Ipca Laboratories (IPCLAB) - ICICI Direct

August 4, 2015

ICICI Securities Ltd | Retail Equity Research

Result Update

Numbers indicate long road to recovery… • Revenues de-grew 19% YoY to | 758.0 crore (above I-direct estimate

of | 700.9 crore). The 42% de-growth in export formulations due to the ongoing USFDA compliance issues led to a drop in both branded and institutional businesses that was partially offset by 8% YoY growth in domestic formulations

• EBITDA margins declined 1383 bps YoY to 10.8% but above I-direct estimate of 6.8% mainly due to lower-than-expected other expenditure. EBITDA de-grew 64.4% to | 82.2 crore vs. I-direct estimate of | 47.9 crore

• Net profit de-grew 87% YoY to | 18.9 crore against I-direct estimate of a loss of | 7 crore

Export formulations main growth catalyst but challenges, going ahead Exports formulations (40% of the turnover) have grown at a CAGR of 20.5% in the last five years and surpassed domestic formulations (37% of the turnover) in the process. Growth in exports formulations was on the back of growth in both international generics and international branded formulations. The international anti-malarial institutional business has also contributed substantially to overall exports growth. Bottlenecks for the company on the US front were made good by strong traction in this business. US traction will, however, take more time than earlier estimated. This is due to USFDA import alerts for the Ratlam facility that is the only API source for Silvassa and Indore SEZ formulations plants along with Silvassa and Pithampur (Indore) plants that are specifically earmarked for US business, besides third party sales. Offtake from the Indore SEZ for the US market has now been delayed, thus affecting the US visibility and overall company multiple. The hitherto safe institutional business has also faced shipment delays due to stringent testing requirements. Exposure to Russia has affected the offtake of its branded sales. All these issues are likely take some time to get resolved. We expect export formulations to grow at a CAGR of 18.6% (on a lower base) between FY15 and FY17E to | 1745 crore. Indian formulations steady but anti-malarial dependence still high Domestic formulations comprise 37% of total revenues. During FY10-15, this segment grew at a CAGR of 13.6% backed by new launches and field force addition. However, the domestic performance has been volatile at times due to significant presence of anti-malarials in the portfolio. Due to the seasonality of this therapeutic segment the overall performance has remained lumpy. Anti-malarials currently comprise ~20% of the domestic portfolio. We expect Indian formulations to grow at a CAGR of 14.7% between FY15 and FY17E to | 1486 crore. Crawling back to normal but long way to go; maintain HOLD As expected, the Q1 result turned out to be a washout event with little signs of a recovery in the form of WHO clearance and partial USFDA allowances. On the other hand, some fresh concerns in the nature of a domestic slowdown due to a slowdown in the anti-malarials segment and a marked slowdown in branded exports sales have emerged. Overall, back to back import alerts for three facilities besides observations from the WHO will, however, continue to act as a major stumbling block in the near term. The management has guided for 7-8% revenue growth and 18% EBITDA margins for FY16. We maintain our HOLD recommendation with a target price of | 665 (16x FY17E EPS of | 41.5).

Rating matrix Rating : HoldTarget : | 665Target Period : 12 monthsPotential Upside : -8%

What’s Changed? Target Changed from | 625 to | 665EPS FY16E Changed from | 28.9 to | 25.0EPS FY17E Changed from | 39.0 to | 41.5Rating Unchanged

Standalone Quarterly Performance

Q1FY16 Q1FY15 YoY (%) Q4FY15 QoQ (%)Revenue 758.0 936.0 -19.0 627.9 20.7EBITDA 82.2 230.9 -64.4 33.7 144.1EBITDA (%) 10.8 24.7 -1383 bps 5.4 548 bpsNet Profit 18.9 145.5 -87.0 7.8 142.5

Key Financials (| crore) FY14 FY15 FY16E FY17ERevenues 3281.8 3141.8 3381.8 4138.3EBITDA 810.6 529.1 573.4 839.2Net Profit 533.3 251.2 316.0 523.3EPS (|) 37.9 20.2 25.0 41.5Adj. EPS (|) 42.3 19.9 25.0 41.5

Valuation summary

FY14 FY15 FY16E FY17EPE (x) 19.0 35.8 28.8 17.4Target PE (x) 17.5 32.9 26.5 16.0EV to EBITDA (x) 11.9 19.1 15.6 12.1Price to book (x) 4.7 4.3 3.8 3.2RoNW (%) 24.4 12.1 15.1 17.5RoCE (%) 27.6 11.4 12.5 15.8

Stock data ParticularMarket Capitalisation Debt (FY15)Cash (FY15)EV 52 week H/L 829/591Equity capital | 12.6 croreFace value | 2

Amount| 9094 crore| 935 crore| 125 crore

| 9904 crore

Price performance (%)

1M 3M 6M 1YIpca Labs -1.6 8.7 9.4 -2.4Aurobindo Pharma -0.4 12.5 15.9 111.9Biocon -1.1 0.7 9.9 -2.1Torrent Pharma 10.3 19.5 30.6 95.5

Ipca Laboratories (IPCLAB) | 721

Research Analyst

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


Variance analysis Q1FY16 Q1FY16E Q1FY15 Q4FY15 YoY (%) QoQ (%) Comments

Revenue 758.0 700.9 936.0 627.9 -19.0 20.7 YoY decline was due to USFDA import alert, lower institutional business and currency fluctuations in emerging markets.

Raw Material Expenses 297.3 277.9 342.6 256.9 -13.2 15.7 YoY decline in gross margin was mainly due to adverse product mix.Employee Expenses 158.0 138.9 138.9 128.8 13.7 22.7Other Expenditure 220.5 236.2 223.5 208.6 -1.3 5.7 Registered ~| 11 crore of one time claim settlement for supply failures.Operating Profit (EBITDA) 82.2 47.9 230.9 33.7 -64.4 144.1EBITDA (%) 10.8 6.8 24.7 5.4 -1383 bps 548 bps Sharp decline was mainly due to higher fixed cost and lower gross margin. Ex one-

off expense of | 30 crore pertaining to claims settlement, the company's margin was ~14%

Interest 5.5 6.3 5.7 8.3 -4.7 -34.1Depreciation 42.1 55.8 37.9 57.7 11.1 -27.0Other Income 4.1 6.9 6.3 14.3 -34.3 -71.2Forex 11.6 0.0 -2.3 -22.5 LP LPEO 0.0 0.0 0.0 0.0 0.0 0.0PBT 27.1 -7.3 195.8 4.6 -86.1 493.7Tax 8.2 -1.7 50.4 -3.2 -83.6 LPTax Rate (%) 30.4 23.0 25.7 -70.5 18.1 LPNet Profit 18.9 -5.6 145.5 7.8 -87.0 142.5 YoY declined was mainly in sync with EBITDA and higher depreciationEPS (|) 1.5 -0.4 11.5 0.6 -87.0 142.6Key MetricsExport APIs 152.1 119.0 183.1 120.9 -16.9 25.8 Delta vis-à-vis our expectations was mainly due to higher-than-expected sales in

ex-US export marketsExport formulations 221.2 247.4 387.7 240.2 -43.0 -7.9 Decline in export formulations on the back of USFDA import alert, lower

institutional business and currency fluctuations in emerging marketsDomestic APIs 56.0 32.1 64.1 32.7 -12.8 71.4Domestic formulations 318.1 296.1 293.2 229.0 8.5 38.9 Delta vis-à-vis our expectations was mainly due to better-than-expected growth

in chronic segments

Source: Company, ICICIdirect.com Research Change in estimates

(| Crore) Old New % Change Old New % Change CommentsRevenue 3,438.2 3,381.8 -1.6 4,170.9 4,138.3 -0.8EBITDA 631.9 573.4 -9.3 802.1 839.2 4.6 Lower revision in sync with management guidanceEBITDA Margin (%) 18.4 17.0 -145 bps 19.2 20.3 108 bpsPAT 364.0 316.0 -13.2 492.5 523.3 6.3EPS (|) 28.9 25.0 -13.3 39.0 41.5 6.4

FY16E FY17E

Source: Company, ICICIdirect.com Research Assumptions

FY14 FY15 FY16E FY17E FY16E FY17EExport APIs 600.2 513.7 518.6 581.3 494.6 555.0

Export formulations 1,447.6 1,240.6 1,328.8 1,744.9 1,425.9 1,839.9 Changed as per management guidance and lower than expectd growth in Q1.

Domestic APIs 164.5 178.3 178.4 207.5 172.0 200.4Domestic formulations 969.4 1,128.7 1,270.1 1,486.1 1,315.0 1,538.5

Current Earlier

Source: Company, ICICIdirect.com Research


Company Analysis Established in 1949, Ipca is known for its dominance in the anti-malarials business. It has come a long way from an anti-malarial player to a player offering a gamut of other therapeutic products. Currently, anti-malarials account for ~30% of revenues encompassing various sub heads. This is followed by CVS - 27% and pain management-22%. Overall formulations to API ratio stand at 77:23. A further breakup of formulations is : 1) domestic formulations - 48%, 2) export formulations -52%. Further breakup of APIs is- 1) domestic APIs - 26%, 2) export APIs - 74%. Exports formulations are further divided into - 1) branded formulations - 24% of exports formulations, 2) generic formulations - 46% of exports formulations and 3) institutional business - 30% of exports formulations. The US business is being accounted into the generic exports formulation category. In the domestic formulations, the company owns a field force of 3800 MRs covering 12 therapy focused marketing divisions. Major therapies in the domestic formulations are - 1) anti-malarials - 22% of the domestic formulations, 2) pain management - 22% of domestic formulations, 3) cardiovascular (CVS) - 17% of the domestic formulations, 4) gastrointestinal (GI) - 8% of domestic formulations. Overall, we expect revenues to grow at a CAGR of 14.8% in FY15-17E to | 4138 crore driven mainly by domestic formulations. Exhibit 1: Exports and domestic formulations to drive growth

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Domestic formulations comprise 37% of total revenues. During FY10-15 this segment has grown at a CAGR of 13.6% backed by new launches and field force addition. However, the domestic performance has been volatile at times due to the significant presence of anti-malarials in the portfolio. Due to the seasonality of this therapeutic segment the overall performance has remained lumpy. Anti-malarials currently comprise ~20% of the domestic portfolio. We expect Indian formulations to grow at CAGR of 14.7% in FY15-17E to | 1486 crore.


Exhibit 2: Domestic formulations to grow at CAGR of 14.7% in FY15-17E

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Exports formulations (40% of turnover) have grown at a CAGR of 20.5% in the last five years and surpassed domestic formulations (37% of the turnover) in the process. Growth in exports formulations was on the back of growth in both International generics and international branded formulations. The international anti-malarial institutional business has also contributed substantially to the overall exports growth. Bottlenecks for the company, on the US front, were made good by strong traction in this business. The US traction will, however, take more time than earlier estimated due to USFDA import alerts for the Ratlam facility, which is the only API source for Silvassa and Indore SEZ formulations plants along with Silvassa and Pithampur (Indore) plants that are specifically earmarked for US business, besides third party sales. Offtake from the Indore SEZ for the US market has now been delayed, thus affecting the US visibility and overall company multiple. We expect export formulations to grow at a CAGR of 18.6% in FY15-17E (on a lower base) to | 1745 crore. Exhibit 3: Export formulations to grow at CAGR of 18.6% in FY15-17E

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Exhibit 4: Export APIs to grow at CAGR of 6.4% in FY15-17E

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Exhibit 5: Domestic APIs to grow at a CAGR of 7.9% FY15-17E

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Exhibit 6: EBITDA to grow at CAGR of 25.9% in FY15-17E

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Exhibit 7: Adjusted net profit to grow at CAGR of 44.3% in FY15-17E

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Exhibit 8: Trends in return ratios

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Exhibit 9: Trends in quarterly financials | Crore Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 YoY (%)

Net Sales 553.1 630.3 757.5 692.4 658.6 792.5 834.3 815.2 743.8 928.2 774.9 734.1 622.7 751.0 -19.1

OOI 8.0 7.4 10.6 8.6 13.1 13.0 12.4 17.8 5.9 7.8 5.7 6.5 5.2 7.0 -9.9

Revenues 561.1 637.6 768.1 701.02 671.7 805.6 846.7 833.0 749.61 935.96 780.60 740.65 627.93 757.97 -19.0

Raw material cost 219.3 249.0 307.8 276.2 258.1 323.8 283.4 278.1 242.1 342.6 271.0 272.6 256.9 297.3 -13.2

% of Revenue 39.1 39.0 40.1 39.4 38.4 40.2 33.5 33.4 32.3 36.6 34.7 36.8 40.9 39.2

Gross Profit 341.9 388.7 460.3 424.9 413.6 481.7 563.3 554.9 507.5 593.4 509.6 468.0 371.1 460.7 -22.4

GPM (%) 60.9 61.0 59.9 60.6 61.6 59.8 66.5 66.6 67.7 63.4 65.3 63.2 59.1 60.8

Employee cost 85.5 91.6 97.8 98.3 88.9 114.4 120.8 124.3 118.4 138.9 137.5 134.4 128.8 158.0 13.7

% of Revenue 15.2 14.4 12.7 14.0 13.2 14.2 14.3 14.9 15.8 14.8 17.6 18.1 20.5 20.8

Other expenditure 144.7 155.2 183.7 168.2 182.4 196.4 208.0 213.2 206.7 223.5 237.3 212.5 208.6 220.5 -1.3

% of Revenue 25.8 24.3 23.9 24.0 27.1 24.4 24.6 25.6 27.6 23.9 30.4 28.7 33.2 29.1

Total Expenditure 449.5 495.8 589.3 542.6 529.4 634.5 612.2 615.6 567.3 705.0 645.8 619.5 594.3 675.8 -4.1

% of Revenue 80.1 77.8 76.7 77.4 78.8 78.8 72.3 73.9 75.7 75.3 82.7 83.6 94.6 89.2

EBIDTA 111.7 141.8 178.8 158.4 142.3 171.0 234.5 217.3 182.3 230.9 134.8 121.1 33.7 82.2 -64.4

EBIDTA Margin (%) 19.9 22.2 23.3 22.6 21.2 21.2 27.7 26.1 24.3 24.7 17.3 16.4 5.4 10.8

Depreciation 14.2 19.9 20.9 21.6 21.6 24.1 25.2 25.6 26.0 37.9 39.6 42.0 57.7 42.1 11.1

Interest cost 11.1 9.5 8.9 7.4 5.5 7.1 5.7 5.4 6.3 5.7 5.7 5.9 8.3 5.5 -4.7

Other Income 3.7 3.0 9.2 4.0 2.6 4.5 5.3 5.4 6.2 6.3 8.7 6.4 14.3 4.1 -34.3

Forex gain/(loss) 5.1 -58.9 6.4 -18.6 7.8 -48.0 -39.9 -2.4 18.2 2.3 -9.4 -11.2 22.5 -11.6 -614.6

PBT 95.2 56.5 164.6 114.8 125.5 96.3 169.0 189.3 174.50 195.84 88.77 68.55 4.57 27.13 -86.1

Tax 18.6 13.5 39.5 26.9 50.1 24.5 39.6 50.2 37.5 50.4 27.5 27.0 -3.2 8.2 -83.6

Tax Rate (%) 19.5 23.9 24.0 23.4 39.9 25.4 23.4 26.5 21.5 25.7 30.9 39.4 -70.5 30.4

PAT 76.6 43.0 125.1 87.9 75.4 71.8 129.5 139.1 137.0 145.49 61.30 41.53 7.79 18.89 -87.0

PAT Margin (%) 13.7 6.7 16.3 12.5 11.2 8.9 15.3 16.7 18.3 15.5 7.9 5.6 1.2 2.5

EPS (|) 6.1 3.4 9.9 7.0 6.0 5.7 10.3 11.0 10.9 11.5 4.9 3.3 0.6 1.5 -87.0


SWOT Analysis Strengths - Performance consistency, strong operating margins, healthy return ratios, comfortable leverage ratios, management transparency. Weakness - Late entrant in the US generics space. Anti-malarial space is lumpy in nature. Opportunities - Exports markets, incremental offtake from the Indore SEZ Threats - Increased USFDA scrutiny across the globe regarding cGMP issues and consolidation in the US pharmacy space. The company has received import alert for its Ratlam API facility, which is a core facility as it exports API to the US and also supplies to other formulations facility, which, in turn, supply formulations to the US. Recently the Indore SEZ and Silvassa facilities also received import alerts from the USFDA. The global anti-malarial institutional business has also come across detailed testing and witnessed order postponements.


Conference call highlights • The company has received WHO clearance confirmation for its

Ratlam Plant. It expects to receive WHO clearance certificate in few days and to commence dispatches for Institutional business from September after the completion of co-financing arrangements with the global funds

• Branded generic business was down ~50% YoY on account of 1) ~66% YoY drop in CIS region and 2) ~76% drop in West African business

• While the West African business is expected to normalise in Q2, the company does not expect growth in the CIS region owing to price cuts

• It expects ~| 70-80 crore of revenues in Q2FY16 and | 125-150 crore revenue run-rate for the subsequent quarters in FY16 from this business

• It expects to commence institutional injectable filings in the current fiscal year

• The company has already started shipment in the US for exempted products. Post Pithampur and Ratlam plants the company has also received USFDA approval for its Silvassa plant for these products

• The USFDA has exempted one more product (API) from its Ratlam plant

• Ratlam plant utilisation level is 50-60% • The company has postponed ANDA filings until facility clearance

from the USFDA. • Ipca expects just five to six annual products launches in the

domestic markets • Current domestic MR Strength of the company is 3800 MRs and

the company does not plan to increase that in the near term • The company has given 7-8% growth guidance for FY16

(including US Sales) with 18% margins. It has guided 12% domestic growth in FY16. Low domestic growth is expected due to the lumpy nature of anti-malarial business

• During the quarter, anti-malarial sales (~14% of overall sales) were down ~21% YoY

• The company has guided for 50-60% revenue growth in the Australian business and for 15-18% revenue growth in the European business in FY16


Valuation As expected, the Q1 result turned out to be a washout event with little signs of recovery in the form of WHO clearance and partial USFDA allowances. On the other hand, some fresh concerns in the nature domestic slowdown due to slow down in anti-malarials segment and marked slowdown in branded exports sales have emerged. Overall, back to back import alerts for three facilities besides observations from the WHO will, however, continue to act as a major stumbling block in the near term. The management has guided for 7-8% revenue growth and 18% EBITDA margins for FY16. We maintain our HOLD recommendation with TP of | 665 (16x FY17E EPS of | 41.5). Exhibit 10: One year forward PE

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

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Exhibit 12: Valuation

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

FY14 3282 17 42.3 145 19.0 11.9 27.2 26.8FY15 3142 -4 19.9 -53 35.8 18.7 11.4 11.5FY16E 3382 8 25.0 26 28.8 17.0 13.0 11.0FY17E 4138 22 41.5 66 17.4 11.6 18.3 16.6



Company snapshot

Target Price:| 664

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Source: Bloomberg, Company, ICICIdirect.com Research Key events Date EventApr-08 Receives WHO approval for its anti-malarial drug artesunate + amodiaquine. Ipca is the 2nd company globally to have pre qualification for the product.Nov-08 Announces buyback offer for acquiring maximum 10 lakh (4% of total number of equity shares) shares from open market.

Dec-09 Receives WHO pre-qualification anti-malarial finished dose combination formulations Artemether + Lumefantrine.

Mar-11 UKMHRA grants approval for SEZ manufacturing facility at Indore

Apr-11 Acquires UK based Onyx Scientific, a contract manufacturing company which is having a manufacturing facility in UK.

Jun-12 Receives USFDA approval to Indore SEZ

Nov-12 Voluntarily informs USFDA of a few non conformances at its Indore SEZ

Sep-13 Receives approval from the USFDA to launch products from Indore facility to the US market

Jul-14 Receives 483 from the USFDA for Ratlam (API) facility; volantarily shut downs its Ratlam (API) facility

Oct-14 Receives 483 from the USFDA for Pithampur (Formulations) facility; acquires manufacturing unit from Alpa Labs for | 71.7 crore

Jan-15 USFDA bans imports from Ratlam facility citing violations of standard production practices

Mar-15 Receives import alerts on Silvasa and Pithampur facilities from USFDA

Source: Company, ICICIdirect.com Research Top 10 Shareholders Shareholding Pattern Rank Name Latest Filing Date % O/S Position (m) n Change (m)1 Kaygee Investments Pvt. Ltd. 31-Mar-15 21.41 27.0 0.02 Exon Laboratories Pvt. Ltd. 31-Mar-15 6.55 8.3 0.03 Chandurkar Investments Pvt. Ltd. 31-Mar-15 5.53 7.0 0.04 HDFC Asset Management Co., Ltd. 31-Mar-15 4.53 5.7 0.55 Paschim Chemicals Pvt. Ltd. 31-Mar-15 3.98 5.0 0.06 Lavender Investments, Ltd. 31-Mar-15 3.95 5.0 0.07 Norges Bank Investment Management (NBIM) 31-Mar-15 2.83 3.6 0.58 Franklin Templeton Asset Management (India) Pvt. Ltd. 31-Mar-15 2.36 3.0 1.99 Khazanah Nasional Berhad 31-Mar-15 2.24 2.8 0.010 Godha (Premchand) 31-Mar-15 2.12 2.7 0.0

(in %) Jun-14 Sep-14 Dec-14 Mar-15 Jun-15Promoter 45.9 45.9 45.9 45.9 45.9FII 25.3 24.2 22.8 20.1 22.8DII 11.0 11.6 11.9 12.9 11.9Others 17.9 18.3 19.4 21.1 19.4

Source: Reuters, ICICIdirect.com Research Recent Activity

Investor name Value Shares Investor name Value SharesBellevue Asset Management AG 20.77m 1.89m Janus Capital Management LLC -21.76m -2.13m Franklin Templeton Asset Management (India) Pvt. Ltd. 19.08m 1.87m T. Rowe Price Associates, Inc. -12.89m -1.10m Grandeur Peak Global Advisors, LLC 7.54m 0.63m SBI Funds Management Pvt. Ltd. -7.85m -0.68m Pictet Asset Management Ltd. 5.61m 0.48m William Blair & Company, L.L.C. -6.90m -0.59m HDFC Asset Management Co., Ltd. 4.84m 0.47m IDFC Asset Management Company Private Limited -4.13m -0.33m

Buys Sells

Source: Reuters, ICICIdirect.com Research


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Financial summary

Profit and loss statement | Crore (Year-end March) FY14 FY15 FY16E FY17ERevenues 3,281.8 3,141.8 3,381.8 4,138.3Growth (%) 16.7 -4.3 7.6 22.4Raw Material Expenses 1,136.6 1,154.7 1,214.5 1,382.3Employee Expenses 498.0 565.1 620.8 729.9Other Expense 836.6 893.0 973.1 1,187.0Total Operating Expenditure 2,471.2 2,612.7 2,808.4 3,299.1EBITDA 810.6 529.1 573.4 839.2Growth (%) 30.1 -34.7 8.4 46.4Interest 26.9 28.4 24.5 26.0Depreciation 103.1 179.6 169.5 183.4Other Income 22.3 35.8 30.1 41.0Forex (gain)/loss 72.2 -4.2 0.0 0.0Less: Exceptional Items 0.0 0.0 0.0 0.0PBT after EO/Forex 630.6 361.1 409.5 670.9Total Tax 152.4 101.9 93.5 147.6MI & Profit from associates 0.3 -4.9 0.0 0.0PAT 478.5 254.2 316.0 523.3Growth (%) 47.9 -46.9 24.3 65.6Adjusted PAT 533.3 251.2 316.0 523.3EPS 37.9 20.2 25.0 41.5EPS (Adjusted) 42.3 19.9 25.0 41.5


Cash flow statement | Crore (Year-end March) FY14 FY15 FY16E FY17EProfit after Tax 478.5 254.2 304.4 523.3Add: Depreciation 103.1 179.6 169.5 183.4(Inc)/dec in Current Assets -187.0 -6.6 -73.6 -417.1Inc/(dec) in CL and Provisions 101.9 -12.1 60.2 51.6Add: Interest Paid 26.9 34.1 24.5 26.0Others 0 6.08 0 0CF from operating activities 523.44 455.28 484.96 367.04(Inc)/dec in Fixed Assets -377.4 -675.6 -250.0 -200.0(Inc)/dec in Investments -0.1 -0.8 0.0 0.0Inc/(dec) deff. tax liability & MI 16.7 19.3 0.0 0.0Others -30.6 -0.3 6.8 -7.6CF from investing activities -391.39 -657.3 -243.2 -207.6Issue/(Buy back) of Equity 0.0 0.0 0.0 0.0Inc/(dec) in loan funds -85.4 376.4 370.0 -200.0Dividend paid & dividend tax -73.8 -36.9 -76.9 -94.4Exchange rate Fluctuation -0.3 0.0 0.0 0.0Other 45.6 -89.1 -24.5 -26.0CF from financing activities -113.9 250.5 268.6 -320.4Net Cash flow 18.1 48.5 510.4 -161.0Opening Cash 58.2 76.3 124.8 635.1Closing Cash 76.3 124.8 635.1 474.2


Balance sheet | Crore (Year-end March) FY14 FY15 FY16E FY17EEquity Capital 25.2 25.2 25.2 25.2Reserve and Surplus 1,934.4 2,183.2 2,410.6 2,839.5Total Shareholders funds 1,959.7 2,208.4 2,435.9 2,864.7Total Debt 602.6 935.0 1,305.0 1,105.0Deferred Tax Liability 147.1 174.3 174.3 174.3LTP & Other LTL 16.23 22.05 42.05 62.05Total Liabilities 2,725.6 3,339.8 3,957.2 4,206.1Gross Block 1,897.6 2,511.9 2,791.9 3,011.9Accumulated Depreciation 578.5 745.9 915.4 1,098.8Net Block 1,319.2 1,766.0 1,876.5 1,913.1Capital WIP 164.9 267.2 237.2 217.2Total Fixed Assets 1,484.1 2,033.2 2,113.7 2,130.3Goodwill on Consolidation 34.4 34.4 34.4 34.4Investments 9.2 16.2 16.2 16.2LT L&A,Non Current Assets 80.5 114.5 127.7 155.3Inventory 847.6 926.6 918.0 1,132.5Debtors 449.5 353.0 413.1 566.3Loans and Advances 67.3 47.5 51.1 62.0Other Current Assets 161.5 162.2 180.6 219.1Cash 76.28 124.8 635.1 474.2Total Current Assets 1,602.2 1,614.0 2,197.9 2,454.1Creditors 341.3 306.6 330.5 415.6Provisions 55.6 36.0 41.1 51.1Other current libilities 87.8 130.0 161.2 117.6Total Current Liabilities 484.7 472.6 532.8 584.3Net Current Assets 1,117.5 1,141.4 1,665.2 1,869.7Application of Funds 2,725.6 3,339.8 3,957.2 4,206.1


Key ratios (Year-end March) FY14 FY15 FY16E FY17EPer share data (|)Adjusted EPS 42.3 19.9 25.0 41.5BV per share 155.3 175.1 193.1 227.1Dividend per share 5.8 6.4 6.1 7.5Cash per Share 6.0 9.9 50.3 37.6Operating Ratios (%)EBITDA / Net Sales 25.3 17.0 17.1 20.5EBIT / Net Sales 22.1 11.2 12.1 16.0PAT / Net Sales 16.7 8.1 9.4 12.8Inventory days 96.7 108.5 100.0 100.8Debtor days 51.3 41.3 45.0 50.4Creditor days 38.9 35.9 36.0 37.0Return Ratios (%)RoE 27.2 11.4 13.0 18.3RoCE 26.8 11.5 11.0 16.6RoIC 246.5 45.7 46.8 122.9Valuation Ratios (x)P/E 19.0 35.8 28.8 17.4EV / EBITDA 11.9 18.7 17.0 11.6EV / Net Sales 3.0 3.2 2.9 2.4Market Cap / Sales 2.8 2.9 2.7 2.2Price to Book Value 4.6 4.1 3.7 3.2Solvency RatiosDebt / EBITDA 0.7 1.8 2.3 1.3Debt / Equity 0.3 0.4 0.5 0.4Current Ratio 3.1 3.2 2.9 3.4Quick Ratio 1.4 1.2 1.2 1.5



ICICIdirect.com coverage universe (Healthcare) I-Direct CMP TP Rating M CapCode (|) (|) (| Cr) FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E

Ajanta Pharma AJAPHA 1552 1488 BUY 13693.7 38.3 45.6 53.1 33.1 27.8 23.9 7.8 6.5 5.3 50.6 48.7 46.4 41.9 38.5 35.9

Apollo Hospitals APOHOS 1379 1454 BUY 19237.8 24.0 35.3 0.0 57.5 39.0 0.0 28.0 19.0 0.0 11.6 10.3 14.4 10.6 10.4 13.7

Aurobindo Pharma AURPHA 756 840 BUY 44254.6 28.0 36.7 42.0 27.9 20.5 17.9 10.1 7.8 6.3 23.5 25.5 25.0 30.3 29.9 26.1

Biocon BIOCON 462 469 HOLD 9271.3 20.4 23.0 28.0 18.8 20.4 16.7 6.9 5.4 4.1 10.4 11.8 13.3 12.5 12.7 13.9

Cadila Healthcare CADHEA 1852 1913 BUY 38036.5 56.2 75.1 95.6 20.8 15.6 12.2 14.7 11.2 8.6 21.3 24.6 26.6 26.4 27.3 26.8

Cipla CIPLA 712 650 HOLD 57374.1 14.9 22.3 29.5 30.1 20.1 15.2 3.4 2.8 2.2 13.2 17.6 19.9 10.8 14.3 16.2

Dr Reddy's Labs DRREDD 4144 4600 BUY 70886.2 130.6 159.9 191.6 21.6 17.7 14.7 13.9 11.2 9.2 17.0 19.3 20.6 19.9 20.1 19.8

Glenmark Pharma GLEPHA 990 1000 HOLD 28008.9 16.5 33.7 47.5 38.6 18.9 13.4 16.5 11.6 8.7 12.6 23.7 29.5 14.3 24.0 26.7

Indoco Remedies INDREM 335 385 BUY 3093.8 9.0 12.6 19.2 24.3 17.4 11.3 12.4 10.0 7.1 19.8 22.3 28.0 16.0 19.0 23.4

Ipca Laboratories IPCLAB 722 665 HOLD 9133.4 20.2 25.0 41.5 18.7 17.0 11.6 3.2 2.9 2.4 11.5 11.0 16.6 11.5 11.0 16.6

Jubilant Life Sciences VAMORG 276 168 HOLD 4405.9 -3.7 13.2 23.6 0.0 11.8 6.6 9.5 7.2 5.3 5.7 8.9 12.1 -2.4 8.2 13.4

Natco Pharma NATPHA 2315 2200 HOLD 7715.8 31.2 46.4 67.1 23.0 15.5 10.7 15.9 12.2 9.2 15.6 19.6 23.0 12.4 16.6 19.8

Sun Pharma SUNPHA 831 850 HOLD 200558.2 19.6 21.1 32.6 44.2 39.4 25.5 24.6 24.3 16.4 19.0 17.9 22.2 20.7 18.5 23.1

Torrent Pharma TORPHA 1426 1660 BUY 24209.2 44.4 94.4 79.0 32.0 15.0 18.0 13.6 5.1 6.6 19.8 44.9 30.3 30.2 44.4 29.0

Unichem Laboratories UNILAB 250 214 HOLD 2275.8 8.3 14.8 21.4 24.8 13.9 9.6 17.9 9.4 6.5 8.4 17.1 21.5 8.7 14.5 18.5

RoNW (%)Company

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



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Pankaj Pandey Head – Research [email protected]

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Ipca Laboratories (IPCLAB) - ICICI Direct

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