rating mat lupin (lupin) | 993 -...
TRANSCRIPT
August 4, 2017
ICICI Securities Ltd | Retail Equity Research
Result Update
US price erosion, GST impact hurt Q1…
Revenues declined 13% YoY to | 3870 crore (I-direct estimate:
| 3933 crore) due to acute price erosion in the US and GST impact in
domestic formulations. US business declined 27% YoY to | 1602
crore (I-direct estimate: | 1652 crore). India sales declined 2% to
| 932 crore (I-direct estimate: | 792 crore) while Japan grew 17% to
| 498 crore (I-direct estimate: |553 crore) driven by acquisition of
Shionogi’s portfolio
EBITDA margins declined 948 bps YoY to 19.9% (I-direct estimate:
20.3%) as the Q1FY17 base was higher due to Glumetza exclusivity
Net profit declined 59% YoY to | 358 crore (I-direct estimate: | 385
crore) owing to a weak operational performance
US business main growth engine despite pricing headwinds
Lupin’s US business (~43% of total turnover) is witnessing a shift from
branded to generics with a slowdown in the branded space and
emergence of generics. Post the acquisition of US based Gavis, the
company now owns one of the largest ANDA pipelines comprising 368
filed ANDAs and 151 pending approvals including ~45 FTFs. This
acquisition is likely to strengthen its position in dermatology, controlled
substance products and other high value niche generics segments
besides its maiden foray into US institutional business. We expect US (ex
gGlumetza) to grow at 10% CAGR in FY17-19E to | 7009 crore. The
growth is likely to be driven by volume amid pricing pressure.
Indian formulations growth steady
Lupin ranks seventh in domestic formulations with a market share of
3.3%. The acute: chronic ratio for the company is at 32:68. In terms of MR
productivity, at | 57 lakh per MR it has one of the best MR productivity
among large cap peers. Also, tie-ups with Eli Lilly, Boehringer for anti-
diabetics and with MSD for pneumonia vaccines are some steps to
bolster the domestic franchise. We expect sales from India to grow at a
CAGR of 14% in FY16-19E to | 4921 crore.
Core strength in geographical diversification, strong financials
Lupin has established a significant presence in the US by 1) focusing on
limited competition/FTF opportunities, 2) concentration on niche
therapies such as oral contraceptives, dermatology, ophthalmology,
respiratory, etc, and 3) acquiring small but profitable brands at the right
price. It is slowly but surely establishing itself in other geographies like
Japan and Australia. Higher growth on a fairly consistent basis and a
strong balance sheet (despite Gavis acquisition) are some of the
differentiators for Lupin besides management pedigree.
Pricing pressure in US, currency headwinds to impact margins
The management has reduced its EBITDA margin guidance to 21-23%
(from 26-28%) mainly due to adverse product mix, higher fixed cost &
adverse currency movement. The US franchise is not out of the woods
yet as acute pricing pressure still looms large on the back of channel
consolidation and higher competition. However, the management is quite
confident on recovery in US from FY19 owing to exclusive & limited
competition launches. Japan growth is expected to remain under
pressure due to changes in co-payment policy and price correction. We
reduce our FY18, FY19 EPS estimates by 26% and 20%, respectively
taking into account lower margins guidance and lower currency estimates
on the back of rupee strengthening. Accordingly, our new target price is
| 1070 based on 20x FY19E EPS of | 53.4. We downgrade the stock to
HOLD as headwinds are unlikely to wane in the near future.
Rating matrix
Rating : Hold
Target : | 1070
Target Period : 12-15 months
Potential Upside : 8%
What’s Changed?
Target Changed from | 1335 to | 1070
EPS FY18E Changed from | 56.2 to | 41.4
EPS FY19E Changed from | 66.8 to | 53.4
Rating Changed from Buy to Hold
Quarterly Performance
Q1FY18 Q1FY17 YoY (%) Q4FY17 QoQ (%)
Revenue 3,869.6 4,467.7 -13.4 4,253.3 -9.0
EBITDA 768.4 1,310.8 -41.4 781.4 -1.7
EBITDA (%) 19.9 29.3 -948 bps 18.4 149 bps
Net Profit 358.1 882.0 -59.4 380.2 -5.8
Key Financials
(| Crore) FY16 FY17 FY18E FY19E
Revenues 14255.5 17494.3 16976.1 19066.0
EBITDA 3685.4 4493.1 3620.9 4384.3
Net Profit 2260.7 2557.5 1868.0 2412.9
EPS (|) 50.4 56.6 41.4 53.4
Valuation summary
FY16 FY17 FY18E FY19E
PE (x) 19.8 17.5 24.0 18.6
Target PE (x) 21.2 18.9 25.9 20.0
EV to EBITDA (x) 13.9 11.1 13.5 10.8
Price to book (x) 4.0 3.3 3.0 2.6
RoNW (%) 20.3 18.9 12.4 14.2
RoCE (%) 17.8 16.6 12.4 15.5
Stock data
Particular
Market Capitalisation
Debt (FY16)
Cash (FY16)
EV
52 week H/L (|) 1734/985
Equity capital
Face value (|) | 2
| 90.3 crore
Amount
| 44877 crore
| 52138 crore
| 7961 crore
| 699 crore
Price performance (%)
1M 3M 6M 1Y
Lupin -5.2 -20.9 -33.0 -40.5
Dr Reddy's -12.7 -9.8 -25.5 -20.3
Sun Pharma -6.5 -18.0 -20.3 -38.5
Research Analyst
Siddhant Khandekar
Mitesh Shah
Harshal Mehta
Lupin (LUPIN) | 993
ICICI Securities Ltd | Retail Equity Research Page 2
Variance analysis
(| crore) Q1FY18 Q1FY18E Q1FY17 Q4FY17 YoY (%) QoQ (%) Comments
Revenue 3,869.6 3,932.5 4,467.7 4,253.3 -13.4 -9.0 YoY decline was mainly due to 27% decline in the US sales. The decline was
however, partially negated by 17% growth in Japan sales.
Raw Material Expenses 1,232.6 1,225.4 1,271.9 1,185.1 -3.1 4.0 338 bps YoY contraction in gross margins to 68.1% mainly on the back high
base of Metformin group in Q1FY17. Forex losses too contributed to the
decline in the margins.
Employee Expenses 718.0 707.9 703.2 707.8 2.1 1.4 Increased mainly due to new recruitments at expanded Somerset (Gavis)
facility in the US
Other Expenditure 1,150.6 1,201.2 1,181.8 1,579.1 -2.6 -27.1 R&D declined 10% YoY to | 500 crore
EBITDA 768.4 798.1 1,310.8 781.4 -41.4 -1.7
EBITDA (%) 19.9 20.3 29.3 18.4 -948 bps 149 bps YoY decline in margin mainly due to high base of Metformin, forex loss of | 72
crore and higher employee expenditure.
Interest 43.9 35.5 34.7 40.6 26.4 8.1
Depreciation 260.5 272.7 202.7 267.4 28.5 -2.6 YoY increase in depreciation mainly due to Gavis amortisation
Other Income 32.0 38.5 82.6 45.3 -61.3 -29.5
PBT 495.9 528.4 1,156.0 518.7 -57.1 -4.4
Tax 136.8 142.7 273.4 136.7 -50.0 0.1
PAT before MI 359.1 414.7 882.6 382.0 -59.3 -6.0
Minority Interest -1.2 0.8 0.6 1.8 -301.7 -168.0
Net Profit 358.1 384.9 882.0 380.2 -59.4 -5.8 YoY decline mainly due to lower operational performance and higher taxation.
Miss vis-à-vis I-Direct estimates was due to lower operational performance,
higher interest cost and lower other income
Key Metrics
India 932.4 791.6 949.9 878.8 -1.8 6.1 GST transition impact was | 150 crore in Q1FY18. Beat vis-à-vis I-Direct
mainly due to lower-than-expected GST transition impact
Japan 498.4 553.3 424.4 468.7 17.4 6.3 Strong sales YoY mainly due to acquisation of Shionogi's portfolio. Miss vis-à-
vis I-Direct estimates due to base business impact led by changes in the co-
payment policy in Japan
US 1,601.8 1,651.6 2,188.6 1,900.7 -26.8 -15.7 YoY decline mainly due to price erosion in Metformin group
Europe 123.8 134.4 128.0 135.5 -3.2 -8.6 Constant currency sales in Germany declined 9.6% YoY to €6.5 million
South Africa 102.1 120.1 91.4 165.8 11.6 -38.4 Miss vis-à-vis estimates mainly due to lower-than-expected constant currency
growth. Constant currency growth was 2%
ROW markets 269.0 304.6 234.7 331.0 14.6 -18.7 YoY growth mainly due to 17% growth in LatAm to | 127 crore. Miss vis-à-vis
I-Direct estimates was mainly due to lower sales from tender business
API 279.3 292.6 296.6 281.5 -5.8 -0.8
Change in estimates
(| Crore) Old New % Change Old New % Change
Revenue 17,834.2 16,976.1 -4.8 19,597.0 19,066.0 -2.7
EBITDA 4,450.7 3,620.9 -18.6 5,086.6 4,384.3 -13.8
EBITDA Margin (%) 25.0 21.3 -367 bps 26.0 23.0 -300 bps Changed as per management guidance
PAT 2,532.3 1,868.0 -26.2 3,007.2 2,412.9 -19.8
EPS (|) 56.2 41.4 -26.4 66.8 53.4 -20.0 Changed mainly in sync with EBITDA and increase in depreciation
FY18E FY19E
Assumptions
Current Comments
(| crore) FY16 FY17 FY18E FY19E FY18E FY19E
India 3,406.4 3,815.7 4,128.5 4,921.3 4,308.9 4,890.4
Japan 1,364.2 1,779.1 2,118.0 2,329.7 2,408.6 2,697.6 Reduced mainly due to changes in co-payment policy
US 5,913.2 8,262.6 6,880.3 7,573.7 7,168.8 7,667.1
Europe 455.4 529.4 565.3 621.9 582.3 640.5
South Africa 399.7 482.2 555.3 638.6 550.4 633.0
ROW markets 947.0 1,084.2 1,245.9 1,432.8 1,281.5 1,473.7
API 1,214.9 1,138.4 1,137.9 1,160.7 1,151.3 1,174.3
Earlier
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 3
Company Analysis
From a global leader in anti-tuberculosis (TB) and other infectious
diseases to one of the fastest growing prescription companies in the US,
Lupin has come a long way to emerge as a leading Indian generic
exporter. Established in 1968, the company adapted well as per the
changed industry dynamics like other peers such as Sun, Dr Reddy’s,
Ranbaxy and Cipla. During this journey, it changed focus in therapies -
from acute to chronic and also geographies, from domestic driven to
export oriented. It received USFDA approvals for two facilities-
Ankaleshwar and Mandideep way back in 1989. Besides this, the
company has been fairly active on the global M&A front. It has acquired
companies in Japan (significant acquisitions), Australia, Philippines and
South Africa. Similarly, the company also acquired small ticket but
lucrative brands in the US (Suprax, Antara, Locoid lotion, Inspira Chamber
and Alinia). Its latest acquisition, however, has been a complex injectable
technology based company (Nanomi) in the Netherlands. Infrastructure -
11 manufacturing facilities including two in Japan – seven formulations
(three USFDA approved) and four APIs (two USFDA approved).
Exhibit 1: Return ratios to improve further
25.4 25.4
18.9
21.9 21.6
17.8
29.8
22.5
26.527.1
20.3
26.3
26.6
35.7 35.1
16.6
0
5
10
15
20
25
30
35
40
FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E
(%
)
RoNW RoCE
Source: Company, ICICIdirect.com Research
Exhibit 2: R&D spend likely to remain at elevated level
466.0 500.6
681.8
929.4
1099
1604
6.0
7.37.7
9.2
13.5 13.5
6.6
5.2
0
300
600
900
1200
1500
1800
2100
FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E
3
5
7
9
11
13
15
R & D cost (| crore) R & D cost % revenues
Source: Company, ICICIdirect.com Research
The current financial health of the company is the culmination of prudent
business decisions in the past. Over the last 10 years, revenues, EBITDA
and PAT have grown at a CAGR of 20%, 26% and 21%, respectively.
Considering more recent numbers, in FY12-17, revenue, EBITDA and PAT
have grown at a CAGR of 20%, 17% and 13% to | 14466 crore, | 4333
crore and | 2551 crore, respectively. Similarly, in the same period, R&D
spend as percentage of sales, has gone up from 6.6% in FY12 to 9.2% in
FY17.
Going ahead, in the near term, we expect revenues, EBITDA and PAT to
grow at a CAGR of 4%, -1.2% and -2.9%, respectively, in FY17-19E.
However, from a long term perspective, we believe the company is well
poised to grow at a healthy rate given the strong US pipeline, vast
experience and good understanding of the US market, continued traction
in Indian branded formulations with higher chronic focus and
improvement in the Japanese market, which is perhaps the only
geography where there is a scope for improvement. On the R&D front, we
see the composition spend tilting towards NDDS, NCEs, biosimilars from
the current ANDA/NDA albeit gradually to prepare for the scenario
beyond 2020.
ICICI Securities Ltd | Retail Equity Research Page 4
Exhibit 3: Revenues to grow at CAGR of 4% in FY17-19E
7082.9
9641.3
11286.6
12770.0
14255.5
17494.316976.1
19066.0
0
3000
6000
9000
12000
15000
18000
21000
FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E
(| c
rore
)
Source: Company, ICICIdirect.com Research
Exhibit 4: US base business pricing pressure, higher base to percolate into negative CAGR
2079.8
3769.5
4887.1
5659.35913.2
8262.6
6880.3
7573.7
0.0
2000.0
4000.0
6000.0
8000.0
10000.0
FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E
US (| crore)
Source: Company, ICICIdirect.com Research
Exhibit 5: Indian formulation sales to grow at CAGR of 14% in FY17-19E
1350.01573.5
2479.6
2968.0
3406.4
3815.7
4128.5
4921.3
0.0
1100.0
2200.0
3300.0
4400.0
5500.0
FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E
India (| crore)
Source: Company, ICICIdirect.com Research
Revenues to grow at a CAGR of 4% in FY17-19E to
| 19066 crore driven by 14% growth in the India business,
14% in Japan, 15% in RoW markets, 15% in South Africa,
8% in European markets and 4% de-growth in US
formulations business
Lupin is the fifth largest generics player in the US in terms
of prescriptions. It owns a healthy product pipeline
(including Gavis) in the US (368 ANDAs filed, 151
pending approvals and 217 approvals), which includes
some limited competition products and ~45 FTFs
opportunities. It is planning to launch more than 150 (100
owns and 50 from GAVIS) products in the US market in
the next four or five years. Acquisition of Gavis will also
strengthen its position in dermatology, controlled
substance products and other high value niche generics
segments besides its maiden foray into US institutional
business. Lupin is one of the few generic companies that
has a presence in the branded business. Currently, it is
marketing four branded products in the US market,
including two that were in-licensed in the last 12 months.
However, with continued pricing pressure in the US base
business due to buyers consolidation, we expect sales
from the US market to decline at a CAGR of 4% in FY17-
19E to | 7574 crore
Lupin is ranked seventh in domestic formulations with a
market share of 3.3%. The company is adding more drugs
in chronic therapies, which would drive growth in the
domestic market. We expect sales from India to grow at a
CAGR of 14% in FY17-19E to | 4921 crore
19.8% CAGR
4.4% CAGR
31.8% CAGR
-4.3% CAGR
23% CAGR
13.6% CAGR
ICICI Securities Ltd | Retail Equity Research Page 5
Exhibit 6: Japanese revenue to grow at CAGR of 14% in FY17-19E
860.8
1304.0 1295.4 1323.9 1364.2
1779.1
2118.0
2329.7
0.0
500.0
1000.0
1500.0
2000.0
2500.0
FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E
Japan (| crore)
Source: Company, ICICIdirect.com Research
Exhibit 7: EBITDA to de-grow at CAGR of 1% in FY17-19E
1959
2270
2899
3620 3685
4493
3621
4384
27.7
23.5
25.7
28.3
25.9 25.7
21.3
23.0
15
17
19
21
23
25
27
29
0
1000
2000
3000
4000
5000
6000
7000
FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E
(%
)
(| crore)
EBITDA EBITDA Margins (%)
Source: Company, ICICIdirect.com Research
Exhibit 8: Net profit to de-grow at CAGR of 3% in FY17-19E
1382.11314.1
1836.4
2403.2
2260.7
2557.5
2412.9
1868.0
19.5
13.6
16.3
18.8
14.6
11.0
12.7
15.9
0
500
1000
1500
2000
2500
3000
FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E
5
7
9
11
13
15
17
19
Net Profit Net Profit Margins (%)
Source: Company, ICICIdirect.com Research
The Japanese acquisitions i.e. Kyowa and I’rom are yet to
achieve expected critical mass both in terms of
scalability and profitability. While Kyowa profitability is
expected to improve on the back of back-ended
integration by sourcing of APIs from Goa, the I’rom
business remains challenging due to the lumpy nature of
the CRAMS business. Kyowa has acquired 21 branded
products from Shionogi. Recently acquired 21 products
from Shionogi will add to the company’s overall growth.
We expect sales from Japan to grow at a CAGR 14% in
FY17-19E to | 2330 crore mainly due to consolidation of
Shionogi’s portfolio
15.6% CAGR
14.4% CAGR
ICICI Securities Ltd | Retail Equity Research Page 6
Exhibit 9: Trends in quarterly financial performance
(| crore) Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 YoY (%) QoQ (%)
US 1605.5 1271.6 1404.3 1377.9 1190.6 1155 1380.5 2187.1 2188.6 1997.8 2175.5 1900.7 1601.8 -26.8 -15.7
Europe 69.0 87.6 80.5 89.1 100.3 115.8 113.9 125.4 128.0 123.1 142.8 135.5 123.8 -3.2 -8.6
Japan 341.5 345.9 342.2 294.3 323.1 323.4 373.5 344.2 424.4 436.8 449.2 468.7 498.4 17.4 6.3
India 761.5 799.0 743.8 663.7 885.1 873.8 886.0 761.5 949.9 995.8 991.2 878.8 932.4 -1.8 6.1
South Africa 86.9 105.7 107.0 122.2 81.6 99.8 104.8 113.5 91.4 112.4 112.7 165.8 102.1 11.6 -38.4
RoW 127.1 188.7 191.3 199.3 174.5 288.6 208.1 275.8 234.7 253.4 265.1 331.0 269.0 14.6 -18.7
API 292.5 318.3 275.8 307.5 325.7 321.9 283.5 283.8 296.6 291.9 268.4 281.5 279.3 -5.8 -0.8
Net Sales 3284.0 3116.8 3144.9 3054.0 3080.9 3192.6 3357.7 4082.3 4341.8 4211.2 4404.9 4161.9 3806.8 -12.3 -8.5
OOI 56.9 56.6 32.7 24.1 75.2 137.1 198.2 88.4 125.9 79.3 77.9 91.4 62.8 -50.1 -31.4
Revenues 3340.8 3173.4 3177.6 3078.2 3156.1 3329.7 3555.8 4170.7 4467.7 4290.5 4482.9 4253.3 3869.6 -13.4 -9.0
RM Cost 1107.4 1069.8 1023.6 956.4 983.5 1124.9 1123.0 1101.0 1271.9 1242.9 1301.6 1185.1 1232.6 -3.1 4.0
% of Revenue 33.1 33.7 32.2 31.1 31.2 33.8 31.6 26.4 28.5 29.0 29.0 27.9 31.9
Gross Profit 2233.5 2103.6 2154.1 2121.8 2172.6 2204.8 2432.8 3069.8 3195.7 3047.7 3181.3 3068.2 2637.0 -17.5 -14.1
GPM (%) 66.9 66.3 67.8 68.9 68.8 66.2 68.4 73.6 71.5 71.0 71.0 72.1 68.1 -338 -399
Employee Cost 410.4 438.9 415.9 482.2 497.3 532.8 528.4 577.9 703.2 712.4 731.2 707.8 718.0 2.1 1.4
% of Revenue 12.3 13.8 13.1 15.7 15.8 16.0 14.9 13.9 15.7 16.6 16.3 16.6 18.6 281.6 191.3
Other expenditure 708.4 832.2 855.3 850.2 850.5 1009.4 1027.3 1186.8 1181.8 1307.2 1234.3 1579.1 1150.6 -2.6 -27.1
% of Revenue 21.2 26.2 26.9 27.6 26.9 30.3 28.9 28.5 26.5 30.5 27.5 37.1 29.7
Total Expenditure 2226.1 2340.9 2294.7 2288.8 2331.2 2667.1 2678.7 2865.7 3156.9 3262.4 3267.0 3471.9 3101.2 -1.8 -10.7
% of Revenue 66.6 73.8 72.2 74.4 73.9 80.1 75.3 68.7 70.7 76.0 72.9 81.6 80.1 948.3 -148.6
EBITDA 1114.8 832.5 882.9 789.4 824.8 662.6 877.2 1305.0 1310.8 1028.1 1215.8 781.4 768.4 -41.4 -1.7
EBITDA Margin (%) 33.4 26.2 27.8 25.6 26.1 19.9 24.7 31.3 29.3 24.0 27.1 18.4 19.9 -948.3 148.6
Other income 28.9 110.2 83.4 17.2 75.7 57.8 65.3 34.9 82.6 27.1 103.6 45.3 32.0 -61.3 -29.5
Interest 2.6 2.1 2.7 2.5 7.0 24.1 9.2 21.3 34.7 26.3 45.9 40.6 43.9 26.4 8.1
Depreciation 108.6 108.7 110.3 107.2 101.4 115.5 111.4 148.7 202.7 211.2 230.9 267.4 260.5 28.5 -2.6
PBT 1031.5 831.0 852.4 696.0 791.1 579.9 820.9 1168.9 1155.0 816.7 1041.6 517.7 494.9 -57.1 -4.4
Tax 402.9 192.6 238.7 136.2 225.8 159.1 290.9 418.8 273.4 158.9 409.5 136.7 136.8 -50.0 0.1
Tax rate (%) 39.1 23.2 28.0 19.6 28.5 27.4 35.4 35.8 23.7 19.5 39.3 26.4 27.6
PAT 628.6 638.4 613.7 559.7 565.3 420.8 530.0 750.1 881.6 657.8 632.1 381.0 358.1 -59.4 -6.0
PAT Margin (%) 18.8 20.1 19.3 18.2 17.9 12.6 14.9 18.0 19.7 15.3 14.1 9.0 9.3 -1047.7 29.7
Minority Interest 4.8 9.4 13.3 13.7 -2.2 2.7 1.3 3.3 0.6 0.8 2.4 1.8 -1.2 -301.7 -168.0
PAT After MI 623.7 629.0 600.5 546.0 567.6 418.1 528.8 746.9 881.0 657.0 629.7 379.2 359.3 -59.2 -5.2
Source: Company, ICICIdirect.com Research
Lupin - SWOT Analysis
Strengths - Prudent geographical mix covering high opportunity
emerging markets as well as developed markets. It has a formidable US
presence with highest rank among Indian peers in the US generic
prescriptions space. It has one of the best working capital management in
the industry with strong return ratios and ever improving margins.
Weakness - The Japanese market still remains a low margin business.
Opportunities - In the US generics space, a lot of opportunities are
panning out in the oral contraceptives and respiratory space.
Industry threats - Increased USFDA scrutiny across the globe regarding
cGMP issues, pricing pressure due to client consolidation in the US. Gavis
like costly acquisitions can stretch the balance sheet further if the product
pipeline fails to deliver the expected payback. Appreciation of rupee
against US$ likely to impact the financials performance
ICICI Securities Ltd | Retail Equity Research Page 7
Conference call highlights
On the US sales front, the management faced a challenging
scenario with single digit price erosion in the base business. On a
YoY basis, US sales were down mainly due to increased
competition in gGlumetza (diabetic) sales. Adjusting for the
gGlumetza and gFortamate (diabetic) sales, the base portfolio
grew 11% sequentially
Going ahead, the management expects single digit in price
erosion in the US base business to persist during FY18
On the Japanese sales front, changes in the co-pay policies of the
government, led to a decline in sales. Also, the expected 12-13%
price cut on a two-year basis has been revised to annual price cut
of 6%
On the India sales front, the GST impact has been estimated by
the management to the tune of | 150 crore on the sales
On the APAC front, a Philippines tender did not come through in
the quarter, adversely impacting sales
The management estimates FY18 US sales to be in a YoY
declining trend whereas some growth is to be expected in FY19
The branded and generic segmentation during the quarter were at
US$23 million and US$215 million, respectively
The company is expected to file 35-40 ANDAs in FY18. R&D
expenses are expected at settle at | 500 crore per quarter
Levothyroxine (thyroid hormone) is expected to be launched in
FY18. Pre-approval inspection (PAI) by USFDA has been
conducted for Levothyroxine (from Indore plant) and Tamiflu
(from Aurangabad)
The management has guided for 21-23% of EBITDA margins and
~68% of gross margins for FY18.
The company has addressed the issues raised during Goa (three
observations) and Indore Unit 2 (six observations) inspection by
the USFDA and is currently awaiting clarity from the regulatory
authority on the issue. There have been no approvals from the
facilities post observations
The company has enlisted several molecules, which are expected
to be launched in FY18 and FY19 namely, gTamiflu (anti-viral),
Lanthanum carbonate (nephrology), Hydrocodone APAP (pain),
potassium chloride (CVS), etc
On the respiratory portfolio, the company has filed gProair in
Q4FY17, gSpiriva is expected to be launched soon. Also, gAdvair
is expected to be launched in FY19
The management has guided for $200 million revenues for Gavis
in FY18
The management expects to get three FTF in FY19, namely,
gRanexa (CVS), gMinocyclin (anti-infective), gMoxeza (anti-
infective)
ICICI Securities Ltd | Retail Equity Research Page 8
Exhibit 10: Major Facilities
Location Segment Regulatory Approvals Type
Inspection
Date Outcome
Goa (India) Formulations USFDA, TGA Australia, WHO GMP, MCC SA Tablets, Capsules, Liquids Jan-16 483 with 3 observations
Ankaleshwar (India) APIs UKMHRA, WHO GMP, ANVISA Brazil, EDQM, KFDA Intermediates and APIs
Mandideep (India) Formulations / APIs USFDA, UKMHRA,WHO GMP, TGA Auatralia APIs- CVS and Ciphalosporins Feb-16 483 with 4 observations
Tarapur (India) APIs USFDA, UKMHRA, WHO GMP APIs Aug-16 No observations
Goa (India) Formulations USFDA, UKMHRA, WHO GMP Solid orals Mar-16 Received EIR
Jammu (India) Formulations WHO GMP, ANVISA Brazil Formulations
Vadodara (India) APIs WHO GMP Intermediates and APIs
Indore (India) Formulations / APIs USFDA, UKMHRA,TGA Auatralia APIs and Formulations Jan-16 483 with 6 observations
Nagpur (India) Formulations WHO and USFDA Formulations
Kyowa (Japan) Formulations PMDA Orals
I' rom (Japan) Formulations PMDA Injectables
Vishakapatnam, AP APIs Under Initiation
Pune (India) R&D Aug-16 No observations
Oldenzaal, Netherlands R&D
Coral Springs, FL R&D
Somerset, NJ Formulations & R&D
Mexico City, Mexico Formulations & R&D
Minas Gerias, Brazil Formulations & R&D
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 9
Valuation
The management has reduced its EBITDA margin guidance to 21-23%
(from 26-28%) mainly due to adverse product mix, higher fixed cost and
adverse currency movement. The US franchise is not out of the woods
yet as the acute pricing pressure still looms large on the back of channel
consolidation and increased competition. However, the management is
quite confident of a recovery in the US from FY19 owing to exclusive and
limited competition launches. Japan growth is expected to remain under
pressure due to changes in co-payment policy and price correction. We
reduce our FY18, FY19 EPS estimates by 26%, 20%, respectively, taking
into account lower margin guidance as well as lower currency estimates
on the back of rupee strengthening. Accordingly, our new target price is
| 1070 based on 20x FY19E EPS of | 53.4. We downgrade the stock to
HOLD as the headwinds are unlikely to wane in the near future.
Exhibit 11: One year forward PE
0.0
500.0
1000.0
1500.0
2000.0
2500.0
3/31/201
1
9/30/201
1
3/31/201
2
9/30/201
2
3/31/201
3
9/30/201
3
3/31/201
4
9/30/201
4
3/31/201
5
9/30/201
5
3/31/201
6
9/30/201
6
3/31/201
7
Series1 35.3x 29.4x 27.5x 19.6x 15.6x
[
Source: Company, ICICIdirect.com Research
Exhibit 12: One year forward PE of company vs. CNX Pharma
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
45.00
3/31/201
1
9/30/201
1
3/31/201
2
9/30/201
2
3/31/201
3
9/30/201
3
3/31/201
4
9/30/201
4
3/31/201
5
9/30/201
5
3/31/201
6
9/30/201
6
3/31/201
7
(x)
Lupin CNX Pharma
13.5% Premium
Source: Company, ICICIdirect.com Research
Exhibit 13: Valuation
Revenues Growth EPS Growth P/E EV/EBITDA RoNW RoCE
(| crore) (%) (|) (%) (x) (X) (%) (%)
FY16 14256 11.6 50.4 -5.9 19.8 13.9 20.3 17.8
FY17 17494 22.7 56.6 13.1 17.5 11.1 18.9 16.6
FY18E 16976 -3.0 41.4 -27.0 24.0 13.5 12.4 12.4
FY19E 19066 12.3 53.4 29.2 18.6 10.8 14.2 15.5
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 10
Recommendation history vs. Consensus
0
500
1,000
1,500
2,000
2,500
May-17Feb-17Dec-16Sep-16Jul-16May-16Feb-16Dec-15Sep-15Jul-15May-15
(|
)
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
(%
)
Price Idirect target Consensus Target Mean % Consensus with BUY
Source: Reuters, Company, ICICIdirect.com Research
Key events
Date Event
Sep-11 Receives USFDA approval for its first oral contraceptive drug norethindrone tablets
Nov-11 Japanese subsidiary Kyowa acquires specialty injectables company I’rom Pharmaceutical
Aug-13 Signs an agreement with Romark Laboratories, which provides exclusive rights to Lupin to promote, distribute and market Alinia (nitazoxanide) oral suspension
brand in the US market
Feb-14 Acquires Dutch firm Nanomi B.V. for an undisclosed amount, foraying into the technology intensive complex injectables space.
Mar-14 Acquires Mexico-based ophthalmic drugs maker Laboratories Grin
Apr-15 Consolidated Pharma Dynamics business in South Africa
May-15 Lupin acquires Brazil's Medquimica Industria Farmaceutica SA
Jul-15 Lupin's Goa facility recieves nine Form 483 observations
Jul-15 Lupin acquires Gavis Pharmaceuticals for US$ 880 million to strengthen its US portfolio
Jul-15 Closes Temmler acquisition in Germany
Mar-16 Completes Gavis acquisition
Jul-16 Goa facility receives establishment inspection report (EIR) from USFDA for July 2015 inspectation
Aug-16 Acquires 21 generic brands from Japan’s Shionogi for $150 million
Nov-16 Goa facility receives establishment inspection report (EIR) from USFDA for March 2016 inspectation
Apr-17 Lupin's Goa facility receives three Form 483 observations from USFDA
May-17 Lupin's Aurangabad facility receives nine Form 483 observations from USFDA
May-17 Opens 100,000 square foot expansion of its manufacturing facilities in Somerset, New Jersey
May-17 Indore facility receives six Form 483 observations from USFDA
Source: Company, ICICIdirect.com Research
Top 10 Shareholders Shareholding Pattern
Rank Investor Name Latest Filing Date % O/S Position Position Change
1 Lupin Investments Pvt. Ltd. 28-Jul-17 45.16 204.0m 188.6m
2 Stewart Investors 30-Jun-16 2.43 11.0m 3.8m
3 Jhunjhunwala (Rakesh Radheshyam) 30-Jun-17 1.76 8.0m 0.2m
4 ICICI Prudential Asset Management Co. Ltd. 30-Jun-17 1.60 7.2m 2.1m
5 The Vanguard Group, Inc. 30-Jun-17 1.55 7.0m 0.1m
6 BlackRock Institutional Trust Company, N.A. 30-Jun-17 1.44 6.5m 0.0m
7 GIC Private Limited 30-Jun-17 1.42 6.4m -1.1m
8 ICICI Prudential Life Insurance Company Ltd. 30-Jun-17 1.40 6.3m 6.3m
9 Genesis Investment Management, LLP 30-Nov-16 1.19 5.4m -0.3m
10 Abu Dhabi Investment Authority 31-Mar-17 1.05 4.7m -1.0m
(in %) Jun-16 Sep-16 Dec-16 Mar-17 Jun-17
Promoter 46.8 46.8 46.7 46.7 46.7
Others 53.2 53.2 53.3 53.3 53.3
Source: Reuters, ICICIdirect.com Research
Recent Activity
Investor name Value ($) Shares Investor name Value ($) Shares
Lupin Investments Pvt. Ltd. 3033.5m 188.6m Zyma Laboratories, Ltd. -895.1m -55.7m
ICICI Prudential Life Insurance Company Ltd. 103.7m 6.3m Rahas Investments Pvt. Ltd. -741.1m -46.1m
ICICI Prudential Asset Management Co. Ltd. 34.5m 2.1m Visiomed Investments Pvt. Ltd. -710.7m -44.2m
OppenheimerFunds, Inc. 20.2m 1.2m Lupin Marketing Pvt. Ltd. -656.6m -40.8m
APG Asset Management 18.4m 0.8m Rahas Mercantile Pvt. Ltd. -30.0m -1.9m
Buys Sells
Source: Reuters, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 11
.
Financial summary
Profit and loss statement | Crore
(Year-end March) FY16 FY17 FY18E FY19E
Total Operating Income 14,255.5 17,494.3 16,976.1 19,066.0
Growth (%) 11.6 22.7 -3.0 12.3
Raw Material Expenses 4,332.6 5,001.4 5,407.5 6,073.3
Employee Expenses 2,141.6 2,849.5 2,975.3 3,199.6
Other expenditure 4,096.0 5,150.2 4,972.4 5,408.9
Total Operating Expenditure 10,570.2 13,001.2 13,355.2 14,681.7
EBITDA 3,685.4 4,493.1 3,620.9 4,384.3
Growth (%) 1.8 21.9 -19.4 21.1
Depreciation 487.1 912.2 1,042.0 1,131.2
Interest 59.5 152.5 148.3 99.2
Other Income 190.1 114.8 139.7 156.9
PBT 3,328.8 3,543.1 2,570.2 3,310.7
EO 0.0 0.0 0.0 0.0
Total Tax 1,059.3 978.5 696.9 893.9
PAT before MI 2,269.5 2,564.6 1,873.3 2,416.8
Minority Interest 8.8 7.2 3.0 3.9
Adjusted PAT 2,260.7 2,557.5 1,868.0 2,412.9
Growth (%) -5.9 13.1 -27.0 29.2
EPS (Adjusted) 50.4 56.6 41.4 53.4
Source: Company, ICICIdirect.com Research
Cash flow statement | Crore
(Year-end March) FY16 FY17 FY18E FY19E
Profit/(Loss) after taxation 2260.7 2557.5 1868.0 2412.9
Depreciation 487.1 912.2 1042.0 1131.2
Other operating Activities 98.2 302.5 148.3 99.2
(inc)/dec in Current Assets -3365.0 -49.3 134.1 -1076.0
Inc/ (dec) in Current Liabilities -114.5 530.3 15.5 431.3
CF from Operating Activities -672.2 4103.3 3208.0 2998.6
Purchase of Fixed Assets -5821.7 -2569.3 -1500.0 -1000.0
(Inc)/Dec in Investments 1645.1 -2119.8 500.0 500.0
Other Investing Activities -990.0 234.5 -5.0 -6.8
CF from Investing Activities -5166.7 -4454.6 -1005.0 -506.8
Inc / (Dec) in Loan Funds 6640.5 788.7 -2000.0 -2000.0
Inc / (Dec) in Equity Capital 0.0 0.0 0.0 0.0
Dividend and dividend tax -406 -407 -318 -410
Other Financing Activities -55.1 -152.5 -148.3 -99.2
CF from Financing Activities 6179.3 229.0 -2465.9 -2509.4
Net Cash Flow 340 -122 -263 -18
Opening Cash 481 822 699 437
Closing Cash 821.8 699.4 436.6 419.0
Free Cash flow -6,493.9 1,533.9 1,708.0 1,998.6
Source: Company, ICICIdirect.com Research
Balance sheet | Crore
(Year-end March) FY16 FY17 FY18E FY19E
Equity Capital 90.1 90.3 90.3 90.3
Reserve and Surplus 11,073.3 13,407.3 14,957.7 16,960.5
Total Shareholders funds 11,163.4 13,497.6 15,048.1 17,050.8
Total Debt 7,172.5 7,961.1 5,961.1 3,961.1
Deferred Tax Liability 417.5 492.9 532.3 585.5
Minority Interest 32.1 34.5 37.3 41.0
Other NCL & LT Provisions 654.9 906.1 978.6 1,076.4
Total Liabilities 19,440.3 22,892.1 22,557.3 22,714.9
Gross Block - Fixed Assets 6,946.6 10,085.3 11,685.3 12,685.3
Accumulated Depreciation 495.1 1,362.7 2,404.7 3,535.9
Net Block 6,451.5 8,722.6 9,280.6 9,149.4
Capital WIP 2,702.4 2,133.1 2,033.1 2,033.1
Total Fixed Assets 9,153.9 10,855.7 11,313.6 11,182.4
Investments 16.4 2,136.1 1,636.1 1,136.1
Goodwill on Consolidation 2,265.4 2,310.0 2,310.0 2,310.0
Inventory 3,273.7 3,642.3 3,538.3 3,973.9
Debtors 4,548.8 4,307.3 4,184.4 4,699.6
Loans and Advances 18.5 15.9 17.1 18.8
Other Current Assets 1,219.6 1,144.3 1,235.8 1,359.4
Cash 821.8 699.4 436.6 419.0
Total Current Assets 9,882.2 9,809.2 9,412.2 10,470.7
Creditors 2,001.6 2,594.8 2,520.7 2,831.1
Provisions & Other CL 1,183.0 1,120.0 1,209.6 1,330.6
Total Current Liabilities 3,184.6 3,714.8 3,730.4 4,161.7
Net Current Assets 6,697.7 6,094.3 5,681.8 6,309.0
Deferred Tax Assets 403.6 643.4 694.8 764.3
Long term Loans and advances 51.8 76.5 82.6 90.9
Other Non current assets 851.5 776.1 838.2 922.0
Application of Funds 19,440.3 22,892.1 22,557.3 22,714.9
Source: Company, ICICIdirect.com Research
Key ratios
(Year-end March) FY16 FY17 FY18E FY19E
Per Share data (|)
Reported EPS 50.2 56.6 41.4 53.4
BV per share 247.8 298.9 333.2 377.6
Dividend per share 9.0 9.0 7.0 9.1
Cash per Share 18.2 15.5 9.7 9.3
Operating Ratios (%)
Gross Margin 69.6 71.4 68.1 68.1
EBITDA margin 25.9 25.7 21.3 23.0
PAT Margin 15.9 14.6 11.0 12.7
Inventory Days 83.8 76.0 76.1 76.1
Debtor Days 116.5 89.9 90.0 90.0
Creditor Days 51.2 54.1 54.2 54.2
Asset Turnover 2.1 1.7 1.5 1.5
EBITDA conversion Rate -18.2 91.3 88.6 68.4
Return Ratio (%)
RoE 20.3 18.9 12.4 14.2
RoCE 17.8 16.6 12.4 15.5
RoIC 20.6 20.7 14.5 17.7
Valuation Ratios (x)
P/E 19.8 17.5 24.0 18.6
EV / EBITDA 13.9 11.1 13.5 10.8
EV / Net Sales 3.6 2.9 2.9 2.5
Market Cap / Sales 3.1 2.6 2.6 2.4
Price to Book Value 4.0 3.3 3.0 2.6
Solvency Ratios
Debt / EBITDA 1.9 1.8 1.6 0.9
Debt / Equity 0.6 0.6 0.4 0.2
Current Ratio 2.8 2.5 2.4 2.4
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 12
ICICIdirect.com coverage universe (Healthcare)
Company I-Direct CMP TP Rating M Cap
Code (|) (|) (| Cr) FY16 FY17E FY18E FY19E FY16 FY17E FY18E FY19E FY16 FY17E FY18E FY19E FY16 FY17E FY18E FY19E
Ajanta Pharma AJAPHA 1336 1,880 Buy 11755.4 110.0 56.6 58.2 69.8 12.1 23.6 23.0 19.1 46.2 41.8 33.7 32.3 37.3 33.2 26.8 25.6
Alembic Pharma ALEMPHA 531 570 Hold 10000.8 38.2 21.2 19.1 28.6 13.9 25.0 27.7 18.5 52.2 25.3 18.7 23.9 45.1 21.0 16.5 20.8
Apollo Hospitals APOHOS 1268 1,400 Buy 17634.8 13.2 12.8 16.5 33.3 96.0 98.8 76.6 38.0 6.6 6.0 6.7 10.8 5.3 4.9 5.9 10.9
Aurobindo Pharma AURPHA 741 755 Buy 43434.4 33.9 38.3 37.1 42.1 21.8 19.3 20.0 17.6 23.3 24.8 19.6 19.9 28.1 23.9 19.0 17.9
Biocon BIOCON 374.9 380 Hold 22491.0 7.7 11.0 7.8 13.5 48.6 34.2 48.2 27.8 9.3 11.9 10.1 15.9 11.5 13.6 9.0 13.9
Cadila Healthcare CADHEA 546 420 Hold 55906.6 15.0 14.5 15.4 20.5 36.5 37.6 35.4 26.6 24.9 13.1 15.2 18.5 34.4 21.4 19.4 21.6
Cipla CIPLA 557.2 470 Hold 44832.4 18.5 12.9 17.8 25.3 30.1 43.3 31.2 22.0 12.0 8.0 11.0 14.5 12.5 8.1 10.4 13.1
Divi's Lab DIVLAB 670 665 Hold 17787.7 41.5 39.3 34.6 41.5 16.1 17.0 19.4 16.2 30.5 25.0 20.3 21.5 25.7 19.5 15.4 16.4
Dr Reddy's Labs DRREDD 2324 2,400 Hold 38520.8 141.4 70.6 72.4 126.2 16.4 32.9 32.1 18.4 15.3 6.1 6.8 11.9 19.2 9.5 9.0 13.9
Glenmark Pharma GLEPHA 702 730 Hold 19816.7 32.2 46.0 38.7 40.6 21.8 15.3 18.2 17.3 16.2 18.9 15.9 15.5 21.2 25.5 17.9 15.9
Indoco Remedies INDREM 200.1 180 Hold 1843.5 9.4 8.4 7.7 11.4 21.3 23.9 25.9 17.6 12.9 8.4 8.9 12.1 14.8 12.0 10.2 13.4
Ipca Laboratories IPCLAB 467 525 Hold 5886.6 7.4 15.4 17.6 27.9 63.2 30.3 26.5 16.7 4.5 8.7 9.3 13.2 4.1 7.9 8.4 12.0
Jubilant Life JUBLIF 715.3 845 Buy 11393.4 26.0 36.1 44.3 59.1 27.5 19.8 16.2 12.1 12.0 13.3 14.8 17.6 14.2 16.8 17.3 19.0
Lupin LUPIN 993 1,070 Hold 44876.6 50.4 56.6 41.4 53.4 19.7 17.5 24.0 18.6 17.8 16.6 12.4 15.5 20.3 18.9 12.4 14.2
Natco Pharma NATPHA 968.7 1,055 Buy 16884.3 9.0 27.8 20.6 20.3 107.1 34.8 47.0 47.6 16.0 33.6 22.9 20.3 12.2 29.5 18.7 16.2
Sun Pharma SUNPHA 516 550 Hold 123765.1 23.4 29.0 20.3 25.5 22.0 17.8 25.5 20.2 18.6 19.8 13.5 15.0 18.0 19.0 12.0 13.4
Syngene Int. SYNINT 470 490 Hold 9407.0 11.1 14.3 14.3 17.4 43.6 33.6 33.6 27.7 14.1 16.8 16.2 17.8 21.6 20.3 17.2 17.4
Torrent Pharma TORPHA 1252 1,250 Hold 21186.7 110.9 55.2 48.3 65.8 11.3 22.7 25.9 19.0 46.5 18.9 17.6 20.7 53.7 21.5 16.5 19.2
Unichem Lab UNILAB 268.6 235 Hold 2441.6 12.3 12.0 11.8 16.6 21.8 22.4 22.8 16.1 13.8 12.0 11.0 13.9 11.7 10.5 9.5 12.0
RoE (%)EPS (|) PE(x) RoCE (%)
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 13
RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com
assigns ratings to its stocks according to their notional target price vs. current market price and then
categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless
specified and the notional target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;
Pankaj Pandey Head – Research [email protected]
m
ICICIdirect.com Research
Desk,
ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com
assigns ratings to its stocks according to their notional target price vs. current market price and then
categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless
specified and the notional target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;
Pankaj Pandey Head – Research [email protected]
m
ICICIdirect.com Research
Desk,
ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com
assigns ratings to its stocks according to their notional target price vs. current market price and then
categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless
specified and the notional target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;
Pankaj Pandey Head – Research [email protected]
m
ICICIdirect.com Research
Desk,
ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com
assigns ratings to its stocks according to their notional target price vs. current market price and then
categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless
specified and the notional target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;
Pankaj Pandey Head – Research [email protected]
m
ICICIdirect.com Research
Desk,
ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com
assigns ratings to its stocks according to their notional target price vs. current market price and then
categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless
specified and the notional target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;
Pankaj Pandey Head – Research [email protected]
m
ICICIdirect.com Research
Desk,
ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com
assigns ratings to its stocks according to their notional target price vs. current market price and then
categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless
specified and the notional target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;
Pankaj Pandey Head – Research [email protected]
m
ICICIdirect.com Research
Desk,
ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com
assigns ratings to its stocks according to their notional target price vs. current market price and then
categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless
specified and the notional target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;
Pankaj Pandey Head – Research [email protected]
m
ICICIdirect.com Research
Desk,
ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com
assigns ratings to its stocks according to their notional target price vs. current market price and then
categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless
specified and the notional target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;
Pankaj Pandey Head – Research [email protected]
m
ICICIdirect.com Research
Desk,
ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com
assigns ratings to its stocks according to their notional target price vs. current market price and then
categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless
specified and the notional target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;
Pankaj Pandey Head – Research [email protected]
m
ICICIdirect.com Research
Desk,
ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com
assigns ratings to its stocks according to their notional target price vs. current market price and then
categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless
specified and the notional target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;
Pankaj Pandey Head – Research [email protected]
m
ICICIdirect.com Research
Desk,
ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com
assigns ratings to its stocks according to their notional target price vs. current market price and then
categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless
specified and the notional target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;
Pankaj Pandey Head – Research [email protected]
m
ICICIdirect.com Research
Desk,
ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com
assigns ratings to its stocks according to their notional target price vs. current market price and then
categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless
specified and the notional target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;
Pankaj Pandey Head – Research [email protected]
m
ICICIdirect.com Research
Desk,
ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com
assigns ratings to its stocks according to their notional target price vs. current market price and then
categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless
specified and the notional target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;
Pankaj Pandey Head – Research [email protected]
m
ICICIdirect.com Research
Desk,
ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns
ratings to its stocks according to their notional target price vs. current market price and then categorises them
as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional
target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;
Pankaj Pandey Head – Research [email protected]
ICICIdirect.com Research Desk,
ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
ICICI Securities Ltd | Retail Equity Research Page 14
ANALYST CERTIFICATION
We /I, Siddhant Khandekar CA-INTER, Mitesh Shah MS (Finance) Harshal Mehta MTech (Biotechnology) Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views
expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the
specific recommendation(s) or view(s) in this report.
Terms & conditions and other disclosures:
ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities
Limited is a Sebi registered Research Analyst with Sebi Registration Number – INH000000990. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is India’s largest private sector bank and has its
various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (“associates”), the details in respect of which are
available on www.icicibank.com.
ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking and
other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts and their
relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.
The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and meant
solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior
written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current. Also,
there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and
such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this company, or in certain other
circumstances.
This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This
report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial
instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their
receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances.
The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial
positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. The
value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any loss or damage of any kind
arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before
investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice.
ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in
the past twelve months.
ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in
respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction.
ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned in
the report in the past twelve months.
ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its associates or its analysts did not receive any
compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts
and their relatives have any material conflict of interest at the time of publication of this report.
It is confirmed that Siddhant Khandekar CA-INTER, Mitesh Shah MS (Finance) Harshal Mehta MTech (Biotechnology) Research Analysts of this report have not received any compensation from the companies
mentioned in the report in the preceding twelve months.
Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.
ICICI Securities or its subsidiaries collectively or Research Analysts or their relatives do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month
preceding the publication of the research report.
Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject
company/companies mentioned in this report.
It is confirmed that Siddhant Khandekar CA-INTER, Mitesh Shah MS (Finance) Harshal Mehta MTech (Biotechnology) Research Analysts do not serve as an officer, director or employee of the companies
mentioned in the report.
ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.
Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report.
We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities.
This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution,
publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities
described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to
observe such restriction.
report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial
instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their
receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances.
The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial
positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. The
value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any loss or damage of any kind
arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before
investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to
change without notice.
ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in
the past twelve months.
ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in
respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction.
ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned in
the report in the past twelve months.
ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its analysts did not receive any compensation or
other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts have any material
conflict of interest at the time of publication of this report.
It is confirmed that Siddhant Khandekar CA-INTER Mitesh Shah MS (Finance), Harshal Mehta MTech (Biotechnology) Research Analysts of this report have not received any compensation from the companies
mentioned in the report in the preceding twelve months.
Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.