aurobindo pharma 220915 - india...

Sector: Pharmaceuticals

Sector view: Positive

Sensex: 26,193

52 Week h/l (Rs): 833 / 383

Market cap (Rscr) : 42,183

6m Avg vol (‘000Nos): 1,682

Bloomberg code: ARBP IN

BSE code: 524804

NSE code: AUROPHARMA

FV (Re): 1 Price as on September 21, 2015

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Aurobindo Sensex

Share holding pattern % Dec‐14 Mar‐15 Jun‐15

Promoters 54.1 54.0 53.9

Insti 36.2 35.8 35.7

Others 9.7 10.2 10.4

Rating: BUYTarget: Rs960

CMP: Rs712

Upside: 34.8%

Company Report

Research Analyst: Bhavesh Gandhi

[email protected]

Aurobindo Pharma

This report is published by IIFL ‘India Private Clients’ research desk. IIFL has other business units with independent research teams separated by 'Chinese walls' catering to different sets of customers having varying objectives, risk profiles, investment horizon, etc. The views and opinions expressed in this document may at times be contrary in terms of rating, target prices, estimates and views on sectors and markets.

September 22, 2015

Change in Estimates Rating Target

A healthy option

Aurobindo Pharma is set to capitalize its increased focus on complex molecules, differentiated dosage platforms and specialty products. Company has put building blocks in place for its US business through capabilities and filings in peptides, penems, oncology and hormones. A well established oral solids business with 148 approved and 139 pending ANDAs would help sustain momentum generated by injectables portfolio. We forecast ~32% revenue cagr for the US business driven by lagged impact of recent large approvals and potential para IV launches like Abilify and Namenda. Actavis acquisition would help widen channel presence into newer areas like hospitals as well as broaden therapeutic portfolio. Aurobindo expects Actavis business to be PAT neutral in current fiscal and sourcing of APIs from India would be the key driver of turnaround; eventually about 50% API linked sales would be shifted to India. Antiretroviral (ARV) business would be driven by recent approvals in combination products and disciplined participation in tenders. In the rest of the world (ROW) operations, Brazil, South Africa and Canada remain the focus markets while company would consider tie ups/ground presence for other emerging markets. Overall we project ~18% revenue and 26% EPS cagr over FY15‐17E largely driven by robust US performance and ~300bps margin uptick. Stock trades at 16.6x FY17E earnings which is an unjustifiable discount to other large cap peers. We value stock at ~22x FY17E earnings to arrive at 9‐12mth target of Rs960 and rate Aurobindo as amongst the top large cap BUYs in pharma. Lack of adequate FDA approvals and lower than expected growth in ex‐US businesses constitute key risks to our reco.

Set to reap rewards in its US strategy Aurobindo is set to reap rich dividends from its US generics strategy under which it has forayed into complex molecules, differentiated dosage platforms and specialty products in peptides, oncology and hormones. We forecast 18% revenue and 26% EPS cagr over FY15‐17E and rate Aurobindo as top BUYs in pharma space with 9‐12mth target of Rs960.

Financial summary Y/e 31 Mar (Rs cr) FY14 FY15 FY16E FY17E

Revenues 8,100 12,121 14,605 16,932

yoy growth (%) 38.3 49.6 20.5 15.9

Operating profit 2,134 2,564 3,322 4,102

OPM (%) 26.3 21.2 22.7 24.2

Reported PAT 1,173 1,576 1,958 2,500

yoy growth (%) 299.1 34.4 24.3 27.7

EPS (Rs) 20.1 27.0 33.5 42.8

P/E (x) 70.9 52.8 21.2 16.6

P/BV (x) 11.1 8.1 5.9 4.5

EV/EBITDA (x) 21.1 17.8 13.7 10.9

Debt/Equity (x) 1.0 0.9 0.6 0.4

ROE (%) 36.8 34.9 32.2 30.6

ROCE (%) 24.5 24.1 26.4 29.1 Source: Company, India Infoline Research

Aurobindo Pharma

2

Building blocks in place for sustained US growth Aurobindo is well placed to execute the transition in its US business from regular oral solids towards higher value products in injectables, controlled substances, vaccines etc. It has robust 381 ANDA filings of which 176 are pending and another 28 have tentative approvals. In oral solids, Aurobindo is the 10th largest generic player and caters to key therapeutic areas of CNS, CVS, anti diabetic, ARV (antiretroviral), gastroenterological and anti infectives; about 139 (including 28 tentative approvals) of the total 204 pending approvals are accounted by oral solids. Unsurprisingly, Aurobindo USA, the oral prescription business is the largest component of US portfolio with annual revenues of ~US$480mn in FY15. In controlled substances, Aurobindo owns FDA approved manufacturing facility in NJ, US and has 16 ANDA filings of which 7 have been approved. Aurobindo initiated its injectables business strategy in 2010 and has made sizable investments to create a robust pipeline of products in anti biotics, ophthalmic, respiratory, oncology, peptides, hormones and penems; company has about 56 injectables ANDAs pending approvals. Trend in ANDA filings

102 119155 165 166 177

3228

26 26 27 28 75

9288

145183 176

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July 15

Final approval Tentative approval Awaiting approval#

Source: Company, India Infoline Research

Aurobindo owns a large US$480mn oral solids business along with fast growing injectables portfolio Company has 381 ANDA filings of which 176 are pending approvals and another 28 (21 under PEPFAR (HIV) program) have tentative approvals

Oral ANDA filings (~155) mix (%) Injectables ANDA filings (22) mix (%)

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25

34

5

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13

19

CNS

CVS

ARVs

Gastro

Controlled substances

Anti diabetes

Anti biotics

Others

23

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45

23

Anaesthetics

Anti nausea

Anti biotics

Others


Aurobindo Pharma

3

Injectables to gain prominence in US portfolio Injectables and controlled substances share of ANDAs has improved from 18% in March 2012 to 25% in July 2015, an indication of rapid scale building in what is a lucrative but large segment outside of oral solids. For instance, AuroMedics, the injectables subsidiary, has seen ~86% yoy growth in FY15 to US$69mn and accounts for ~8.5‐10% of US revenues. Company in its earnings call has indicated it has seen increased interactions with US FDA on about 16 products and though definite timelines are difficult to come by, management appeared confident of gaining approvals for several of these probably in current fiscal; moreover unlike the smaller market product approvals received in FY16 so far, some of the above 16 pending ANDAs are of larger size which would drive significant jump in injectables sales. Company targets about ~45% rise in injectables revenues to US$100mn in FY16 on back of key product approvals.

Injectables business posted robust 86% yoy growth in FY15 and company expects some sizable approvals to come by later in FY16

ANDA filings profile in March 2012 (% share) Injectables share (%) of ANDAs has risen in July 2015

82

153

Oral solids

Injectables


75

21

4

Oral solids

Injectables



Oral solids account for ~69% of FY15 US revenues US revenue cagr seen at 31.6% over FY15‐17E

68.8

9.9

16.9

4.4

Aurobindo USA (oral Rx)

AuroMedics (Injectables)

AuroLife (Mfg/R&D)

Natrol

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Aurobindo Pharma

4

FDA approvals have picked up noticeably in FY16 Unlike the dismal approval pace seen in the previous fiscal, FY16 run rate have been much better than expected as company garnered 14 approvals in the first six months. Moreover the complete impact of all the approvals is not visible yet given that some of the products have not been introduced as of August 2015. For instance Entacapone and extended Phentyoin Sodium capsules would be released in Q2 FY16. Cefixime for oral suspension has been a key approval with ~US$125mn market and a sizable addition in Q1 FY16. Going ahead, Abilify and Namenda are para IV opportunities and expected to be amongst the second wave of generics; company sees them as H2 FY16 opportunities. Key recent approvals and market opportunity

Date Product Therapy Market size (US$ mn)

4‐Sep‐15 Telmisartan Hypertension 92

29‐Aug‐15 Raloxifene HCL Osteoporosis 404

27‐Aug‐15 Entecavir Chronic Hepatitis B 294

20‐Aug‐15 Omeprazole Ulcer 422

20‐Aug‐15 Ibandronate Sodium Injection Osteoporosis na

27‐Jul‐15 Esmolol Hydrochloride injection Tachycardia and Hypertension

na

10‐Jul‐15 Flecainide Acetate Tachycardia 61

22‐Jun‐15 Entacapone Parkinson’s' Disease 59

22‐Jun‐15 Azithromycin Antibacterial na

15‐Jun‐15 Extended Phenytoin Sodium capsules Anti epilepsy 125

1‐Jun‐15 Metronidazole Anti infective 58

15‐Apr‐15 Cefixime for oral suspension Anti bacterial 123

9‐Apr‐15 Atracurium Besylate injections General anesthesia na

4‐Apr‐15 Sildenafil injection Pulmonary arterial Hypertension

na


Final approval/filings ratio has improved from lows in FY15

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Pace of approvals has dramatically picked up from the dismal rate seen in FY15; some large product launches yet to see full momentum Final approval/filings ratio has improved on back of robust FDA approvals in FY16 so far

Aurobindo Pharma

5

New initiatives in peptides, oncology, penems to drive growth Company is developing Peptides which include four microsphere and liposomal injectables products and working towards filing these products in 2016‐17. The addressable market for the four products is about US$3bn. Overall 30 peptides are available globally and company has capabilities to manufacture each of them. It has filed first peptide DMF in Q4 FY15 and has developed ~7‐10 products and would look to complete validation and stability prior to filing the same; albeit its injectables division has already filed certain Peptides as finished injectables products. Company would target both API and formulations in peptide development. We highlight the potential of just one peptide based filing Angiomax (innovator company The Medicines Co had US sales of US$95mn in Q1 CY15). Hospira has announced the approval of the generic Bivalirudin (Angiomax), probably the only generic approval so far while Sandoz has launched authorized generic licensed from the innovator. There are several other players waiting in the wings (Sun, Teva to launch on or before June 2019 as per settlement terms) who remain in litigation. Aurobindo has been in significant discussions with FDA on the generic ANDA and once the litigation is completed, a way might open up for approval by FDA. Although Angiomax remains a large market, several players have filed and Aurobindo share would depend on timing of approval. Currently, there are four penems (used as neuromuscular blockers under anesthesia reversal) injectables products in US with addressable market size of US$450mn with Ertapenem being the largest; Aurobindo has already filed two products (Doropenem and Meropenem) and likely to initially launch the products in Brazil and Mexico. Aurobindo is close to filing for the third penem and running exhibit batches for the fourth penem so depending on FDA approval timeline, company would eventually have all four penems in the market. Within penems, Aurobindo has also forayed into nanospheres (US$3bn market) and expects first filing in 2017 with approvals in 2 years after filing. Company is working on 15 oncology products through both solid and injectables dosages and first exhibit batches for five hormone products whose dossiers are expected to be filed in FY16.

Peptides is the key focus area and company looks to filing four products in 2016‐17 with addressable market size of US$3bn Company has been in discussions with FDA over Angiomax and believes approval might open up once the litigation is complete Aurobindo has filed for two penems and eventually expects to have all four key penems filed and approved with cumulative market size of US$450mn Aurobindo working on 15 oncology in both oral and injectables dosages as well as first set of hormonal dossiers set to be filed in FY16

Aurobindo Pharma

6

Natrol strategy: drive sales through penetration and reach Aurobindo acquired US‐based nutritional supplement player Natrol for US$133mn in December 2014 which brings a portfolio of established brands into Aurobindo fold. Nutraceuticals is a US$30bn market in US though it is a fragmented one. Natrol posted net FY15 revenues of ~US$96mn (consolidated for ~4 months) and ~14% adjusted EBIDTA margin. Company would look to capacity augmentation and scale building and we expect margin profile improving to about 20% in two years post acquisition. In terms of synergies, customers of Aurobindo Pharma like United, Walgreen can also prescribe OTC products which can be beneficial for Natrol. Aurobindo would also look to focus on markets outside US since the brands are already established. With utilization at below optimum rates, Natrol still has a lot of headroom to grow with existing capacities. In addition, Aurobindo’s capacities at least in the bulk form in pharma OTC can also be utilized. In terms of product profile, only 3 products currently generate meaningful revenues of which the top two brands account for 90% of sales. Company would target pan America presence from presence in two states of California and NJ at the time of acquisition. The average vintage of acquired brands is at 15‐20 years and Aurobindo would leverage existing brands to drive sales. Since creation of new brands would require lot of promotional activity and costs which can take upto 5 years, the company would rather prefer to acquire brands, if necessary to fill up the gap in the nutritional and vitamins portfolio. OTC business in its infancy Company operates OTC business under its AuroHealth subsidiary which has negligible contribution to current revenues. Current portfolio consists of 71 products and 111 SKUs developed till date that is yet to be commercialized. The business has three ANDA approved products in anti allergy namely Fexofenadine, Cetirizine syrup and recent approval in Cetirizine tablets. The balance of the current portfolio is Monograph products which do not require a specific FDA approval but based on guidelines received from the agency. Fexofenadine remains a key driver of existing revenues which form a small part of portfolio though business would ramp up as company increases penetration with national retailers and select regional accounts with additional business under contract and plans for distribution in late Q2 FY16.

Nutraceuticals is a US$30bn market though it is highly fragmented

Natrol posted FY15 net revenues of US$96mn and 14% adjusted EBIDTA margin Aurobindo would widen Natrol’s geographic presence and extract synergies from its existing relationships with pharmacy retailers like United and Walgreen OTC business has negligible contribution to overall revenues though we expect business to ramp up on back of increased penetration and higher business under contract

Aurobindo Pharma

7

European business: lower API costs to restore profitability Actavis acquisition has complemented existing busines verticals in Europe and helped foray into hospital sales to be used for launch of own injectable and specialty portfolio across Europe. One of the key pillars of Actavis turnaround would be transfer of COGS of Actavis products to specific India based manufacturing capacities which would have a direct impact on margin; essentially we believe managing API supplies holds key for European business. Hence the company is building API support (at cost Rs. 100cr) along with formulations (Rs. 200cr) at Vizag; the initial focus area of API unit would be supplies to Europe which would be then made available to other formulatons businesses. Actavis generated US$400‐410mn in FY15 revenues and we factor in FY16 sales growth of 5%.

Turnaround of Actavis would be driven by shift in API sourcing from India as eventually company expects ~50% of sales linked APIs to be supplied from India manufacturing capacities

Oral solids account for large chunk of dosages (%) France accounts for ~45% of acquired business

59

8

14

1

16

1

Tablet

Powder

Capsule

Cream

Liquid

Others

44

22

11

8

9

5 1

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Germany

Netherlands

Italy

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Portugal

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Acquired business sales channel mix (%) Acquired portfolio therapeutic mix (%)

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25

9

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16

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Hospitals

Prescription

OTC

GxT

28

2115

13

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CNS

Anti infectives

Digestive

Antineo plastic

Dermatological

Others


Aurobindo Pharma

8

Expect healthy revenue cagr in ARVs and ROW generics Company prefers selective and disciplined participation in tenders floated by global funding institutions and governments. ARVs (antiretrovirals for treatment of HIV) accounted for 7.9% of consolidated FY15 revenues and Aurobindo has a portfolio of over 43 ARV products that cater to more than 100 countries. Earlier ARV business was more like filling capacity but now it has been transformed into a large opportunity especially after company received combination product approvals; current focus is on triple combination products. Company remains selective in tenders as some of the competitors lack backend API support. ARV business generated US$158mn in FY15 gross revenues and posted ~24% yoy growth in Q1 FY16. Company sees healthy growth in ARV combination products; for instance Mylan is commanding a lion’s share in the Tenofovir combine product which is first line of treatment for HIV and close to US$800mn market in itself.

Aurobindo operates in ROW generics within which South Africa, Brazil and Canada are the focus markets while Mexico, Russia, Columbia and other Latin American/South East Asian markets remain under expansion radar. South Africa is a mature market with US$40‐50mn annualized revenue run rate along with an equal revenue contribution from Brazil. For Canada, FY15 was the first full year of operations and we believe company realized ~US$10mn in revenues. For some of the other focus markets company is considering either ground presence or tie ups. In an earlier interaction with us, company believes ROW markets could grow to US$200‐250mn gross revenue size in three years from US$93mn in FY15.

Antiretrovirals (ARVs) accounted for 7.9% of FY15 consolidated revenues and have emerged as an area of focus given the strong API integration capabilities Brazil, South Africa and Canada are some of the focus markets along with expansion in Africa, Latin America and South East Asia

ARVs to post robust 20% cagr over FY15‐17E… …and so would ROW generic sales

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Aurobindo Pharma

9

APIs; focus on non Betalactams Aurobindo is amongst the most vertically integrated generic players with API integration for most of its products. It has emerging market leadership (and a leading supplier in India) with 10 manufacturing units and 196 DMFs filings. Within the API basket, antibiotics (sterile and non sterile) like Cephalosporin (Cephs) and Semi Synthetic Penincillin (SSP) account for ~66% share of API gross revenues. Both Cephs and SSPs are commoditized with revenues linked to prevailing value in market; hence focus lies more on non Betalactam APIs. Company is adding capacities which can optimize non Betalactam sales as well as continue with debottlenecking efforts by expanding the API capacities. Aurobindo expects R&D spending in the range of 3‐4% as it graduates from regular oral solids towards higher complexity like peptides, oncology, hormones and vaccines.

Aurobindo R&D spend seen between 3‐4% of sales

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Antibiotics account for 66% share of API gross revenues Expect R&D spending in the 3‐4% range as company moves up the pharma value chain towards higher complexity filings

Q1 FY16 API mix (%) Antibiotics account for bulk of API share (%)

34

22

21

24Non Betalactams

Non sterile SSP

Sterile Betalactams

Non sterile Cephs

66

34Antibiotics

Non antibiotics


Aurobindo Pharma

10

Expect ~18% revenue cagr over FY15-17E We expect US business to post robust 31.6% cagr over next two years on back of key approvals in H1 FY16 and traction in base business; over the longer term foray into newer areas like peptides, oncology and penems would add significant scale to US portfolio. Europe is likely to be driven by mid single digit rise in Actavis revenues and a 10% cagr in ex‐Actavis European operations; overall we forecast 7.5% revenue cagr for the region. ROW and ARV segments would report healthy 20% cagr driven by rising penetration and select participation in tender business. Overall we expect 18.2% compounded revenue growth over FY15‐17E; moreover as large approvals kick in over next 18‐24 months, we expect operating leverage tailwinds to support ~300bps rise in margin which would in turn lead to 26% EPS cagr during the same period. Revenue forecast FY15‐17E Revenue forecast Rs cr FY13 FY14 FY15 FY16E FY17E US 1,753 3,403 4,832 6,586 8,364

Europe 468 672 3,195 3,516 3,734

‐ Actavis ‐ ‐ 2,442 2,688 2,822

‐ Ex‐Actavis ‐ ‐ 753 828 911

ROW 416 463 568 682 818

ARVs 750 840 964 1,157 1,388

Formulations 3,387 5,379 9,559 11,941 14,304

SSPs 765 978 864 821 780

Cephalosporins 937 875 930 977 1,025

Non Betalactam 834 1,011 912 867 823

APIs 2,536 2,864 2,706 2,664 2,628

Total revenues 5,923 8,243 12,265 14,605 16,932 Source: Company, India Infoline Research

Expect 18% revenue cagr over FY15‐17E driven by stellar 31.6% compounded growth in US business

Margins to improve from FY15 base Return ratios to remain elevated

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Aurobindo Pharma

11

Valuation discount to narrow; rate Aurobindo as top BUY Aurobindo has put the building blocks in place for its US operations as company develops capabilities to file increasingly complex molecules on differentiated platforms like liposomes, microspheres etc. Moreover about 16 injectables products are under significant discussion with FDA and company expects many of them to be approved in current fiscal; as some of the large pending ANDAs get approved, injectables business would see ramp up in revenues, potentially from H2 FY16 onwards. Injectables portfolio would also get a leg up from complex filings in peptides, penems, oncology and hormones especially peptides in the near term where for instance an Angiomax approval can make meaningful contribution. We have built in 31.6% US revenue cagr driven by lagged effect of recent key approvals and forthcoming potential launches like Abilify and Namenda. European revenues would be driven by mid single digit growth in Actavis along with PAT break even in FY16 as company shifts API sourcing from third party to India owned manufacturing facilities. We expect revenue and EPS cagr of 18.2% and 26% respectively over FY15‐17E along with ~300bps ramp up in margin. Stock trades at attractive 16.6x FY17E earnings, at a large discount to peers like Glenmark (24x), Cadila (21x) and Torrent (18.5x) which we believe is unjustified given the strong earnings profile. Rate Aurobindo as top BUY with 9‐12mth target of Rs960 based on ~22x FY17E EPS. Lack of FDA approvals and lower than expected growth in ex‐US businesses constitute key risks to our reco. Peer comparison

Aurobindo has developed capabilities to file increasingly complex molecules, differentiated dosage platforms and specialty products Peptides, oncology and hormones would drive the medium term growth on the back of filed dossiers and ANDAs Rate Aurobindo as one of the top pharma BUYs with 9‐12mth target of Rs960

Aurobindo 1‐yr fwd PE bands RoCE profile vis‐à‐vis peers

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EPS cagr PE

Company CMP Target Reco Upside/Downside

(%) FY15‐17E

FY16E FY17E FY17E RoCE

Aurobindo 715 960 BUY 34.2 26.0 21.3 16.6 29.1

Glenmark 1,022 1,070 Accumulate 4.7 58.0 33.6 24.3 21.6

Cadila 1,920 2,200 Accumulate 14.6 27.8 28.1 20.9 26.2

Torrent Pharma 1,416 1,690 BUY 19.4 31.5 16.8 18.5 25.0 Source: Company, India Infoline Research

Aurobindo Pharma

12

Financials Income statement Y/e 31 Mar (Rs cr) FY14 FY15 FY16E FY17E

Revenue 8,100 12,121 14,605 16,932

Op. profit 2,134 2,564 3,322 4,102

Depreciation (313) (333) (387) (442)

Interest exp (310) (160) (223) (178)

Other income 22 81 85 89

PBT 1,533 2,152 2,797 3,572

Taxes (363) (597) (839) (1,071)

MI 4 5 ‐ ‐

Exceptionals ‐ 16 ‐ ‐

Net profit 1,173 1,576 1,958 2,500

Balance sheet Y/e 31 Mar (Rs cr) FY14 FY15 FY16E FY17E

Equity capital 29 29 58 58

Reserves 3,721 5,127 6,931 9,277

Net worth 3,750 5,156 6,989 9,336

Minority int 26 26 26 26

Debt 3,769 4,451 4,451 3,551

Def.tax lia 205 211 211 211

Total liabilities 7,750 9,843 11,677 13,123

Intangibles 210 841 1,087 1,339

Fixed assets 2,822 3,285 3,373 3,516

Investments 38 30 30 30

Net working cap 4,681 5,683 7,182 8,233

Inventories 2,368 3,611 4,351 5,045

Sundry debtors 2,637 3,539 4,265 4,944

Cash 179 469 467 448

Other curr assets 1,238 1,134 1,753 2,032

Sundry creditors (1,351) (2,051) (2,472) (2,865)

Other curr lia (388) (1,020) (1,182) (1,370)

Def tax assets ‐ 5 5 5

Total assets 7,750 9,843 11,677 13,123

Cash flow statement Y/e 31 Mar (Rs cr) FY14 FY15 FY16E FY17E

PBT 1,533 2,152 2,797 3,572

Depreciation 313 333 387 442

Def.tax lia 137 ‐ ‐ ‐

Tax paid (363) (597) (839) (1,071)

Working capital ∆ (1,489) (712) (1,501) (1,070)

Other op.items 4 20 ‐ ‐

Operating CF 134 1,197 844 1,872

Capital exp (487) (1,426) (722) (837)

Free cash flow (353) (229) 122 1,035

Equity raised 74 (14) 29 (0)

MI 15 ‐ ‐ ‐

Investments 3 8 ‐ ‐

Debt fin/disp 334 682 ‐ (900)

Dividends (102) (156) (154) (154)

Net ∆ in cash (30) 291 (3) (19)

Key ratios Y/e 31 Mar FY14 FY15 FY16E FY17E

Growth matrix (%)

Revenue growth 38.3 49.6 20.5 15.9

Op profit growth 140.0 20.2 29.6 23.5

EBIT growth 175.5 25.5 30.6 24.1

Net profit growth 299.1 34.4 24.3 27.7

Profitability ratios (%)

OPM 26.3 21.2 22.7 24.2

EBIT margin 22.7 19.1 20.7 22.1

Net profit margin 14.4 12.8 13.4 14.8

RoCE 26.6 26.3 28.1 30.2

RoNW 36.8 34.9 32.2 30.6

RoA 14.3 14.6 14.9 16.5

Per share ratios

EPS 20.1 27.0 33.5 42.8

Dividend per share 1.5 2.2 2.3 2.3

Cash EPS 25.4 32.3 40.2 50.4

Book value per share 64.2 88.3 119.7 159.9

Valuation ratios (x)

P/E 70.9 52.8 21.2 16.6

P/BV 22.2 16.1 5.9 4.5

M Cap/Sales 5.1 3.4 2.8 2.5

EV/EBIDTA 21.1 17.8 13.7 10.9

Payout (%)

Tax payout 23.7 27.7 30.0 30.0

Dividend payout 7.5 9.9 7.9 6.1

Liquidity ratios

Debtor days 119 107 107 107

Inventory days 107 109 109 109

Creditor days 61 62 62 62

Leverage ratios

Interest coverage 5.9 14.5 13.6 21.1

Net debt / equity 1.0 0.8 0.6 0.3

Net debt / op. profit 1.7 1.6 1.2 0.8

Du‐Pont Analysis Y/e 31 Mar FY14 FY15 FY16E FY17E

Tax burden (x) 0.76 0.72 0.70 0.70

Interest burden (x) 0.83 0.93 0.93 0.95

EBIT margin (x) 0.23 0.19 0.21 0.22

Asset turnover (x) 0.99 1.14 1.11 1.12

Financial leverage (x) 2.57 2.40 2.17 1.85

RoE (%) 36.8 34.9 32.2 30.6

13

‘Best Broker of the Year’ – by Zee Business for contribution to brokingNirmal Jain, Chairman, IIFL, received the award for The Best Broker of the Year (for contribution to broking in India) at India's Best Market Analyst Awards 2014 organised by the Zee Business in Mumbai. The award was presented by the guest of Honour Amit Shah, president of the Bharatiya Janata Party and Piyush Goel, Minister of state with independent charge for power, coal new and renewable energy.

'Best Equity Broker of the Year' – Bloomberg UTV, 2011IIFL was awarded the 'Best Equity Broker of the Year' at the recently held Bloomberg UTV Financial Leadership Award, 2011. The award presented by the Hon'ble Finance Minister of India, Shri Pranab Mukherjee. The Bloomberg UTV Financial Leadership Awards acknowledge the extraordinary contribution of India's financial leaders and visionaries from January 2010 to January 2011.

'Best Broker in India' – Finance Asia, 2011IIFL has been awarded the 'Best Broker in India' by Finance Asia. The award is the result of Finance Asia's annual quest for the best financial services firms across Asia, which culminated in the Country Awards 2011

Other awards

2012BEST BROKING HOUSE WITH

GLOBAL PRESENCE

2009, 2012 & 2013BEST MARKET

ANALYSTBEST BROKERAGE,

INDIAMOST IMPROVED,

INDIABEST BROKER,

INDIA

2009FASTEST GROWING

LARGE BROKING HOUSE

Recommendation parameters for fundamental reports:

Buy – Absolute return of over +15%

Accumulate – Absolute return between 0% to +15%

Reduce – Absolute return between 0% to ‐10%

Sell – Absolute return below ‐10%

Call Failure ‐ In case of a Buy report, if the stock falls 20% below the recommended price on a closing basis, unless otherwise specified by the analyst; or, in case of a Sell report, if the stock rises 20% above the recommended price on a closing basis, unless otherwise specified by the analyst

India Infoline Group (hereinafter referred as IIFL) is engaged in diversified financial services business including equity broking, DP services, merchant banking, portfolio management services, distribution of Mutual Fund, insurance products and other investment products and also loans and finance business. India Infoline Ltd (“hereinafter referred as IIL”) is a part of the IIFL and is a member of the National Stock Exchange of India Limited (“NSE”) and the BSE Limited (“BSE”). IIL is also a Depository Participant registered with NSDL & CDSL, a SEBI registered merchant banker and a SEBI registered portfolio manager. IIL is a large broking house catering to retail, HNI and institutional clients. It operates through its branches and authorised persons and sub‐brokers spread across the country and the clients are provided online trading through internet and offline trading through branches and Customer Care. Terms & Conditions and Other Disclosures:‐ a) This research report (“Report”) is for the personal information of the authorised recipient(s) and is not for public distribution and should not be

reproduced or redistributed to any other person or in any form without IIL’s prior permission. The information provided in the Report is from publicly available data, which we believe, are reliable. While reasonable endeavors have been made to present reliable data in the Report so far as it relates to current and historical information, but IIL does not guarantee the accuracy or completeness of the data in the Report. Accordingly, IIL or any of its connected persons including its directors or subsidiaries or associates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained, views and opinions expressed in this publication.

b) Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is

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c) The Report also includes analysis and views of our research team. The Report is purely for information purposes and does not construe to be

investment recommendation/advice or an offer or solicitation of an offer to buy/sell any securities. The opinions expressed in the Report are our current opinions as of the date of the Report and may be subject to change from time to time without notice. IIL or any persons connected with it do not accept any liability arising from the use of this document.

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14

e) IIL has other business segments / divisions with independent research teams separated by 'chinese walls' catering to different sets of customers having varying objectives, risk profiles, investment horizon, etc and therefore, may at times have, different and contrary views on stocks, sectors and markets.

f) 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,

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g) As IIL along with its associates, are engaged in various financial services business and so might have financial, business or other interests in other

entities including the subject company/ies mentioned in this Report. However, IIL encourages independence in preparation of research report and strives to minimize conflict in preparation of research report. IIL and its associates did not receive any compensation or other benefits from the subject company/ies mentioned in the Report or from a third party in connection with preparation of the Report. Accordingly, IIL and its associates do not have any material conflict of interest at the time of publication of this Report.

h) As IIL and its associates are engaged in various financial services business, it might have:‐

(a) received any compensation (except in connection with the preparation of this Report) from the subject company in the past twelve months; (b) managed or co‐managed public offering of securities for the subject company in the past twelve months; (c) received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months; (d) received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months; (e) engaged in market making activity for the subject company.

i) IIL and its associates collectively do not own (in their proprietary position) 1% or more of the equity securities of the subject company/ies mentioned in the report as of the last day of the month preceding the publication of the research report.

j) The Research Analyst/s engaged in preparation of this Report or his/her relative

(a) does not have any financial interests in the subject company/ies mentioned in this report; (b) does not own 1% or more of the equity securities of the subject company mentioned in the report as of the last day of the month preceding the publication of the research report; (c) does not have any other material conflict of interest at the time of publication of the research report.

k) The Research Analyst/s engaged in preparation of this Report:‐ (a) has not received any compensation from the subject company in the past twelve months; (b) has not managed or co‐managed public offering of securities for the subject company in the past twelve months; (c) has not received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months; (d) has not received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months; (e) has not received any compensation or other benefits from the subject company or third party in connection with the research report; (f) has not served as an officer, director or employee of the subject company; (g) is not engaged in market making activity for the subject company.

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Published in 2015. © India Infoline Ltd 2015 India Infoline Limited (Formerly “India Infoline Distribution Company Limited”), CIN No.: U99999MH1996PLC132983, Corporate Office – IIFL Centre, Kamala City, Senapati Bapat Marg, Lower Parel, Mumbai – 400013 Tel: (91‐22) 4249 9000 .Fax: (91‐22) 40609049, Regd. Office – IIFL House, Sun Infotech Park, Road No. 16V, Plot No. B‐23, MIDC, Thane Industrial Area, Wagle Estate, Thane – 400604 Tel: (91‐22) 25806650. Fax: (91‐22) 25806654 E‐mail: [email protected] Website: www.indiainfoline.com, Refer www.indiainfoline.com for detail of Associates. National Stock Exchange of India Ltd. SEBI Regn. No. : INB231097537/ INF231097537/ INE231097537, Bombay Stock Exchange Ltd. SEBI Regn. No.:INB011097533/ INF011097533/ BSE‐Currency, MCX Stock Exchange Ltd. SEBI Regn. No.: INB261097530/ INF261097530/ INE261097537, United Stock Exchange Ltd. SEBI Regn. No.: INE271097532, PMS SEBI Regn. No. INP000002213, IA SEBI Regn. No. INA000000623, SEBI RA Regn.:‐ INH000000248.

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