitesh Shah
mitesh.sha@icicisecurities.com
Nandan Kamat
nandan.kamat@icicisecurities.com

ICICI Securities Ltd | Retail Equity Research

Revenues grew 2.2 YoY to | 7082.1 crore (I-direct estimate: | 6734.5)


on account of 8.3% growth in domestic sales to | 1890.3 crore and
69.7% growth in API sales to | 441 crore led by consolidation of
opiates business in Australia. US formulations, on the other hand,
continued to languish and declined ~6% to | 3200.3 crore
Sequentially, EBITDA margins increased 235 bps to 30.6% (I-direct
estimate: 28.5%) due to strong margins at Taro. Taros EBITDA
margins increased 756 bps QoQ to 68.8%. EBITDA grew 12.2% QoQ
to | 2169 crore (I-direct estimate: | 1919.3 crore)
Net profit grew 258.3% YoY | 1416.6 crore (I-direct estimate:
| 1107.1 crore) mainly due to higher other income led by proceeds
received on brand divestments and lower taxation
US business spearheads robust growth; Ranbaxy benefits back-loaded
The US business, which constitutes ~50% of the turnover, has grown at
28.4% CAGR inFY11-15 on the back of successful acquisitions such as
Caraco and Taro (recently Dusa, URL) and timely product launches. The
US product basket remains robust- 591 ANDAs filed, 435 approvals
received; some niche launches include Lipodox/Doxil, Doxycycline,
Nystatin, etc besides complex/limited competition products and plain
vanilla generics. US growth is also being backed by extensive
infrastructure- Out of the 50 global manufacturing facilities more than 20
are approved by the USFDA. The only blot in an otherwise smooth
journey is the warning letter to Halol plant. The Ranbaxy acquisition will
also drag margins initially, though it is expected to bring benefits of
scalability in the long run. Ranbaxys stronghold in the fast growing
emerging markets (50% of Ranbaxy's sales) will complement Suns
presence in this space. Regarding US, it is determined to address
Ranbaxys cGMP issues as four out of five US centric facilities remain
under USFDA embargo. Sun will gain leadership position in the niche
generic derma space and will also get entry in to branded and OTC
segments. In the domestic space the acquisition is likely to provide more
therapeutic diversification to Suns portfolio and is likely to improve its
market share in key segments in the domestic space. Its domestic market
share has substantially improved from 5.5% to 9.1% with a leadership in
as many as 11 therapies. The management expects ~US$300 million
synergy benefits by FY18. We expect US sales to grow at a CAGR of
10.1% to | 18288 crore in FY15-18E. Similarly, Indian formulations
business is likely to grow at 15.2% CAGR to | 10270 crore in FY15-18E.
Halol resolution key to overall growth; maintain HOLD
Adjusting for consolidation and one-offs, the ex-taro Q3 numbers were
more or less in line with our expectations. We believe most of the
negatives pertaining to the Halol plant have been factored in. However,
until the Halol resolution, US sales are likely to remain under pressure
even though the company has sufficient bandwidth to make alternate
arrangements. Other developments in the field of biosimilars and
acquisitions are likely to be overshadowed by this glaring issue. The
progress on Halol may have prompted the management to approach the
USFDA in Q1FY17 for re-inspection. We have ascribed a target price of
| 845 based on 24x FY18E EPS of | 35.2. We maintain our HOLD rating
until any positive development takes place regarding Halol.

Variance analysis
Revenue

Q3FY16 Q3FY16E
7,082.1 6,734.5

Q3FY15
6,929.5

Q2FY16
6,837.6

YoY (%) QoQ (%)


2.2
3.6

Raw Material Expenses


Employee Expenses
Other Expenditure
Total Expenditure
EBITDA
EBITDA (%)

1,755.4
1,148.3
2,009.4
4,913.1
2,169.0
30.6

1,683.6
1,212.2
1,919.4
4,815.2
1,919.3
28.5

1,712.7
1,090.9
1,961.3
4,765.0
2,164.5
31.2

1,558.3
1,208.8
2,136.8
4,903.9
1,933.7
28.3

2.5
12.7
5.3
-5.0
2.4
-6.0
3.1
0.2
0.2
12.2
-61 bps 235 bps

Interest
Depreciation
Other income
EO
PBT
Tax
MI
Adj. Net Profit
Key Metrics
India formulations

117.0
250.8
219.2
0.0
2,020.5
202.0
401.9
1,416.6

148.4
271.1
110.4
0.0
1,610.2
241.5
261.6
1,107.1

152.9
228.4
-73.3
0.0
1,709.9
1,029.0
285.6
395.3

148.4
271.1
191.3
0.0
1,705.5
335.5
263.3
1,106.7

-23.5
9.8
LP
NA
18.2
-80.4
40.7
258.3

-21.1
-7.5
14.6
NA
18.5
-39.8
52.6
28.0

1890.3

1,832.7

1,745.4

1,818.7

8.3

3.9

US formulations

3,200.3

3,161.8

3,385.8

3,315.8

-5.5

-3.5

RoW formulations

1,551.0

1,407.4

1,563.8

1,405.7

-0.8

10.3

461.2

298.9

259.9

328.7

77.5

40.3

APIs

Comments
Growth in the domestic market and API sales led by consolidation of opiates business in
Australia was largly offset by de-growth in US business

Sequential growth in EBITDA margin was mainly due to 756 bps QoQ improvement in
Taro's margins to 68.7%

Included proceeds from brand divestments

Sharp YoY increase mainly due to high other income and lower taxation
Acute segment growth impacted during the quarter due to continued impact of
withdrawal of bonus offers
YoY de-growth primarily due to competitive pressure in some products and temporary
supply constraints arising from remediation efforts at the Halol facility
Muted YoY growth due to currency depreciation in emerging markets and exit from low
margin businesses. Beat vis--vis our expectations mainly due to better-than-expected
constant currency growth
Increased due to consolidation of opiates business in Australia. Beat vis--vis our
expectations mainly due to earlier-than-expected consolidation of opiates business

Source: Company, ICICIdirect.com Research; *LP: Loss to Profit

Change in estimates
(| Crore)
Old
Total Operating Incom 31,634.2
EBITDA
9,990.7
EBITDA Margin (%)
31.6
Adjusted PAT
6,352.8
EPS (Adjusted)
26.3

FY17E
New % Change
32,294.9
2.1
10,201.3
2.1
31.6
1 bps
6,793.9
6.9
28.2
7.1

Old
37,692.3
12,268.5
32.5
8,286.4
34.4

FY18E
New % Change
37,976.6
0.8
12,360.7
0.8
32.5
0 bps
8,497.6
2.5
35.2
2.4

Increased PAT due to lower tax guidance by Taro

Source: Company, ICICIdirect.com Research

Assumptions
| crore
Indian Formulations
US Formulations
RoW markets
APIs

FY15
6,716.6
13,719.6
6,064.6
1,070.2

FY16E
7,406.8
13,283.9
5,928.6
1,545.0

Current
FY17E
FY18E
8,703.3 10,269.9
14,960.6 18,288.2
6,535.0
7,188.5
1,883.7
1,977.9

Earlier
FY17E
FY18E
8,634.2 10,188.3
15,057.7 18,489.1
6,437.0
7,402.5
1,297.2
1,362.1

Increased due to consolidation of opiates business in Australia

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 2

Company Analysis
Established in 1983, Sun Pharma is the largest Indian pharmaceutical
company both in terms of market capitalisation and turnover (FY15).
The company manufactures and markets a large basket of pharmaceutical
formulations in India, the US and several other markets across the world.
However, the US and Indian formulations are by far the core strengths
and growth drivers for the company.
The US business has been built mostly on acquisitions and generic focus.
It owns the largest product basket among Indian players with as many as
591 product (ANDA) filings.
In Indian formulations, the company is a leader in niche therapy areas of
psychiatry, gastroenterology, neurology, cardiology, nephrology,
orthopaedics and ophthalmology.
The company completed the $3.2-billion acquisition of Ranbaxy
Laboratories after almost a year of navigating the regulatory gauntlet to
create the worlds fifth-biggest generic pharmaceutical company by
revenue.
A snapshot of galloping performance in the last five years- Sales grew at
a CAGR of 48% to | 27433 crore; EBIDTA grew at a CAGR of ~41% to
| 7867 crore; Adjusted PAT grew at a CAGR of 25.7% to | 4539.5 crore.
Going ahead, we expect revenues to grow at a CAGR of 11.4% in FY1518E to | 37976 crore after considering Ranbaxy acquisition.
Exhibit 1: Revenues to grow at CAGR of 11.4% in FY15-18E
40000

37,976.6
32,294.9

35000
30000

27,433.4

28,538.4

FY15

FY16E

(| crore)

25000
20000

16,080.4

15000
10000

11,299.9
5,721.4

8,011.6

5000
0
FY11

FY12

FY13

FY14

FY17E

FY18E

Total Operating Income

Source: Company, ICICIdirect.com Research

The US business, which comprises ~50% of the turnover, has grown at a


CAGR of 77.3% in FY11-15 on the back of successful acquisitions such as
Caraco and Taro (recently Dusa, URL) and timely product launches. The
US product basket remains robust- 591 ANDAs filed, 435 approvals
received; some niche launches include Lipodox/ Doxil (~US$150 million),
Doxycycline (~US$100 million) and Nystatin (~US$90 million), etc,
besides complex/limited competition products and plain vanilla generics.
US growth has also being backed by extensive infrastructure- Out of the
50 global manufacturing facilities more than 20 have been approved by
the USFDA. The only blot in an otherwise smooth journey is the warning
letter to the Halol plant. We expect the US business to grow at a CAGR of

ICICI Securities Ltd | Retail Equity Research

Page 3

10.1% to | 18228 crore on a higher base in FY15-18E backed by new


launches and base business growth.
Exhibit 2: US business to grow at CAGR of 10.1% in FY15-18E
20000

18,288.2

18000
16000
14000
(| crore)

12000

14,960.6

13,719.6

13,283.9

FY15

FY16E

9,784.4

10000
8000

6,153.8

6000

3,471.6

4000

1,386.9

2000
0

FY11

FY12

FY13

FY14

FY17E

FY18E

US

Source: Company, ICICIdirect.com Research

Indian formulations which form 23% of the turnover have grown at a


CAGR of 28.4% in FY11-15. With a market share of 8.8% the company is
ranked one (standalone) in domestic formulations. The acute, chronic and
sub-chronic segments were at 36%, 45% and 19% of revenues. It is a
leader in at least seven therapeutic categories, five of which are chronic
therapies. Indian formulation growth was unaffected despite NLEM 2011
implementation vagaries and channel disturbances due to trade margin
issues with wholesalers/distributors. Revenues coming under the price
control list are just 9% of Indian formulations sales. We expect Indian
formulations to grow at a CAGR of 15.2% to | 10269.9 crore in FY15-18E
backed by new launches and price hikes.
Exhibit 3: India sales to grow at CAGR of 15.2% in FY15-18E
12000

10,269.9

10000

8,703.3

(| crore)

8000

6,716.6

7,406.8

6000
4000

2,468.3

2,915.4

2,965.7

FY12

FY13

3,691.8

2000
0
FY11

FY14

FY15

FY16E

FY17E

FY18E

Domestic

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 4

Exhibit 4: Sales from RoW markets to grow at CAGR of 5.8% in FY15-18E


8000

7,188.5

7000

6,064.6

5,928.6

FY15

FY16E

6000

6,535.0

(| crore)

5000
4000
3000
2000
535.8

1000

1,908.4

1,527.1

1,112.4

0
FY11

FY12

FY13

FY14

FY17E

FY18E

ROW

Source: Company, ICICIdirect.com Research

Exhibit 5: Sales from API business to grow at CAGR of 22.7% in FY15-18E


2500
1,883.7

2000

1,977.9

1,545.0
(| crore)

1500
1,070.2

1000
614.7

527.3

754.9

801.0

FY13

FY14

500
0
FY11

FY12

FY15

FY16E

FY17E

FY18E

API & Others

Source: Company, ICICIdirect.com Research

Exhibit 6: EBITDA to grow at CAGR of 16.3% in FY15-18E


44.7

14000
12000

34.4

44.0

40.7

10201.3

(| crore)

10000
7195.6

8000

8540.0
29.9
7866.7
28.7

31.6

1967.2

32.5

45.0
35.0
30.0
25.0
20.0

3258.0

15.0
10.0

2000

5.0

FY11

FY12

FY13

FY14
EBITDA

FY15

FY16E

FY17E

FY18E

EBITDA margins (%)

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

50.0
40.0

4967.2

6000
4000

12360.7

Page 5

Exhibit 7: Net profit to grow at CAGR of 23.3% in FY15-18E


31.7

9000

8,497.6

8000
7000

26.6

(| crore)

6000

4,539.4
16.5

4000
2000

2,587.3

3,008.1

30.0

6,793.9
21.0

19.9

5000
3000

35.0

32.3

22.4

4,779.0

3,204.4

16.7

25.0
20.0
15.0
10.0

1,816.1

5.0

1000
0

FY11

FY12

FY13

FY14

FY15

PAT

FY16E

FY17E

FY18E

Net Profit Margins (%)

Source: Company, ICICIdirect.com Research

Exhibit 8: Trends in return ratios


40
35

34.3

30

34.3

27.8

25
(| crore)

21.9
19.2

20

21.3

21.3

18.6
18.8

17.0

18.2
19.6

19.9

19.1
21.1

22.7

15
10
5
0
FY11

FY12

FY13

FY14

FY15
RoCE(%)

FY16E

FY17E

FY18E

RoNW (%)

Source: Company, ICICIdirect.com Research

SWOT Analysis
Strengths - Above average profitability margins, Healthy return ratios
despite higher cash component, one of the first companies to identify
potential of innovative R&D and generic R&D, robust infrastructure to
scale up US business, India business built around chronic focus, one of
the few companies defying the slowdown in Indian formulations.
Weakness - Pending Ranbaxy compliance issues
Opportunities - The US generics space, biosimilars space where Sun is
yet to make a meaningful foray
Threats - Increased USFDA scrutiny across the globe regarding cGMP
issues and consolidation in the US pharmacy space. Halol facility has
received the warning letter from the USFDA

ICICI Securities Ltd | Retail Equity Research

Page 6

Exhibit 9: Trends in quarterly financials


(| Crore)

Q3FY14

Q4FY14

Q1FY15

Q2FY15

Q3FY15

Q4FY15

Q1FY16

Q2FY16

Q3FY16

YoY (%)

QoQ (%)

Total Operating Income

7206.4

6525.4

6341.2

8039.4

6929.5

6157.0

6757.6

6837.6

7082.1

2.2

3.6

Raw Material Expenses

1828.3

1596.1

1645.2

1817.2

1712.7

1597.4

1717.4

1558.3

1755.4

2.5

12.7

5.3

-5.0

2.4

-6.0

3.1

0.2

0.2

12.2

Gross Profit Margin (%)


Employee Expenses
% of Revenue
Other Expenditure
% of Revenue
Total Expenditure
% of Revenue
EBITDA
EBITDA Margin (%)

74.6

75.5

74.1

77.4

75.3

74.1

74.6

77.2

75.2

1065.7

1021.5

1096.0

1114.3

1090.9

1128.6

1227.0

1208.8

1148.3

14.8

15.7

17.3

13.9

15.7

18.3

18.2

17.7

16.2

2195.0

1892.4

1661.9

2041.7

1961.3

2638.6

1963.5

2136.8

2009.4

30.5

29.0

26.2

25.4

28.3

42.9

29.1

31.3

28.4

5089.0

4510.0

4403.1

4973.2

4765.0

5364.7

4907.9

4903.9

4913.1

70.6

69.1

69.4

61.9

68.8

87.1

72.6

71.7

69.4

2117.4

2015.4

1938.1

3066.2

2164.5

792.4

1849.7

1933.7

2169.0

29.4

30.9

30.6

38.1

31.2

12.9

27.4

28.3

30.6

Depreciation

196.5

201.4

235.4

269.1

228.4

461.8

240.1

271.1

250.8

9.8

-7.5

Other Income

273.2

373.5

181.9

-30.9

-73.3

382.5

105.4

191.3

219.2

LP

14.6

2194.1

2187.5

1884.6

2766.2

1862.8

713.0

1715.0

1853.9

2137.5

14.7

15.3

127.3

117.5

148.9

161.7

152.9

124.8

123.0

148.4

117.0

-23.5

-21.1

Profit before Interest & Tax


Interest
Less: Exceptional Items
PBT
Total Tax
PAT
Minority Interest
PAT after MI
EPS (|)
Share Capital (cr)

103.6

156.0

237.8

0.0

0.0

0.0

685.2

0.0

0.0

NA

NA

1963.3

1914.1

1497.9

2604.5

1709.9

588.3

906.8

1705.5

2020.5

18.2

18.5
-39.8

341.9

229.8

206.3

279.3

1029.0

-599.9

226.8

335.5

202.0

-80.4

1621.3

1684.3

1291.6

2325.2

680.9

1188.2

680.0

1370.0

1818.5

167.1

32.7

245.5

171.7

87.1

274.9

285.6

301.2

201.1

263.3

401.9

40.7

52.6

1375.9

1512.6

1204.6

2050.3

395.3

886.9

479.0

1106.7

1416.6

258.3

28.0

5.7

6.3

5.0

8.5

1.6

3.7

2.0

4.6

5.9

258.3

28.0

241.1

241.1

241.1

241.1

241.1

241.1

241.1

241.1

241.1

Source: Company, ICICIdirect.com Research

Conference call highlights

ICICI Securities Ltd | Retail Equity Research

Suns cumulative ANDAs was at 591 including 156 pending


approvals (includes 10 tentative approvals). In 9MFY16, it filed 11
ANDAs and received nine approvals
The company is planning a re-inspection request to USFDA for
Halol facility in Q1FY17. It is increasing capacity of this facility,
irrespective of the re-inspection
The company expects ~30% market share in gGleevec
It expects Phase III of MK-3222 (tildrakizumab) to be available by
Q1FY17
Sumatriptan auto-injector sales were halted due to warning letter.
It expects to re-launch this product again in near term
Sun Pharma and MSD have mutually decided to wind down their
joint venture established in 2011, due to changes in the strategic
priorities of both parent companies. There will be no material
impact of this development on Sun Pharma

Page 7

Valuation
Adjusting for consolidation and one-offs, the ex-taro Q3 numbers were
more or less in line with our expectations. We believe most of the
negatives pertaining to the Halol plant have been factored in. However,
until the Halol resolution, US sales are likely to remain under pressure
even though the company has sufficient bandwidth to make alternate
arrangements. Other developments in the field of biosimilars and
acquisitions are likely to be overshadowed by this glaring issue. The
progress on Halol may have prompted the management to approach the
USFDA in Q1FY17 for re-inspection. We have ascribed a target price of
| 845 based on 24x FY18E EPS of | 35.2. We maintain our HOLD rating
until any positive development takes place regarding Halol.

(|)

Exhibit 10: One year forward PE


2000
1800
1600
1400
1200
1000
800
600
400
200
0
Mar06

Dec06

Sep07

Jun08

Mar09

Price

Dec09

68.7x

Sep10

Jun11

56.0x

Mar12

Dec12

34.9x

Sep13

Jun14

18.0x

Mar15

Dec15

9.5x
[

Source: Company, ICICIdirect.com Research

Exhibit 11: One year forward PE of company vs. CNX Pharma


90
80

47.1% Premium

70
60
(x)

50
40
30
20
10
0
Mar06

Dec06

Sep07

Jun08

Mar09

Dec09

Sep10

Jun11

Mar12

Dec12

Sep13

Sun Pharma

CNX Pharma

EPS
(|)
19.8
22.7
28.2
35.2

P/E EV/EBITDA
(x)
(X)
45.1
25.5
42.8
22.8
30.1
18.7
24.1
14.9

Jun14

Mar15

Dec15

Source: Company, ICICIdirect.com Research

Exhibit 12: Valuation

FY15
FY16E
FY17E
FY18E

Revenues
(| crore)
27433
28538
32295
37977

Growth
(%)
2.1
4.0
13.2
17.6

Growth
(%)
199.3
14.4
24.3
25.1

RoE
(%)
18.6
18.2
19.1
19.9

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 8

RoCE
(%)
18.8
19.6
21.1
22.7

Company snapshot
1,600
1,400
1,200
Target Price:| 845

1,000
800
600
400
200

Jan-17

Oct-16

Jul-16

Apr-16

Jan-16

Oct-15

Jul-15

Apr-15

Jan-15

Oct-14

Jul-14

Apr-14

Jan-14

Oct-13

Jul-13

Apr-13

Jan-13

Oct-12

Jul-12

Apr-12

Jan-12

Oct-11

Jul-11

Apr-11

Oct-10

Jan-11

Jul-10

Apr-10

Jan-10

Oct-09

Jul-09

Apr-09

Jan-09

Source: Bloomberg, Company, ICICIdirect.com Research

Key events
Date
Jun-09

Event
USFDA seizes more than 33 generic drugs from Caraco for failing to meet FDA cGMP requirements

Aug-10

Manufacturing facility in Cranbury, New Jersey receives warning letter from USFDA

Sep-10

Increases stake in Taro Pharma to 48.7% with voting rights of 65.8%

Apr-11
Sep-11

Forms joint venture with Merck & Co Inc to develop, manufacture and commercialise new combinations, novel formulations and branded generics in emerging
markets
Receives establishment inspection report (EIR) from USFDA for its Cranbury, New Jersey facility

Feb-12

USFDA grants special approval to Sun Pharma to supply short supply oncology product Doxil to the US market

Aug-12

USFDA gives approval to Caraco Pharmas manufacturing facility & packaging sites to resume production for two drugs

Nov-12

Acquires US based dermatology company Dusa Pharma, which was marketing innovative drug & device Levulan (aminolevulinic acid HCl)

Dec-12

Acquires generic business of URL Pharma from Takeda Pharmaceuticals

Feb-13

Receives final approval for Doxorubicin Hcl Liposome injection (Doxil)

May-14

Karkhadi unit receives warning letter from the USFDA

Sep-14
Mar-15

Halol unit receives Form 483 observation letter from the USFDA
Sun Pharma acquires GSK's Opiates Business in Australia with two Opiates manufacturing facilities in Port Fairy & Latrobe

Apr-15

Completes Ranbaxy merger

Dec-15

Receives warning letter from the USFDA for its Halol manufacturing facility.

Source: Company, ICICIdirect.com Research

Top 10 Shareholders
Rank
1
2
3
4
5
6
7
8
9
10

Name
Shanghvi (Dilip Shantilal)
Viditi Investment Pvt. Ltd.
Tejaskiran Pharmachem Industries Pvt. Ltd.
Family Investment Pvt. Ltd.
Quality Investment Pvt. Ltd.
Virtuous Finance, Ltd.
Virtuous Share Investment Pvt. Ltd.
Life Insurance Corporation of India
Aditya Medisales, Ltd.
GIC Private Limited

Shareholding Pattern
Latest Filing Date % O/S Position (m) n Change (m)
30-Sep-15 0.10
231.1
0.0
30-Sep-15 0.08
201.4
0.0
30-Sep-15 0.08
195.3
0.0
30-Sep-15 0.08
182.9
0.0
30-Sep-15 0.08
182.9
0.0
30-Sep-15 0.04
97.1
0.0
30-Sep-15 0.03
84.0
0.0
30-Sep-15 0.03
71.0
7.5
30-Sep-15 0.02
40.2
0.0
30-Sep-15 0.02
38.0
1.4

(in %)
Promoter
FII
DII
Others

Sep-14 Dec-14 Mar-15 Jun-15 Sep-15


63.7
63.7
54.7
54.7
54.7
22.8
21.7
18.8
23.8
27.6
4.6
4.9
5.2
7.8
8.1
9.0
9.8
21.3
13.8
9.7

Source: Reuters, ICICIdirect.com Research

Recent Activity
Buys
Investor name
Capital International Investors
Fidelity Management & Research Company
Life Insurance Corporation of India
Abu Dhabi Investment Authority
Thornburg Investment Management, Inc.

Value ($)
109.8
98.8
98.8
32.5
19.9

Shares
8.9
8.0
7.5
2.5
1.5

Sells
Investor name
William Blair & Company, L.L.C.
Vontobel Asset Management, Inc.
T. Rowe Price International (UK) Ltd.
T. Rowe Price Hong Kong Limited
Matthews International Capital Management, L.L.C.

Value ($)
-132.9
-82.4
-54.6
-33.2
-21.4

Shares
-10.0
-6.6
-4.4
-2.7
-1.6

Source: Reuters, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 9

Financial summary
Profit and loss statement
(Year-end March)
Revenues
Growth (%)
Raw Material Expenses
Employee Expenses
Other Expenditure
Total Operating Expenditure
EBITDA
Growth (%)
Depreciation
Interest
Other Income
PBT
Less: Exceptional Items
Total Tax
PAT
Minority Interest
Adjusted PAT
Growth (%)
EPS (Adjusted)

| Crore
FY15
27,433.4
2.1
6,739.2
4,429.9
8,397.7
19,566.7
7,866.7
102.7
1,194.7
578.9
547.7
6,640.7
237.8
914.7
4,539.4
936.4
4,777.1
199.3
19.8

FY16E
28,538.4
4.0
6,873.1
4,828.4
8,297.0
19,998.5
8,540.0
8.6
1,009.6
505.3
641.2
7,666.3
685.2
1,023.8
4,779.0
1,178.4
5,464.1
14.4
22.7

FY17E
32,294.9
13.2
7,805.7
5,490.1
8,797.7
22,093.6
10,201.3
19.5
1,061.8
366.8
730.4
9,503.2
0.0
1,570.9
6,793.9
1,138.4
6,793.9
24.3
28.2

FY18E
37,976.6
17.6
9,475.9
6,076.3
10,063.8
25,615.9
12,360.7
21.2
1,133.3
265.5
858.9
11,820.7
0.0
2,127.7
8,497.6
1,195.4
8,497.6
25.1
35.2

Source: Company, ICICIdirect.com Research

| Crore
FY15
241.0
25,382.6
25,638.5
8,996.1
98.5
2,851.2
2,718.7
40,303.0
16,705.9
7,724.4
8,981.5
2,038.6
11,020.1
2,716.3
1,850.2
3,701.0
2,736.0
10,998.3
5,312.3
2,193.3
5,668.0
2,832.9
27,004.7
3,153.8
5,571.5
8,725.3
18,279.4
40,302.9

(Year-end March)
Profit/(Loss) after taxation
Depreciation
(Inc)/Dec in Current Assets
(Inc)/Dec in Current Liabilities
Others
CF from operation
Purchase of Fixed Assets
(Inc)/Dec in Investments
Others
CF from Investing Activities
Inc / (Dec) in Loan Funds
Inc / (Dec) in Equity Capital
Dividend and dividend tax
Other Financial Activities
CF from Financing Activities
Cash generation during the year
Op bal Cash & Cash equivalents
Closing Cash/ Cash Equivalent
Free Cah Flow

| Crore
FY15
4539.4
1194.7
-1087.0
1047.8
251.3
5946.2
-3161.4
708.7
3418.0
965.2
-547.9
75.0
-363.3
-251.3
-1087.5
5824.0
5722.1
11546.1
2784.8

FY16E
4779.0
1009.6
-34.4
22.3
505.3
6281.8
-405.5
184.9
951.1
730.6
-2060.5
-14.9
-408.5
-505.3
-2989.2
4023.2
10998.3
15021.5
5876.3

FY17E
6793.9
1061.8
-2373.1
908.2
366.8
6757.5
-1300.0
-305.4
911.1
-694.3
-1500.0
0.0
-1161.3
-366.8
-3028.1
3035.2
15021.5
18056.6
5457.5

FY18E
8497.6
1133.3
-3218.3
1195.2
265.5
7873.4
-1300.0
-305.4
968.1
-637.3
-1500.0
0.0
-1452.6
-265.5
-3218.1
4018.0
18056.6
22074.6
6573.4

FY15

FY16E

FY17E

FY18E

19.8
23.8
106.3
1.5
45.6

22.7
24.0
124.4
1.7
62.3

28.2
32.6
147.8
4.8
74.9

35.2
39.9
177.0
6.0
91.6

75.4
28.7
17.4
75.4
70.7
42.0
75.6

75.9
29.9
19.1
79.6
57.8
37.9
73.6

75.8
31.6
21.0
80.1
58.1
38.1
66.2

75.0
32.5
22.4
80.1
58.1
38.1
63.7

18.6
18.8
28.6

18.2
19.6
31.5

19.1
21.1
35.3

19.9
22.7
39.5

45.1
25.5
7.3
7.5
8.0

42.8
22.8
6.8
7.2
6.8

30.1
18.7
5.9
6.3
5.7

24.1
14.9
4.9
5.4
4.8

1.1
0.4
1.8

0.8
0.2
1.8

0.5
0.2
1.9

0.3
0.1
2.0

Source: Company, ICICIdirect.com Research

Balance sheet
(Year-end March)
Equity Capital
Reserve and Surplus
Total Shareholders funds
Total Debt
Deferred Tax Liability
Minority Interest
Other LT Liabitlies & LT Provision
Total Liabilities
Gross Block
Accumulated Depreciation
Net Block
Capital WIP
Total Fixed Assets
Investments
Deferred tax assets
Goodwill on Consolidation
LT Loans & Advances & Assets
Cash
Debtors
Loans and Advances
Inventory
Other current assets
Total Current Assets
Creditors
Provisions & other current liability
Total Current Liabilities
Net Current Assets
Application of Funds

Cash flow statement

FY16E
241.0
29,753.1
29,994.1
6,935.6
123.4
4,029.6
2,718.7
43,801.4
18,005.9
8,734.0
9,271.9
1,144.1
10,416.0
2,531.4
2,102.4
3,701.0
2,736.0
15,021.5
4,515.7
2,273.0
6,221.8
3,030.3
31,062.3
2,960.8
5,786.9
8,747.6
22,314.7
43,801.4

FY17E
241.0
35,385.6
35,626.6
5,435.6
148.3
5,168.0
2,718.7
49,097.3
19,305.9
9,795.8
9,510.1
1,144.1
10,654.2
2,836.8
2,354.6
3,701.0
2,736.0
18,056.6
5,144.0
2,650.2
7,087.4
3,532.4
36,470.6
3,372.7
6,283.2
9,655.8
26,814.8
49,097.2

Source: Company, ICICIdirect.com Research

FY18E
241.0
42,430.7
42,671.6
3,935.6
173.2
6,363.4
2,718.7
55,862.6
20,605.9
10,929.2
9,676.8
1,144.1
10,820.8
3,142.2
2,606.8
3,701.0
2,736.0
22,074.6
6,048.6
3,107.7
8,333.8
4,142.2
43,706.9
3,965.8
6,885.3
10,851.0
32,855.8
55,862.6

Key ratios
(Year-end March)
Per share data (|)
Adjusted EPS
Cash EPS
BV per share
Dividend per share
Cash Per Share
Operating Ratios (%)
Gross Margin
EBITDA Margin
PAT Margin
Inventory days
Debtor days
Creditor days
EBITDA Conversion rate
Return Ratios (%)
RoE
RoCE
RoIC
Valuation Ratios (x)
P/E
EV / EBITDA
EV / Net Sales
Market Cap / Sales
Price to Book Value
Solvency Ratios
Debt / EBITDA
Debt / Equity
Current Ratio

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 10

ICICIdirect.com coverage universe (Healthcare)


ICICIdirect Healthcare coverage Universe
Company
I-Direct
CMP TP
Code
(|)
(|)

Rating M Cap
(| Cr)

FY15

EPS (|)
FY16E FY17E FY15

PE(x)
EV/EBITDA (x)
RoCE (%)
RoE (%)
FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E

Ajanta Pharma

AJAPHA

1312 1,780 Buy

11546.6

36.0

44.1

49.3

36.4

29.8

26.6

22.6

19.4

17.0

1400 1,340 Hold

50.3

45.5

40.2

37.8

33.8 29.0
11.5 12.3

Apollo Hospitals

APOHOS

19471.9

23.7

28.8

34.1

59.0

48.7

41.0

28.7

24.3

19.8

9.9

11.5

12.9

10.4

Aurobindo Pharma

AURPHA

660

990 Buy

38574.7

28.1

33.0

37.7

23.5

20.0

17.5

30.7

25.5

21.8

23.4

24.4

25.4

31.7

28.1 24.8

Alembic Pharma

ALEMPHA

589

790 Buy

11111.1

15.1

39.0

28.5

39.1

15.1

20.7

32.2

12.8

17.5

30.7

56.7

33.0

32.1

52.2 30.1

Biocon

BIOCON

444

510 Hold

8880.0

20.4

23.5

26.3

21.7

18.9

16.9

7.1

6.2

5.2

10.4

11.7

13.1

12.5

12.6 12.8

Cadila Healthcare
Cipla

CADHEA
CIPLA

306
529

405 Buy
750 Buy

31357.2
42463.6

11.2
14.7

14.3
22.0

15.3
29.9

27.4
35.9

21.4
24.0

20.0
17.7

20.3
22.5

15.3
17.7

14.6
13.5

20.7
13.8

25.8
15.1

24.6
18.4

27.0
10.9

27.4 24.1
14.4 16.8

Divi's Laboratories

DIVLAB

988 1,320 Buy

26217.7

32.1

40.2

46.7

30.8

24.6

21.1

23.6

19.9

16.8

29.4

31.3

31.1

24.4

25.6 25.1

Dr Reddy's Labs

DRREDD

2846 3,880 Buy

48562.6 129.0 142.2 142.1

22.1

20.0

20.0

14.4

12.0

11.6

16.7

17.4

16.5

22.3

19.8 16.5

Glenmark Pharma

GLEPHA

691

975 Buy

19494.3

23.1

30.0

40.1

29.9

23.0

17.2

19.7

14.7

12.1

13.3

17.8

21.2

21.7

22.3 23.3

Indoco Remedies

INDREM

269

390 Buy

2482.5

9.0

9.6

15.4

30.0

28.1

17.5

18.2

16.7

12.4

16.4

15.9

22.0

16.0

15.1 20.5

Ipca Laboratories

IPCLAB

585

735 Buy

7380.2

19.9

12.0

30.3

29.4

48.9

19.3

17.0

23.3

13.5

11.5

6.6

13.9

11.4

6.6 14.6

Jubilant Life Sciences

VAMORG

306

375 Hold

4878.6

-0.6

31.0

41.3

NA

9.9

7.4

14.3

7.3

5.9

5.8

13.3

15.4

NA

17.1 18.9

Lupin

LUPIN

1751 2,200 Buy

78888.4

53.6

47.9

69.8

32.7

36.6

25.1

22.0

24.3

16.7

35.1

21.9

28.4

27.1

20.3 23.8

Natco Pharma

NATPHA

454

630 Buy

7906.6

8.3

7.3

11.3

54.6

62.0

40.1

37.4

31.4

23.5

15.4

12.9

16.1

17.9

9.8 13.5

Sun Pharma

SUNPHA

848

845 Hold

204169.5

19.8

22.7

28.2

42.8

37.4

30.1

25.5

22.8

18.7

18.8

19.6

21.1

18.6

18.2 19.1

Torrent Pharma

TORPHA

1232 1,650 Buy

20847.1

44.4 112.3

66.8

27.8

11.0

18.4

24.2

8.5

13.3

20.1

42.8

24.4

30.2

49.4 24.1

15.7

24.6

18.7

13.0

21.1

13.7

10.7

8.5

13.1

16.6

8.7

10.6 13.7

Unichem Laboratories
UNILAB
205
Source: Company, ICICIdirect.com Research

310 Buy

1859.5

ICICI Securities Ltd | Retail Equity Research

8.3

11.0

Page 11

RATING RATIONALE

ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns


ratings to its stocks according to their notional target price vs. current market price and then categorises them
as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional
target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;

Pankaj Pandey

Head Research

pankaj.pandey@icicisecurities.com

ICICIdirect.com Research Desk,


ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai 400 093
research@icicidirect.com

ICICI Securities Ltd | Retail Equity Research

Page 12

ANALYST CERTIFICATION
We /I, Siddhant Khandekar, CA INTER and Mitesh Shah, MS (finance), Nandan Kamat MBA Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed
in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific
recommendation(s) or view(s) in this report.

Terms & conditions and other disclosures:


ICICI Securities Limited is a SEBI registered Research Analyst having registration no. INH000000990. ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia,
engaged in the business of stock brokering and distribution of financial products. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is Indias largest private sector bank and has its various
subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (associates), the details in respect of which are
available on www.icicibank.com.
ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking
and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts
and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.
The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and
meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without
prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current.
Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended
temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this
company, or in certain other circumstances.
This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This
report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial
instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their
receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific
circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment
objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate
the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any
loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the
risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to
change without notice.
ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment
in the past twelve months.
ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in
respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction.
ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned
in the report in the past twelve months.
ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its analysts did not receive any compensation
or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts have any
material conflict of interest at the time of publication of this report.
It is confirmed that Siddhant Khandekar, CA INTER and Mitesh Shah, MS (finance), Nandan Kamat MBA, Research Analysts of this report have not received any compensation from the companies
mentioned in the report in the preceding twelve months.
Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.
ICICI Securities or its subsidiaries collectively or Research Analysts do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the
publication of the research report.
Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject
company/companies mentioned in this report.
It is confirmed that Siddhant Khandekar, CA INTER and Mitesh Shah, MS (finance), Nandan Kamat MBA, Research Analysts do not serve as an officer, director or employee of the companies mentioned in
the report.
ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.
Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report.
We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities.
This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution,
publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities
described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and
to observe such restriction.

ICICI Securities Ltd | Retail Equity Research

Page 13