Glenmark Pharmaceuticals (GLEPHA)€¦ · · 2015-02-20ICICI Securities Ltd | Retail Equity...

February 20, 2015

ICICI Securities Ltd | Retail Equity Research

Result Update

Performance hurt by forex loss; outlook promising • Revenues grew 6.2% YoY to | 1701 crore in line with I-direct estimate

of | 1680.3 crore. India, LatAm and RoW sales grew 13.6%, 105.8% and 27.3% YoY to | 433 crore, | 234 crore and | 173 crore, respectively. On the other hand, US and RoW declined 2.7% and 31.3% YoY to | 507 crore and | 207 crore, respectively

• EBITDA margins declined 718 bps to 15.6%, lower than I-direct estimate of 20.5% mainly due to forex losses. EBITDA declined 27.2% YoY to | 265.7 crore, less than I-direct estimate of | 344.2 crore

• Net profit declined 47% YoY to | 115 crore, lower than I-direct estimate of | 179.2 crore on the back of a lower margins

US generics business provide impetus after R&D setbacks After toying with R&D success and subsequent setbacks, the company has successfully developed and nurtured the US generics franchise. US generics now comprise ~30% of total turnover and have grown at a CAGR of 23% in the last five years. Total USFDA filings as on date are 169 and so far the company has received approvals for 94. From the pending ANDAs, 33 are Para IV applications. Key therapies in the US are oral contraceptives, pain management and CVS. The new focus areas in the US will be oncology, respiratory and dermatology. However, the management remains guarded on growth prospects in the US due to slower pace of product approvals in the US and consolidation in the distribution space. We expect US sales to grow at a CAGR of 16% in FY14-17E to | 3125 crore.

Targeting specific therapies in IPM Glenmark ranks 16th in domestic formulations with a market share of 2.19%. It is market leader in dermatology and is improving its presence in therapies such as respiratory, CVS and anti-infectives. It has defied muted growth in IPM in FY14 by growing at 16% vis-à-vis IPM growth of 6% by churning the portfolio. We expect sales from India to grow at a CAGR of 16% in FY14-17E to | 2353 crore.

US generics, India formulations main growth drivers; R&D can wait The R&D setback in 2008-10 has, in fact, benefited the company as the focus has shifted to more productive segments such as the US, India and RoW markets. The changed focus has improved operating cash flows as well as leverage situation as the debt-EBITDA has improved from a high of 4.6x in FY09 to 2.5x in FY14. Glenmark has also focused more on niche therapies such as dermatology, oral contraceptives and respiratory where competition is relatively less intense.

Management optimistic on US, RoW markets, going ahead After languishing for a few quarters, the US franchisee is likely to get some momentum, thanks to the interesting approvals lined up in FY16-17. Taking into account the product pipeline (including 33 Para IVs) the prospects are certainly to improve in FY16E and FY17E if indeed the momentum improves. Indian formulation growth is likely to remain at elevated level (Q3 was slightly muted), going ahead. Other geographies such as Europe, Latin America are emerging as new growth drivers but these geographies are slightly lumpy in nature. Respiratory launches in Russia despite adversaries bode well for RoW traction. We have valued the company at | 824 on SOTP basis. We ascribe | 817 to base business based on 18x FY17E EPS of | 45.4 and we have calculated NPV of | 7 for gZetia.

Rating matrix Rating : HoldTarget : | 824Target Period : 12 monthsPotential Upside : 8%

What’s Changed? Target Changed from | 75 to | 824EPS FY15E Changed from | 28 to | 22.1EPS FY16E Changed from | 33.4 to | 34.7EPS FY17E Changed from | 45.2 to | 45.4Rating Unchanged

Quarterly Performance

Q3FY15 Q3FY14 YoY (%) Q2FY15 QoQ (%)Revenue 1,701.3 1,601.8 6.2 1,680.7 1.2EBITDA 265.7 365.0 -27.2 335.8 -20.9EBITDA (%) 15.6 22.8 -717 bps 20.0 -437 bpsNet Profit 114.8 216.2 -46.9 165.1 -30.5

Key Financials (| Crore) FY14 FY15E FY16E FY17ERevenues 6007.3 6623.5 7890.4 9286.0EBITDA 1310.4 1243.3 1682.3 2092.9Net Profit 542.6 599.2 939.8 1231.5EPS (|) 20.0 22.1 34.7 45.4

Valuation summary

FY14 FY15E FY16E FY17EPE (x) 38.2 34.6 22.1 16.8Target PE (x) 41.2 37.3 23.8 18.2EV to EBITDA (x) 15.0 16.1 11.8 9.2Price to book (x) 5.8 5.1 4.2 3.4RoNW (%) 18.3 17.7 23.1 25.1RoCE (%) 16.0 17.4 23.8 28.6

Stock data ParticularMarket CapitalisationDebt (FY14)Cash (FY14)EV 52 week H/L 840/510Equity capital |27.1 croreFace value | 1

Amount| 20741 crore

| 3267 crore| 803 crore

| 23205 crore

Price performance (%)

1M 3M 6M 1YGlenmark Pharma 1.6 -3.1 13.4 32.7Divi's Labs -4.2 -6.3 8.7 18.9Cadila Healthcare -10.3 1.8 37.7 63.5

Glenmark Pharmaceuticals (GLEPHA) | 765

Research Analyst

Siddhant Khandekar [email protected] Mitesh Shah [email protected]

Nandan Kamat [email protected]


Variance analysis

(| crore) Q3FY15 Q3FY15E Q3FY14 Q2FY15 YoY (%) QoQ (%) CommentsRevenue 1,701.3 1,680.3 1,601.8 1,680.7 6.2 1.2 Slow growth was mainly due to muted growth in the US (-2.7%) on account of lack

of new product approvals and 31% de-growth in RoW due to currency related issuesin Russia.

Raw Material Expenses 556.0 534.8 537.3 548.9 3.5 1.3Employee Expenses 316.5 341.8 273.5 355.3 15.7 -10.9Other expenditure 563.1 459.6 426.0 440.7 32.2 27.8

Total Expenditure 1,435.6 1,336.2 1,236.8 1,344.9 16.1 6.7 Includes | 106 crore of forex loss.EBITDA 265.7 344.2 365.0 335.8 -27.2 -20.9EBITDA (%) 15.6 20.5 22.8 20.0 -717 bps -437 bps contraction in margin mainly due to higher forex loss.Interest 51.3 51.5 47.3 51.6 8.6 -0.6

Depreciation 65.5 65.9 61.1 65.0 7.1 0.7Other income 2.1 3.0 5.1 1.0 -58.2 119.1EO expenses 0.0 0.0 0.0 0.0 0.0 0.0PBT 151.0 229.8 261.7 220.2 -42.3 -31.4

Tax 36.3 50.6 47.4 55.2 -23.4 -34.3PAT 114.8 179.2 214.3 165.0 -46.5 -30.5MI 0.0 0.1 -1.9 -0.1 NA NANet Profit 114.8 179.2 216.2 165.1 -46.9 -30.5 Decline in net profit was synch with operational performance and higher taxation.

Key MetricsUSA 507.2 516.1 521.4 507.6 -2.7 -0.1 YoY de-growth on the back of lack of new product launches and channel

consolidation.India 433.1 476.5 381.2 478.2 13.6 -9.4Europe 173.0 135.8 135.8 130.6 27.3 32.5 Growth was mainly driven by new product launches including gSeretide.

Latin America 234.4 199.4 113.9 230.9 105.8 1.5Despite currency volatility, 200%+growth in Mexico and Venezuela drove the growth in Latin America

RoW markets 207.1 180.6 301.0 174.0 -31.2 19.0 Subdued growth was mainly due to adverse currency movement in Russia

API 146.5 162.7 147.9 159.5 -1.0 -8.2Out-licensing income 0.0 0.0 0.0 0.0 0.0 0.0

Source: Company, ICICIdirect.com Research Change in estimates

(| Crore) Old New % Change Old New % Change CommentsRevenues 6,822.0 6,623.5 -2.9 7,940.2 7,890.4 -0.6EBITDA 1,465.6 1,243.3 -15.2 1,688.7 1,682.3 -0.4 Reduction in FY15 EBITDA estimates after incorporating margin fall in H2FY15 due to

forex losses especially in Russia.EBITDA Margin (%) 21.5 18.8 -271 bps 21.3 21.3 5 bpsNet Profit 759.4 599.2 -21.1 907.1 939.8 3.6 Reduction in estimates in synch with reduction in EBITDA in FY15EPS (|) 28.0 22.1 -21.1 33.4 34.7 3.7

FY15E FY16E

Source: Company, ICICIdirect.com Research Assumptions

Comments(| crore) FY13 FY14 FY15E FY16E FY15E FY16EUSA 1,688.7 2,027.1 2,019.3 2,373.8 2,043.5 2,402.6India 1,309.6 1,510.5 1,760.3 2,077.2 1,777.1 2,097.0Europe 372.4 506.1 584.8 792.1 639.6 767.5Latin America 346.8 404.6 795.4 1,002.0 634.7 825.1 Change in FY16 estimates to factor abnormal growth in Venezuela, Mexico and

growth recovery in Brazil on the back of new product launches.

RoW markets 812.2 986.0 798.0 922.7 1,045.9 1,098.2 Reduction in estimates to factor in currency volatility in Russia API 397.6 529.2 626.6 720.6 650.2 747.8Out-licensing income 49.3 36.5 29.9 0.0 29.9 0.0

Current Earlier

Source: Company, ICICIdirect.com Research


Company Analysis

Incorporated in 1977 Glenmark was never a mass-market player with a clear focus on niche areas such as dermatology, respiratory and cardiology. The company was one of the few Indian players (like DRL) to identify the importance of dedicated R&D efforts in the nineties. Post its maiden IPO in 2000, the company started ramping up API business via small acquisitions. In 2005 it struck its first out-licensing R&D seal with US based Forest Laboratories for COPD/asthma molecule with Oglemilast. Similar R&D deals were struck with Innovator companies such as Eli Lily and Merck KGaA (Germany). It received a substantial amount in the nature of upfront – milestone payments. However, it received a setback in most of these deals, one after another during 2007-09, as clients were unsatisfied with the progress or not interested to pursue the same any further due to changed priorities or budgetary constraints. This had hit the company hard during that period as, unlike other Indian players which hived off the risky R&D ventures into separate companies to protect core balance-sheet, Glenmark hived off the generic business. Its balance sheet got stretched with huge debts with the D/E and debt/EBITDA ratio swelled to 2x and 4x, respectively. However, post the R&D debacle the company refocused on the generics business especially in the US and Indian formulations putting R&D on the backburner. The changed has worked going by the performance in the last two-three years as the strong traction in the US, backed by forays into niche areas such as oral contraceptives and dermatology, robust growth in Indian formulations and strong tractions from ROW and Latam markets have improved the balance sheet and operating cash-flows significantly. The R&D deals are still active but the focus on the innovative R&D and generic R&D is almost equal. The company has almost fully recovered the amount spent on innovative R&D which is almost US$200 million in the last nine years. With other geographies also chipping in, the growth, going ahead is likely to be broad based with India and the US, the largest geographies growing at a decent pace and emerging segments such as RoW markets and Latin America showing greater traction. The company also remains committed to API exports. We expect sales to grow at a CAGR of 16% to | 9286 crore between FY14 and FY17E. Exhibit 1: Revenues to grow at CAGR of 16% in FY14-17E

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Glenmark has reclassified it operations into six categories - India, US, Europe, Latin America, ROW markets and APIs. Earlier the classification was on the basis of - 1) specialty businesses and 2) generics businesses.


India (25% of overall sales) – In India it operates through over 20 divisions with focus on dermatology, cardiology, respiratory and anti-infectives among all. The company markets over 350 products in India. As AIOCD MAT 2014, Glenmark ranks sixteenth in IPM with a market share of 2.19%. Among therapies, it ranks second in dermatology, sixth in respiratory and tenth in cardiology. The current MR strength of the company is ~3200 and the MR productivity is | 47.2 lakh per MR. The acute: chronic ratio for Glenmark is 63: 37. Exhibit 2: India business major growth driver…

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The US (34% of overall sales) – The US generic business is being operated through its subsidiary Glenmark Generics Limited. It focuses on developing, manufacturing and the distribution of generics through wholesalers, retailers and pharmacy chains. Glenmark’s US strategy is to focus on less crowded therapies such as oral contraceptives, dermatology, oncology, etc. Typically, the company focuses on small ticket but niche opportunities. Till date, the company has filed 169 ANDAs with the USFDA. Of these, it has received approval for 94 ANDAs. It is currently awaiting USFDA approval for 75 ANDAs, of which 33 are Para IV applications. Exhibit 3: … so is the US

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The drug discovery business is focusing on areas of inflammation (asthma/COPD, rheumatoid arthritis, etc.), metabolic disorders (diabetes, obesity, etc.) and pain (neuropathic pain and inflammatory pain).


Glenmark has a pipeline of six molecules – 3 NCEs and 4 NBEs in various stages of preclinical and preclinical development. Of these, five are in clinical trials. Glenmark has been following a strategy of out-licensing research-staged molecules in clinical development to MNCs. So far Glenmark has struck seven deals in the last nine years booking ~US$ 200 million as upfront and milestone payments. Exhibit 4: Higher R&D spend here to stay….

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Exhibit 5: Margins remains under pressure due to higher R&D spend

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Exhibit 6: Net profit to grow at CAGR of 31% in FY14-17E on lower base

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Exhibit 7: Return ratios to improve, going ahead…

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Exhibit 8: Trends in quarterly financials (| crore) Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 YoY (%) QoQ (%)

Net Sales 1031.1 1065.9 1040.4 1255.2 1381.3 1335.5 1237.9 1463.0 1601.2 1681.7 1477.8 1671.5 1692.1 5.7 1.2

Other operating income 0.2 0.3 0.3 0.4 0.4 0.4 0.4 0.4 0.5 21.8 9.1 9.2 9.2 1638.2 0.2

Revenues 1031.3 1066.2 1040.7 1255.6 1381.6 1335.9 1238.2 1463.4 1601.8 1703.6 1486.9 1680.7 1701.3 6.2 1.2

Raw material cost 370.3 410.9 366.3 442.6 467.7 377.0 405.0 486.9 537.3 443.9 447.2 548.9 556.0 3.5 1.3

% to revenues 35.9 38.5 35.2 35.2 33.9 28.2 32.7 33.3 33.5 26.1 30.1 32.7 32.7 -86.5 2.2

Gross Profit 661.1 655.3 674.4 813.0 913.9 958.9 833.3 976.5 1064.4 1259.7 1039.7 1131.8 1145.3 7.6 1.2

Gross Profit Margin (%) 64.1 61.5 64.8 64.8 66.1 71.8 67.3 66.7 66.5 73.9 69.9 67.3 67.3 86.5 -2.2

Employee cost 173.4 163.3 165.6 201.6 212.4 208.7 210.8 264.5 273.5 277.4 276.4 355.3 316.5 15.7 -10.9

% to revenues 16.8 15.3 15.9 16.1 15.4 15.6 17.0 18.1 17.1 16.3 18.6 21.1 18.6 152.6 -253.5

Other expenditure 384.8 270.3 343.7 340.1 381.4 495.4 374.7 396.4 426.0 600.7 421.0 440.7 563.1 32.2 27.8

% to revenues 37.3 25.4 33.0 27.1 27.6 37.1 30.3 27.1 26.6 35.3 28.3 26.2 33.1 649.6 687.9

Total Expenditure 928.5 844.4 875.6 984.2 1061.5 1081.1 990.5 1147.7 1236.8 1321.9 1144.6 1344.9 1435.6 16.1 6.7

% to revenues 90.0 79.2 84.1 78.4 76.8 80.9 80.0 78.4 77.2 77.6 77.0 80.0 84.4 717.1 436.7

EBIDTA 102.9 221.8 165.1 271.3 320.2 254.8 247.8 315.7 365.0 381.6 342.3 335.8 265.7 -27.2 -20.9

EBITDA margin (%) 10.0 20.8 15.9 21.6 23.2 19.1 20.0 21.6 22.8 22.4 23.0 20.0 15.6 -717.8 -436.7

Depreciation 23.1 23.6 27.5 32.1 35.6 31.8 34.9 60.5 61.1 60.3 65.1 65.0 65.5 7.1 0.7

Interest 35.9 41.0 38.0 38.4 40.0 43.6 46.4 48.5 47.3 46.4 48.1 51.6 51.3 8.6 -0.6

Other income 10.8 2.3 2.6 6.6 5.2 -5.0 3.3 13.4 5.1 -12.1 3.5 1.0 2.1 -58.2 119.1

Exceptional items 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 217.5 0.0 0.0 0.0

PBT 54.5 159.5 102.2 207.4 249.7 174.4 169.8 220.1 261.7 45.3 232.6 220.2 151.0 -42.3 -31.4

Tax 8.4 7.3 21.8 47.7 36.6 4.6 39.2 62.8 47.4 1.9 47.7 55.2 36.3 -23.4 -34.3

Tax Rate (%) 15.4 4.6 21.3 23.0 14.7 2.6 23.1 28.5 18.1 4.1 20.5 25.1 24.0

PAT 46.1 152.2 80.4 159.7 213.0 169.8 130.6 157.3 214.3 43.4 184.9 165.0 114.8 -46.5 -30.5

PAT Margin (%) 4.5 14.3 7.7 12.7 15.4 12.7 10.5 10.7 13.4 2.5 12.4 9.8 6.7

Minority Interest 1.3 1.9 2.1 3.0 0.1 3.0 1.9 3.0 -1.9 0.3 0.1 -0.1 0.0

Net Profit 44.8 150.4 78.3 156.8 212.9 166.8 128.7 154.3 216.2 43.1 184.8 165.1 114.8 -46.9 -30.5

EPS (|) 1.7 5.6 2.9 5.8 7.9 6.2 4.8 5.7 8.0 1.6 6.8 6.1 4.2


SWOT Analysis Strengths- Prudent geographical mix covering high opportunity emerging markets as well as developed markets. Presence in niche therapies in the US such as oral contraceptives, dermatology which is relatively less crowded. Time tested R&D focused business model with a portfolio of Innovative products. Well placed to monetise the R&D pipeline in with product in various stages of completion. Weakness- High debt level; Presence of substantial intangibles in the Balance sheet. Higher R&D spends likely to put pressure on the margins. Opportunities- In the US Generics space lot of opportunities are panning out in the Oral Contraceptives and Respiratory space. Threats- Increased USFDA scrutiny across the globe regarding cGMP issues and consolidation in the US pharmacy space.


Conference call highlights • Gross debt and cash stood at ~| 3160 crore and ~| 406 crore

respectively in Q3FY15. • In Q3, the company has received 1 USFDA approval

(gPrilosec) and filed 4 products. Cumulatively, it has 94 products in the US and has 75 pending approvals including 33 Para IV application. It also expects to file 4 ANDA in Q4FY15.

• It expects acceleration in the USFDA approvals from Q4 onwards. It has also taken some price hikes in the US.

• R&D stood at | 176 crore in Q3 FY15 (10.4% of total sales). The company has spent ~US$ 40-45 million in R&D for innovative products in CY14. Going ahead, the proportion of Innovative R&D in the total R&D is likely to go down.

• CIS is contributing 50-55% of the company’s total ROW sales. Venezuela is contributing 25-30% of company’s total Latin American sales.

• In Russia, the company has not taken any price hike despite sharp Rouble depreciation. During the quarter the company has received 3-4 products approval including gSeretide (for asthma; US$ 60-70 million sales). The company is holding back some Russian sales to avoid bad-debts.

• Russian margins are normally above the company’s blended margins.

• The company has also filed gSeretide in 4-5 other emerging markets and plans to file 5-6 more respiratory products in these markets.

• It expects strong European sales from Q4FY15 mainly due to launches of 3-4 products including gTarka

• The company expects ~18% growth in the domestic market. In Latin America, despite currency volatility it expects 10-15% growth due to incremental product launches.

• Capex expected to be ~| 500 crore for FY16.

Market Share: Domestic

MAT Dec 2014 (%) MAT Dec 2013 (%)Cardiac 3.81 3.50Respiratory 3.82 3.58Anti-Infectives 1.81 1.63Anti-Diabetic 1.97 1.50Gynacology 1.42 1.48Derma 8.04 8.16



Valuation After languishing for few quarters, the US franchisee is likely to get some momentum, thanks to the interesting approvals lined up in FY16-17. Taking into account the product pipeline (including 33 Para IVs) the prospects are certainly to improve in FY16E and FY17E if indeed the momentum improves. Indian formulations growth is likely to remain at elevated level (Q3 was slightly muted) going ahead. Other geographies such as Europe, Latin America are emerging as new growth drivers but these geographies are slightly lumpy in nature. Respiratory launches in Russia despite adversaries bode well for ROW traction. We have valued the company at | 824 on SOTP basis- We ascribe | 817 to base business based on 18x FY17E EPS of | 45.4 and we have calculated NPV of | 7 for gZetia. Exhibit 9: One year forward PE

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Exhibit 10: One year forward PE of company vs. BSE Healthcare Index

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Exhibit 11: Valuation

Revenues Growth EPS Growth P/E EV/EBITDA RoNW RoCE(| crore) (%) (|) (%) (x) (X) (%) (%)

FY14 6007 49 20.0 17.9 31.8 15.0 18.3 16.0FY15E 6624 10 22.1 10.4 28.8 16.1 17.7 17.4FY16E 7890 19 34.7 56.8 18.4 11.8 23.1 23.8FY17E 9286 18 45.4 45.4 14.0 9.2 25.1 28.6



Company snapshot

Target Price: | 824

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Source: Bloomberg, Company, ICICIdirect.com Research Key events Date EventAug-09 Forest & Glenmark Pharma announce Phase IIb results for Oglemilast. The molecule did not show satisfactory results compare to its Placebo.

Oct-09 Launches four products in the UK market through its subsidiary Glenmark Generics Europe.

Mar-10 Receives USFDA approval for its new drug application for Oxycodone Hydrochloride capsules and liquid solutions filed as an NDA with USFDA under 505b2 route.

May-10 Enters into an agreement with Sanofi to out-license its GRC 15300 molecule. Receives US$ 20 million as an upfront payment.

Jan-11 Sanofi & Abbott win patent litigation case of generic Tarka. A Federal jury asks Glenmark to pay US$ 16 million as damages for launching at risk in the US market.

Apr-11 Enters into an exclusive agreement with a Canadian base company ImmanenceIntegrale Dermo Correction (IDC) to market high end dermatology products in eight countries including India & Brazil.

May-11 Out-licenses monoclonal antibody GBR 500 to Sanofi. Receives US$ 50 million as upfront payment.

Aug-12 The International Center for Dispute resolution rules in favor of Glenmark on the arbitration claim it filed against Napo Pharma. Glenmark will have rights to develop, commercialise and distribute Crofelemer in 140 emerging markets.

Jul-13 Conforms filing of ANDA for Lacosamide tablets and oral solutions with the USFDA under Para IV certification.

Mar-14 Provided | 213 crore for Tarka liability

Jan-15 Company has received shareholders' nod to raise up to $300 million (around Rs 1,890 crore) through issue of securities.

Source: Company, ICICIdirect.com Research Top 10 Shareholders Shareholding Pattern Rank Name Latest Filing Date % O/S Position (m)n Change (m)1 Saldanha Family Trust 31-Dec-14 47.27 128.2 0.02 Life Insurance Corporation of India 31-Dec-14 3.37 9.2 -0.23 OppenheimerFunds, Inc. 31-Dec-14 2.06 5.6 0.04 HSBC Global Asset Management (Hong Kong) Limited 31-Dec-14 1.82 5.0 -0.65 Capital International, Inc. 30-Sep-14 1.44 3.9 -0.16 Bellevue Asset Management AG 31-Jul-13 1.33 3.6 3.67 Macquarie Investment Management Ltd. 30-Sep-14 1.24 3.4 0.38 Capital Research Global Investors 31-Dec-14 1.22 3.3 -0.79 The Vanguard Group, Inc. 31-Jan-15 1.07 2.9 0.010 General Insurance Corporation of India 31-Dec-14 1.05 2.9 -0.1

(in %) Dec-13 Mar-14 Jun-14 Sep-14 Dec-14Promoter 48.3 48.3 48.3 48.3 48.3FII 33.1 33.2 34.4 35.1 34.6DII 7.5 7.8 6.8 5.9 6.4Others 11.1 10.7 10.5 10.7 10.7

Source: Reuters, ICICIdirect.com Research Recent Activity

Investor name Value Shares Investor name Value SharesBellevue Asset Management AG 34.13m 3.60m ICICI Prudential Asset Management Co. Ltd. -11.56m -0.95m APG Asset Management 29.36m 2.40m RCM Asia Pacific Ltd. -8.05m -0.68m Baron Capital Management, Inc. 12.53m 1.03m Capital Research Global Investors -7.95m -0.66m Wasatch Advisors, Inc. 12.45m 1.02m HSBC Global Asset Management (Hong Kong) Limited -7.47m -0.61m Tata Asset Management Limited 12.23m 1.00m William Blair & Company, L.L.C. -6.52m -0.56m

Buys Sells

Source: Reuters, ICICIdirect.com Research


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Financial summary

Profit and loss statement | Crore (Year-end March) FY14 FY15E FY16E FY17ERevenues 6,007.3 6,623.5 7,890.4 9,286.0Growth (%) 49.4 10.3 19.1 17.7Raw Material Expenses 1,873.0 2,119.3 2,524.3 2,924.5Employee Expenses 1,026.1 1,295.0 1,554.0 1,808.4R & D cost 538.6 625.7 749.4 882.0Other expenditure 1,259.1 1,340.2 1,380.5 1,578.3Total Operating Expenditure 4,696.9 5,380.2 6,208.1 7,193.1EBITDA 1,310.4 1,243.3 1,682.3 2,092.9Growth (%) 54.7 -5.1 35.3 24.4Depreciation 216.8 270.3 285.6 309.5Interest 188.6 203.3 196.1 170.1Other Income 9.8 9.6 12.0 12.0PBT 914.8 779.3 1,212.5 1,625.3EO 217.5 0.0 0.0 0.0Total Tax 151.3 180.1 272.8 365.7Profit After Tax 546.0 599.2 939.7 1,259.6MI 3.3 -0.1 -0.1 28.1Net Profit 542.6 599.2 939.8 1,231.5Growth (%) 17.9 10.4 56.8 31.0EPS (|) 20.0 22.1 34.7 45.4


Cash flow statement | Crore (Year-end March) FY14 FY15E FY16E FY17EProfit after Tax 546 599 940 1,260Add: Depreciation 217 270 286 309Inc/(dec) in CL and Provisions 721 200 93 435(Inc)/dec in Current Assets -839 -650 -378 -889Others 0 0 0 0CF from operating activities 644.4 419.3 940.7 1,114.9(Inc)/dec in Investments 0 0 0 0(Inc)/dec in Fixed Assets -484 -460 -500 -300Inc/(dec) deffered tax liability 30 0 0 0(Inc)/dec deffered tax liability -164 0 0 0CF from investing activities -618.1 -460.0 -500.0 -300.0Issue/(Buy back) of Equity 0 0 0 0Inc/(dec) in loan funds 502 -100 -300 -500Dividend paid & dividend tax -54 -95 -108 -108Inc/(dec) MI -11 0 0 0Others -271 -111 -141 -206CF from financing activities 165.7 -306.0 -549.2 -814.7Net Cash flow 192 -347 -109 0Opening Cash 611 803 456 348Closing Cash 803.0 456.3 347.7 347.9


Balance sheet | Crore (Year-end March) FY14 FY15E FY16E FY17ELiabilitiesEquity Capital 27.1 27.1 27.1 27.1Reserve and Surplus 2,956.5 3,349.7 4,040.2 4,985.1Total Shareholders funds 2,983.7 3,376.8 4,067.3 5,012.2Total Debt 3,267.0 3,167.0 2,867.0 2,367.0Deferred Tax Liability 207.1 207.1 207.1 207.1Minority Interest 13.3 13.3 13.3 13.3Total Liabilities 6,471.0 6,764.2 7,154.7 7,599.6

AssetsGross Block 3,632.6 3,892.6 4,292.6 4,492.6Less: Acc Depreciation 743.0 1,013.2 1,298.9 1,608.3Net Block 2,889.7 2,879.4 2,993.8 2,884.3Capital WIP 206.2 406.2 506.2 606.2Total Fixed Assets 3,095.9 3,285.6 3,500.0 3,490.5Investments 18.1 18.1 18.1 18.1Inventory 932.9 1,443.7 1,620.9 1,907.7Debtors 2,156.3 2,346.0 2,377.3 2,797.9Loans and Advances 906.4 856.3 1,025.5 1,206.9Other Current Assets 0.0 0.0 0.0 0.0Cash 803.0 456.3 347.7 347.9Total Current Assets 4,798.7 5,102.2 5,371.4 6,260.4Creditors 1,903.0 2,165.5 2,377.3 2,797.9Provisions 260.0 197.6 78.9 92.8Total Current Liabilities 2,163.0 2,363.1 2,456.2 2,890.8Net Current Assets 2,635.7 2,739.1 2,915.2 3,369.6Differed tax assets 721.3 721.3 721.3 721.3Application of Funds 6,471.0 6,764.2 7,154.7 7,599.6


Key ratios (Year-end March) FY14 FY15E FY16E FY17EPer share data (|)EPS 20.0 22.1 34.7 45.4Cash EPS 28.0 32.1 45.2 56.8BV 110.0 124.5 150.0 184.8DPS 2.0 3.5 4.0 4.0Cash Per Share 29.6 16.8 12.8 12.8Operating Ratios (%)EBITDA margins 21.8 18.8 21.3 22.5PBT margins 15.2 11.8 15.4 17.5Net Profit margins 9.0 9.0 11.9 13.3Debtor days 131 130 110 110Inventory days 57 80 75 75Creditor days 120 120 110 110Return Ratios (%)RoE 18.3 17.7 23.1 25.1RoCE 16.0 17.4 23.8 28.6RoIC 21.3 17.5 21.4 24.6Valuation Ratios (x)P/E 31.8 28.8 18.4 14.0EV / EBITDA 15.0 16.1 11.8 9.2EV / Revenues 3.3 3.0 2.5 2.1Market Cap / Revenues 2.9 2.6 2.2 1.9Price to Book Value 5.8 5.1 4.2 3.4Solvency RatiosDebt/EBITDA 2.5 2.5 1.7 1.1Debt / Equity 1.1 0.9 0.7 0.5Current Ratio 2.2 2.2 2.2 2.2Quick Ratio 1.8 1.5 1.5 1.5



ICICIdirect.com coverage universe (Healthcare) ICICIdirect Healthcare coverage Universe

I-Direct CMP TP Rating M CapCode (|) (|) (| Cr) FY14 FY15E FY16E FY14 FY15E FY16E FY14 FY15E FY16E FY14 FY15E FY16E FY14 FY15E FY16E

Ajanta Pharma AJAPHA 2517 3220 BUY 8820.5 66.2 75.0 85.6 38.0 33.6 29.4 24.0 20.9 17.2 44.9 40.6 38.1 39.4 32.8 28.9

Apollo Hospitals APOHOS 1295 1075 HOLD 17951.7 22.8 27.5 35.1 56.9 47.2 36.9 28.1 24.0 18.2 11.6 12.7 14.9 10.6 11.8 13.58

Aurobindo Pharma AURPHA 1124 1303 HOLD 32672.9 47.3 57.4 70.5 23.8 19.6 15.9 17.0 14.0 11.4 24.1 23.4 24.4 31.3 31.6 28.65

Biocon BIOCON 420.5 410 HOLD 8378.7 20.7 20.0 22.6 20.3 21.0 18.6 12.4 12.4 10.9 13.4 11.6 12.9 13.7 12.3 12.9

Cadila Healthcare CADHEA 1545 1634 HOLD 31520.0 39.2 51.1 66.2 39.4 30.2 23.3 28.0 20.9 16.3 15.9 19.0 21.7 23.4 24.6 25.4

Cipla CIPLA 660.7 585 HOLD 52850.1 17.3 15.9 21.7 38.2 41.5 30.4 25.1 22.8 18.3 15.5 14.8 17.2 13.8 11.5 13.7

Divi's Laboratories DIVLAB 1644 1633 HOLD 21744.2 56.0 62.4 81.7 29.4 26.3 20.1 21.3 18.1 15.0 29.6 28.1 29.7 26.1 23.2 25.1

Dr Reddy's Labs DRREDD 3237 3332 HOLD 56545.6 126.7 128.3 151.0 26.3 26.0 22.1 17.1 15.8 13.9 19.2 18.7 20.1 23.7 19.9 19.5

Glenmark Pharma GLEPHA 765 824 HOLD 20193.6 20.0 22.1 34.7 38.2 34.6 22.1 17.3 18.4 12.0 16.0 17.4 23.8 18.3 17.7 23.1

Indoco Remedies INDREM 319.7 375 BUY 2935.1 6.3 9.5 13.3 50.9 33.7 24.0 24.9 16.9 13.1 16.6 21.8 28.1 12.6 16.4 19.4

Ipca Laboratories IPCLAB 670.2 622 HOLD 8425.7 37.9 25.6 31.8 17.7 26.2 21.1 11.0 14.5 14.0 27.6 16.1 17.8 24.4 14.7 16.0

Jubilant Life Sciences VAMORG 155.3 138 SELL 2463.6 6.8 -6.5 20.0 22.7 -24.0 7.8 6.3 11.4 5.5 10.1 4.5 7.6 4.2 -3.5 7.6

Lupin LUPIN 1618 1866 BUY 72401.8 41.0 54.4 61.0 39.5 29.7 26.5 24.9 19.0 17.1 34.5 34.7 32.0 26.5 27.4 24.6

Natco Pharma NATPHA 1402 1354 HOLD 4643.5 30.3 32.5 44.9 36.3 33.8 24.4 27.2 22.5 17.9 15.3 16.7 18.7 14.1 13.5 16.1

Sun Pharma SUNPHA 923.6 1036 BUY 190580.5 29.0 34.8 39.9 31.8 26.5 23.2 19.4 18.8 16.0 32.4 31.2 28.8 27.0 25.3 23.1

Torrent Pharma TORPHA 1152 1165 HOLD 19413.5 39.2 47.2 50.4 29.4 24.4 22.9 20.6 18.3 14.7 28.5 21.4 26.7 34.9 32.4 28.0

Unichem Laboratories UNILAB 215 206 HOLD 1946.2 18.7 6.4 13.2 11.5 33.9 16.3 10.8 17.9 11.1 15.7 6.5 12.8 20.7 7.1 14.0

RoNW (%)Company

EPS (|) PE(x) EV/EBITDA (x) RoCE (%)



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ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai – 400 093

[email protected]


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