torrent pharmaceuticalsjanuary 28,...

ICIC

I S

ecurit

ies –

Retail E

quit

y R

esearch

Result

Update

CMP: | 2027 Target: | 2020 (0%) Target Period: 12 months

Torrent Pharmaceuticals (TORPHA)

HOLD

January 28, 2020

One-offs impact revenues; margins remain strong

Revenues de-grew 4.1% YoY to | 1966 crore (I-direct estimate: | 2075 crore)

mainly due to 22.2% YoY decline in the US business to | 381 crore (I-direct

estimate: | 371.7 crore). Indian formulations grew just 4.3% YoY to | 871

crore (I-direct estimate: | 918.5 crore). EBITDA margins remained flat at

27.5% (I-direct estimate: 27.4%). EBITDA de-grew 3.7% YoY to | 540.0 crore

(I-direct estimate: | 574.1 crore). Net profit remained flattish growing 2%

YoY to | 251.0 crore (I-direct estimate: | 255.6 crore). Delta vis-à-vis EBITDA

was mainly due to higher tax rate offset by higher other income.

India growth steady; acquisitions to enhance coverage

Domestic branded formulations including CRAMs constitute 48% of sales.

The acquisition of Elder Pharma’s branded portfolio has added new

therapies like neutraceuticals, gynaecology and helped fill up portfolio gaps.

The Unichem acquisition has added branded portfolio comprising some

power brands besides achievement of long term synergy benefits. We

expect India sales to grow at ~10% CAGR in FY19-22E to | 4336 crore.

Volatility in export growth

Despite being a late entrant in the US market, the company has built a

healthy pipeline. Exclusivity (shared) launches, such as gCymbalta and

gAbilify in the past, have proven Torrent’s capabilities. To expand its

presence in non-oral segments like derma, injectable, oncology, it has

acquired Zyg Pharma and Bio-Pharm. The company also entered into a

number of collaborations. However, due to cGMP related issues in Indrad

and Dahej plants, we expect the US business growth to be muted in the near

term owing to delay in launches. We expect a ramp up in the Germany

business post the impact of serialisation and optical hygienic related

disturbances. Branded business in Brazil is likely to remain strong. However,

challenging macroeconomic factors and planned de-focus on tender

business are likely to impact near term growth. We expect Germany and

Brazil to grow at a CAGR of ~8% each in FY19-22E.

Valuation & Outlook

One–offs and a subdued US due to regulatory hurdles impacted revenues.

The overhang pertaining to two US focused plants notwithstanding, Torrent

continues to impress thanks to its robust margin profile, which can be

attributed to global portfolio that comprises ~60% branded generics. We

expect a further improvement in this matrix and product rationalisation to

further strengthen margins. The company’s portfolio is finely balanced

between India, Brazil, Germany and the US with Indian being the leader. With

consistent FCF generation and moderation in core capex, we expect the

leverage situation to improve substantially. However, the recent run up in

the stock price has left limited scope for further upsides. We maintain our

target price of | 2020 (22x of FY21E EPS of | 91.8).

Key Financial Summary

(|crore) FY19 FY20E FY21E FY22E CAGR FY19-22E (%)

Revenues 7776.0 7943.8 8862.7 9759.0 7.9

EBITDA 2087.0 2148.7 2503.4 2830.1 10.7

EBITDA margins (%) 26.8 27.0 28.2 29.0

Net Profit 828.4 949.1 1209.9 1554.0 23.3

EPS (|) 48.9 56.1 71.5 91.8

PE (x) 63.6 36.1 28.4 22.1

EV to EBITDA (x) 18.8 17.8 14.9 12.6

Price to book (x) 7.3 6.3 5.4 4.6

RoNW (%) 17.5 17.4 19.1 20.7

RoCE (%) 14.2 15.7 18.4 21.2

Source: ICICI Direct Research; Company

Particulars

Particular Amount

Market Capitalisation | 34304 crore

Debt (FY19) | 6038 crore

Cash (FY19) | 816 crore

EV | 39526 crore

52 week H/L (|) 2074/1452

Equity capital | 84.6 crore

Face value | 5

Key Highlights

One offs in India, Germany and

subdued US impact Q3

revenues. Margin improvement

continues

With consistent FCF generation

and moderation in core capex,

we expect leverage situation to

improve substantially

Recent run up in stock price

leaves limited scope for further

upside

Downgrade from BUY to HOLD

Research Analyst

Siddhant Khandekar

[email protected]

Mitesh Shah, CFA

[email protected]

Sudarshan Agarwal

[email protected]

ICICI Securities | Retail Research 2

ICICI Direct Research

Result Update | Torrent Pharmaceuticals

Exhibit 1: Variance Analysis

Q3FY20 Q3FY20E Q3FY19 Q2FY20 YoY (%) QoQ (%) Comments

Revenue 1,966.0 2,074.9 2,051.0 2,005.0 -4.1 -1.9

YoY decline mainly due to sharp fall in the US. Miss vis-à-vis I-direct

estimates mainly due to one-offs,which impacted domestic and

Germany growth

Raw Material Expenses 542.0 570.6 580.0 538.0 -6.6 0.7

Employee Expenses 354.0 365.2 368.0 358.0 -3.8 -1.1

Other Expenditure 530.0 565.0 542.0 568.0 -2.2 -6.7

EBITDA 540.0 574.1 561.0 541.0 -3.7 -0.2 Miss vis-à-vis I-direct estimates in sync with revenues

EBITDA (%) 27.5 27.7 27.4 27.0 11 bps 48 bps

Interest 111.0 116.0 133.0 116.0 -16.5 -4.3

Depreciation 163.0 163.0 156.0 163.0 4.5 0.0

Other Income 53.0 20.4 3.0 34.0 1,666.7 55.9 Includes hedging gain

PBT before EO & Forex 319.0 315.5 275.0 296.0 16.0 7.8

EO 0.0 0.0 0.0 0.0 0.0 0.0

PBT 319.0 315.5 275.0 296.0 16.0 7.8

Tax 68.0 59.9 29.0 52.0 134.5 30.8

PAT before MI 251.0 255.6 246.0 244.0 2.0 2.9

MI 0.0 0.0 0.0 0.0 0.0 0.0

Adjusted PAT 251.0 255.6 246.0 244.0 2.0 2.9 Delta vis-à-vis EBITDA mainly due to higher other income

Key Metrics

India 871.0 918.5 835.0 899.0 4.3 -3.1

Slow growth and miss vis-à-vis I-direct estimates mainly due to one-

off pertaining to integration of stockists of Torrent and Unichem and

the base impact of discontinued products

Brazil 189.0 168.0 168.0 156.0 12.5 21.2

YoY growth and beat vis-à-vis I-direct estimates mainly due to

market share gains in existing branded and generic-generic segment

US 381.0 371.7 490.0 380.0 -22.2 0.3 YoY decline due to regulatory concerns and high base of Sartan

Germany 219.0 264.3 267.0 250.0 -18.0 -12.4YoY decline and miss vis-à-vis I-direct estimates mainly due to

optical hygienic related measures undertaken

Source: ICICI Direct Research

Exhibit 2: Change in Estimates

(| Crore) Old New % Change Old New % Change

Revenue 8,184.2 7,943.8 -2.9 9,006.8 8,862.7 -1.6

EBITDA 2,225.5 2,148.7 -3.5 2,544.5 2,503.4 -1.6

EBITDA Margin (%) 27.2 27.0 -15 bps 28.3 28.2 -5 bps

PAT 940.6 949.1 0.9 1,252.3 1,209.9 -3.4

EPS (|) 55.6 56.1 0.9 74.0 71.5 -3.4

FY20E FY21E


Exhibit 3: Change in Estimates

Current Comments

(| crore) FY18 FY19 FY20E FY21E FY20E FY21E

India 2,351.0 3,235.0 3,456.4 3,871.2 3,533.4 3,957.4

Brazil 709.5 689.0 734.3 793.0 721.7 757.7 Changed mainly due to better-than-expected growth in Q3FY20

US 1,099.7 1,590.0 1,512.8 1,492.2 1,536.5 1,547.4

Germany 912.3 1,008.0 950.9 1,144.0 1,046.7 1,172.3 Changed mainly due to operational issues in Q3FY20

Earlier





Conference Call Highlights

Indian growth was driven by price hike: 8%, volume growth: 1.8%,

and new introductions – 2% as per AIOCD. Defocus on certain

brands from the Unichem portfolio has impacted domestic sales in

Q3FY20. Going forward, focus brands should negate this impact as

per management, normalising from Q1FY21

Going forward, Indian growth is likely to recover, driven by volume

growth tracking recent launches such as Ticagrelor (CVS),

Vildagliptin (anti-diabetic) and Remoglifitzain (anti-diabetic-

Glenmark deal)

The company has reduced MRs in India by 200 in a rationalisation

exercise, positively impacting employee expenditure. For 9MFY20,

PCPM was at | 7.2 lakh with MR strength of ~4000. The company

expects 70-100 bps improvement in margins, going forward, taking

into account that 60% of business is branded generics

Germany revenues declined 18% YoY, due to supply/backlog issues

at its warehouse. The company has hired additional personnel and

implemented new SOPs to tackle the same. It expects the impact to

normalise by end of FY20

As per the management, Brazil business is expected to continue its

double digit growth trend as primary sales will catch up with internal

growth

The company has maintained its cautious stance on Sartans in the

US by slow ramp-up of the product and is implementing a wait and

watch strategy awaiting clarity from USFDA

The company expects the Dahej facility to be up for re-inspection by

mid CY2020, with other facilities likely being ready for the same by

end CY20. As per management, issues at Leviton and Indrad

facilities are likely to be resolved within 15-18 months from the date

of issue of warning letter in October 2019

In Q3FY20, the company filed three ANDAs. Torrent has 45 ANDA

approvals pending and six ANDAs with tentative approval. It expects

to file 15-20 ANDAs and receive single digit approvals until CY20-

end

The company expects single digit US launches in FY21 and some

derma product launches from the Pithampur facility

The company has guided FY21 capital expenditure to be around

| 300 crore mostly comprising maintenance capex

Net debt reduction of | 900-1000 crore for FY20 is on track. The

company expects to achieve its goal of bringing down the net D/E

to ~1.8 by March 31, 2020

The management has maintained 72-73% gross margins guidance

The company expects tax rate for FY21 at 23-24%

Increase in other income in Q3FY20 was due to hedging gains

Q3FY20 R&D expenses were lower due to efficiency and delay in

some projects. The management has guided for 7% R&D spend in

FY21




Exhibit 4: Quarterly Performance

| Crore Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 YoY (%) QoQ (%)

Net Sales 1413.0 1381.0 1348.0 1401.0 1448.0 1680.0 1834.0 1858.0 1948.0 1822.0 1976.0 1968.0 1924.0 -1.2 -2.2

OOI 30.0 53.0 26.0 28.0 29.0 42.0 38.0 36.0 103.0 34.0 46.0 37.0 42.0 -59.2 13.5

Revenues 1443.0 1434.0 1374.0 1429.0 1477.0 1722.0 1872.0 1894.0 2051.0 1856.0 2022.0 2005.0 1966.0 -4.1 -1.9

Total RM cost 464.0 490.0 401.0 418.0 392.0 463.0 558.0 548.0 580.0 533.0 559.0 538.0 542.0 -6.6 0.7

RM cost % Revenues 32.2 34.2 29.2 29.3 26.5 26.9 29.8 28.9 28.3 28.7 27.6 26.8 27.6 -71 bps 74 bps

Gross Profit 979.0 944.0 973.0 1011.0 1085.0 1259.0 1314.0 1346.0 1471.0 1323.0 1463.0 1467.0 1424.0 -3.2 -2.9

GPM (%) 67.8 65.8 70.8 70.7 73.5 73.1 70.2 71.1 71.7 71.3 72.4 73.2 72.4 71 bps -74 bps

Employee cost 233.0 249.0 263.0 283.0 272.0 317.0 346.0 343.0 368.0 347.0 381.0 358.0 354.0 -3.8 -1.1

% sales 16.1 17.4 19.1 19.8 18.4 18.4 18.5 18.1 17.9 18.7 18.8 17.9 18.0 6 bps 15 bps

Other expenditure 430.0 400.0 413.0 399.0 454.0 578.0 491.0 530.0 542.0 503.0 541.0 568.0 530.0 -2.2 -6.7

% of sales 29.8 27.9 30.1 27.9 30.7 33.6 26.2 28.0 26.4 27.1 26.8 28.3 27.0 53 bps -137 bps

Total Expenditure 1127.0 1139.0 1077.0 1100.0 1118.0 1358.0 1395.0 1421.0 1490.0 1383.0 1481.0 1464.0 1426.0 -4.3 -2.6

% of Revenues 78.1 79.4 78.4 77.0 75.7 78.9 74.5 75.0 72.6 74.5 73.2 73.0 72.5 -11 bps -48 bps

EBITDA 316.0 295.0 297.0 329.0 359.0 364.0 477.0 473.0 561.0 473.0 541.0 541.0 540.0 -3.7 -0.2

EBITDA Margins (%) 21.9 20.6 21.6 23.0 24.3 21.1 25.5 25.0 27.4 25.5 26.8 27.0 27.5 11 bps 48 bps

Depreciation 73.0 97.0 80.0 84.0 94.0 151.0 150.0 152.0 156.0 160.0 160.0 163.0 163.0 4.5 0.0

Interest cost 48.0 58.0 56.0 51.0 80.0 121.0 122.0 126.0 133.0 123.0 122.0 116.0 111.0 -16.5 -4.3

Other Income 50.0 104.0 105.0 78.0 74.0 42.0 27.0 10.0 3.0 17.0 20.0 34.0 53.0 1666.7 55.9

PBT before forex & EO 245.0 244.0 266.0 272.0 259.0 134.0 232.0 205.0 275.0 207.0 279.0 296.0 319.0 16.0 7.8

Forex & EO 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -357.0 0.0 0.0 0.0

PBT 245.0 244.0 266.0 272.0 259.0 134.0 232.0 205.0 275.0 -150.0 279.0 296.0 319.0 16.0 7.8

Tax 16.0 38.0 78.0 68.0 201.0 -94.0 69.0 26.0 29.0 2.0 63.0 52.0 68.0 134.5 30.8

Tax rate (%) 6.5 15.6 29.3 25.0 77.6 -70.1 29.7 12.7 10.5 -1.3 22.6 17.6 21.3

PAT 229.0 206.0 188.0 204.0 58.0 228.0 163.0 179.0 246.0 -152.0 216.0 244.0 251.0 2.0 2.9

PAT after MI 229.0 206.0 188.0 204.0 58.0 228.0 163.0 179.0 246.0 -152.0 216.0 244.0 251.0 2.0 2.9

EPS (|) 13.5 12.2 11.1 12.1 3.4 13.5 9.6 10.6 14.5 -9.0 12.8 14.4 14.8

Source: ICICI Direct Research, Company




Company Background

Incorporated in 1959, the company is a mid-sized generic player with a

strong presence in domestic and semi-regulated markets and a growing

presence in regulated markets. It is also present in the Indian CRAMS space

via supply agreement with Danish pharma major Novo Nordisk for the

latter’s insulin business in India. Also, there are chronic therapies like

cardiovascular, neurology and diabetology along with women's healthcare

and pain management post acquisition of Elder’s selected domestic

portfolio. In FY14, the company acquired Elder Pharma's domestic portfolio

of 30 brands mainly in the women's healthcare, pain management and

neutraceuticals business.

Elder’s premium calcium supplement brand Shelcal had a market share of

~30%. Torrent acquired two brands from Novartis in Q1FY18, which further

strengthens its domestic gynaecology portfolio.

The company acquired Unichem’s branded business of India and Nepal for

a consideration of | 3,600 crore. Unichem's India business comprises a

portfolio of more than 120 brands in India and Nepal, a manufacturing plant

at Sikkim catering to these markets and all the employees engaged in the

said business. The transaction is on a going concern basis by way of a slump

sale. Unichem India business sales were ~| 840 crore in FY17. Torrent will

fund the acquisition through a mix of internal accruals and borrowings. The

deal is expected to close by end of 2017. More than 3,000 employees will

get added to Torrent's employee pool. As per IMS MAT, with this deal

Torrent’s domestic market share will increase to 3.4% from current 2.4%

making it the fifth largest drug maker in India. Unichem’s top brands include

Losar, Unienzyme, Ampoxin, Telsar and Vizylac.

The company has a significant presence in the exports market in countries

like Brazil, Germany and lately in the US, among others. Despite being a late

entrant in the US, the company’s US revenue increased to ~US$200 million

in FY17 from just ~US$23 million in FY11 mainly due to limited competition

products such as gAbilify (Aripiprazole, CNS) in FY16 and gCymbalta

(duloxetine; anti-depression) in FY14. Post acquisition of Zyg Pharma (from

Mumbai based Encore Group), the company has also started filings in niche

dermatological segment in the US. Chronic focus, financial discipline,

successful M&A/deal making track record, higher return ratios and higher

dividend payouts are some of the USPs of Torrent Pharma.




Exhibit 5: Revenues to grow at CAGR of 8% over FY19-22E


Exhibit 6: India to grow at CAGR of 10% over FY19-22E


Exhibit 7: US to remain flat over FY19-22E


Exhibit 8: EBITDA & margins trend


Exhibit 9: Net profit & margins trend


Exhibit 10: RoE & RoCE trend


Exhibit 11: Revenue break-up

| crore FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E CAGR FY15-19 (%) CAGR FY19-22E (%)

India 1617.0 1829.0 1976.0 2351.0 3235.0 3456.4 3871.2 4335.7 18.9 10.3

CRAMs (Incl Others) 339.0 600.0 545.0 408.0 467.0 480.1 528.1 580.9 8.3 7.5

US 831.7 2672.0 1347.0 1099.7 1590.0 1512.8 1492.2 1566.8 17.6 -0.5

Others 492.5 425.1 487.6 522.0 684.0 766.8 843.5 927.8 8.6 10.7

Germany 749.6 647.9 811.0 912.3 1008.0 950.9 1144.0 1281.3 7.7 8.3

Brazil 605.6 506.0 699.0 709.5 689.0 734.3 793.0 856.4 3.3 7.5


4,653.0

6,686.9

5,856.9 6,002.1

7,776.0 7,943.8

8,862.7

9,759.0

0

2,000

4,000

6,000

8,000

10,000

12,000

FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E

(|

crore)

Revenue

CAGR 13.7%

CAGR 7.9%

1,617.01,829.0

1,976.0

2,351.0

3,235.03,456.4

3,871.2

4,335.7

0

1,000

2,000

3,000

4,000

5,000


(|

crore)

India

CAGR 18.9%

CAGR 10.3%

831.7

2,672.0

1,347.0

1,099.7

1,590.01,512.8 1,492.2

1,566.8

0

500

1,000

1,500

2,000

2,500

3,000


(|

crore)

US

CAGR% 17.6

CAGR -0.5%

1,020.0

2,733.0

1,377.31,349.3

2,087.02,148.7

2,503.4

2,830.1

21.9

40.9

23.5 22.5

26.8 27.0

28.2

29.0

10

15

20

25

30

35

40

45

0

500

1,000

1,500

2,000

2,500

3,000


(%

)

(|

crore)

EBITDA EBITDA margins (%)

750.9

1,733.3

933.6

678.1

539.0

949.1

1,209.9

1,554.0

750.9

1,733.3

933.6

678.1

539.0

949.1

1,209.91,554.0

10

210

410

610

810

1,010

1,210

1,410

1,610

1,810

2,010

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000


(%

)

(|

crore)

Net Profit Net Profit

30.2

53.7

21.5

14.717.5 17.4

19.1

20.7

21.3

46.5

18.9

11.2

14.2

15.7

18.4

21.2

0.0

10.0

20.0

30.0

40.0

50.0

60.0


RoE (%) ROCE (%)




Exhibit 12: One-year forward PE of company vs. NSE 500 Index

Source: ICICI Direct Research, Bloomberg

Exhibit 13: Financial Summary

Revenues Growth Adj. EPS Growth P/E EV/EBITDA RoE RoCE

(| crore) (%) (|) (%) (x) (X) (%) (%)

FY19 7776 29.6 48.9 22.2 63.6 18.8 17.5 14.2

FY20E 7944 2.2 56.1 14.6 36.1 17.8 17.4 15.7

FY21E 8863 11.6 71.5 27.5 28.4 14.9 19.1 18.4

FY22E 9759 10.1 91.8 28.4 22.1 12.6 20.7 21.2


0.00

9.00

18.00

27.00

36.00

45.00

Jan-16

Jan-17

Jan-18

Jan-19

Jan-20

(x)

Torrent NSE 500

28% Premium




Exhibit 14: Recommendation history vs. Consensus

Source: ICICI Direct Research; Bloomberg

Exhibit 15: Top 10 Shareholders

Rank Investor Name Filing Date % O/S Position (m) Change

1 Torrent Pvt Ltd 30-Jun-19 71.3 120.56m 0.0m

2 HDFC Asset Management Co Ltd 30-Jun-19 2.5 4.19m (0.2)m

3 UTI Asset Management Co Ltd 30-Nov-19 1.6 2.67m (0.0)m

4 Mirae Asset Focused 30-Jun-19 1.5 2.56m 2.6m

5 Mirae Asset Global Investments Co 31-Dec-19 1.4 2.35m (0.1)m

6 HDFC Life Insurance Co Ltd 30-Jun-19 1.3 2.12m 0.4m

7 Pictet Funds SA 30-Sep-19 0.9 1.48m 0.0m

8 Vanguard Group Inc 31-Dec-19 0.9 1.43m 0.0m

9 SBI Funds Management Pvt Ltd 31-Dec-19 0.8 1.42m (0.1)m

10 T Rowe Price Group Inc 31-Dec-19 0.8 1.36m 0.0m


Exhibit 16: Shareholding Pattern

(in %) Dec-18 Mar-19 Jun-19 Sep-19 Dec-19

Promoter 71.3 71.3 71.3 71.3 71.3

Others 28.8 28.8 28.8 28.8 28.8


0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

0

500

1,000

1,500

2,000

2,500

Jan-20

Dec-19

Nov-19

Oct-19

Sep-19

Aug-19

Jul-19

Jul-19

Jun-19

May-19

Apr-19

Mar-19

Feb-19

Jan-19

Dec-18

Nov-18

Oct-18

Sep-18

Aug-18

Jul-18

Jun-18

May-18

Apr-18

Mar-18

Feb-18

Jan-18

Dec-17

Nov-17

Oct-17

Sep-17

Aug-17

Jul-17

Jun-17

May-17

Apr-17

Mar-17

Feb-17

Jan-17

(%

)(|

)

Price Idirect target Consensus Target Mean % Consensus with BUY




Financial Summary

Exhibit 17: Profit & Loss (| crore)

(Year-end March) FY19 FY20E FY21E FY22E

Revenues 7,776.0 7,943.8 8,862.7 9,759.0

Growth (%) 29.6 2.2 11.6 10.1

Raw Material Expenses 2219.0 2175.5 2437.2 2683.7

Employee Expenses 1404.0 1444.1 1573.4 1707.8

Other Expenses 2066.0 2175.5 2348.6 2537.3

Total Operating Expenditure 5689.0 5795.1 6359.2 6928.9

EBITDA 2,087.0 2,148.7 2,503.4 2,830.1

Growth (%) 54.7 3.0 16.5 13.0

Depreciation 618.0 649.0 663.0 682.5

Interest 504.0 460.0 355.9 269.9

Other Income 57.0 159.6 86.7 114.6

PBT 1022.0 1199.3 1571.2 1992.3

Total Tax 126.0 250.2 361.4 438.3

PAT before MI 539.0 949.1 1209.9 1554.0

Adjusted PAT 828.4 949.1 1,209.9 1,554.0

Growth (%) 22.2 14.6 27.5 28.4

EPS (Adjusted) 48.9 56.1 71.5 91.8


Exhibit 18: Cash Flow Statement (| crore)


Profit/(Loss) after taxation 280.5 949.1 1209.9 1554.0

Depreciation 617.7 649.0 663.0 682.5

Add: Interest Paid 503.7 460.0 355.9 269.9

Other operational Activities 396.2 -143.8 -110.6 -56.1

CF from operation 1,798.1 1,914.4 2,118.2 2,450.3

Purchase/sales of Fixed Assets -660.5 -300.0 -300.0 -300.0

(Inc)/Dec in Investments 75.9 0.0 0.0 0.0

Long Term Provision 0.0 28.9 31.7 34.9

Other Investing Activities 49.8 -68.7 -75.5 -83.1

CFfrom Investing Activities -534.9 -339.8 -343.8 -348.2

Inc / (Dec) in Equity Capital 0.0 0.0 0.0 0.0

Inc / (Dec) in Loan Funds -501.3 -900.0 -1000.0 -1000.0

Dividend and dividend tax -309.7 -234.3 -298.6 -383.6

Other Financing Activities -503.4 -460.0 -355.9 -269.9

CF from Financing Activities -1,314.5 -1,594.3 -1,654.5 -1,653.4

Cash generation during the year -51.2 -19.7 119.9 448.7

Op bal Cash & Cash equivalents 867.3 816.0 796.3 916.2

Adjustments 0.0 0.0 0.0 0.0

Closing Cash/ Cash Equivalent 816.0 796.3 916.2 1,364.9

Free Cash Flow 1,138 1,614.4 1,818.2 2,150.3


Exhibit 19: Balance Sheet (| crore)


Equity Capital 84.6 84.6 84.6 84.6

Reserve and Surplus 4,639.7 5,354.6 6,265.8 7,436.2

Total Shareholders funds 4,724.4 5,439.2 6,350.4 7,520.8

Total Debt 6,038.1 5,138.1 4,138.1 3,138.1

Deferred Tax Liability 7.5 8.3 9.1 10.0

Minority Interest 0.0 0.0 0.0 0.0

Other LT Liabitlies & LT Provision310.8 341.9 376.1 413.7

Total Liabilities 11,080.8 10,927.5 10,873.7 11,082.6

Gross Block - Fixed Assets 9,600.6 9,900.6 10,200.6 10,500.6

Accumulated Depreciation 2,187.7 2,836.7 3,499.8 4,182.3

Net Block 7,412.9 7,063.9 6,700.9 6,318.3

Capital WIP 617.1 617.1 617.1 617.1

Total Fixed Assets 8,030.0 7,681.0 7,318.0 6,935.5

Goodwill on Consolidation 334.8 334.8 334.8 334.8

Investments 353.4 353.4 353.4 353.4

Deferred tax assets 369.9 406.8 447.5 492.3

Other non-current assets 346.6 381.3 419.4 461.3

Cash 816.0 796.3 916.2 1,364.9

Debtors 1,435.7 1,476.0 1,645.8 1,812.2

Loans and Advances 3.8 4.9 6.0 7.1

Inventory 1,935.2 1,989.4 2,218.3 2,442.6

Other current assets 495.5 496.6 497.7 498.8

Total Current Assets 4,686.2 4,763.2 5,284.0 6,125.6

Creditors 2,096.7 2,155.5 2,403.5 2,646.6

Provisions & other current liability 943.4 837.6 879.9 973.7

Total Current Liabilities 3,040.1 2,993.1 3,283.4 3,620.3

Net Current Assets 1,646.1 1,770.1 2,000.6 2,505.3

Application of Funds 11,080.8 10,927.5 10,873.7 11,082.6


Exhibit 20: Key Ratios (| crore)


Per share data (|)

Reported EPS 31.8 56.1 71.5 91.8

BV per share 279.2 321.4 375.2 444.4

Dividend per share 18 14 18 23

Cash Per Share 48.2 47.1 54.1 80.6

Operating Ratios (%)

Gross Profit Margins 71.5 72.6 72.5 72.5

EBITDA Margins 26.8 27.0 28.2 29.0

PAT Margins 10.7 11.9 13.7 15.9

Inventory days 90.8 91.4 91.4 91.4

Debtor days 67.4 67.8 67.8 67.8

Creditor days 98.4 99.0 99.0 99.0

Asset Turnover 0.8 0.8 0.9 0.9

EBITDA conversion Rate 86.2 89.1 84.6 86.6

Return Ratios (%)

RoE 17.5 17.4 19.1 20.7

RoCE 14.2 15.7 18.4 21.2

RoIC 16.4 17.0 21.4 25.8

Valuation Ratios (x)

P/E 63.6 36.1 28.4 22.1

EV / EBITDA 18.8 17.8 14.9 12.6

EV / Net Sales 5.0 4.8 4.2 3.7

Market Cap / Sales 4.4 4.3 3.9 3.5

Price to Book Value 7.3 6.3 5.4 4.6

Solvency Ratios

Debt / EBITDA 2.9 2.4 1.7 1.1

Debt / Equity 1.3 0.9 0.7 0.4

Current Ratio 1.3 1.3 1.3 1.3





Exhibit 21: ICICI Direct Coverage Universe (Healthcare)

Company I-Direct CMP TP Rating M Cap

Code (|) (|) (| cr) FY19 FY20E FY21E FY22E FY19 FY20E FY21E FY22E FY19 FY20E FY21E FY22E FY19FY20EFY21EFY22E

Ajanta PharmaAJAPHA 1176 1,180 Buy 10263 43.5 43.5 52.3 64.4 27.0 27.0 22.5 18.3 21.8 21.8 20.8 21.9 17.1 17.1 16.0 17.2

Alembic PharmaALEMPHA 615 620 Hold 11586 31.4 31.4 26.6 31.0 19.5 19.5 23.1 19.8 19.6 19.6 13.4 14.9 21.8 21.8 13.3 13.8

Apollo HospitalsAPOHOS 1696 1,800 Buy 23596 17.0 17.0 43.7 68.1 100.0 100.0 38.8 24.9 8.8 8.8 14.8 17.5 7.1 7.1 14.9 19.6

Aurobindo PharmaAURPHA 511 475 Hold 29941 42.1 42.1 55.4 59.5 12.1 12.1 9.2 8.6 15.9 15.9 15.7 16.1 17.7 17.7 16.7 15.4

Biocon BIOCON 290 310 Hold 34812 6.2 6.2 10.3 15.7 46.7 46.7 28.1 18.5 10.9 10.9 15.1 19.4 12.2 12.2 14.7 18.6

Cadila HealthcareCADHEA 273 260 Hold 27984 18.1 18.1 16.6 18.7 15.1 15.1 16.5 14.6 13.0 13.0 11.7 12.4 17.8 17.8 13.5 13.6

Cipla CIPLA 464 520 Hold 37445 18.6 18.6 25.3 30.0 25.0 25.0 18.4 15.5 10.9 10.9 13.6 14.8 10.0 10.0 11.2 11.9

Divi's Lab DIVLAB 1918 1,850 Hold 50926 51.0 51.0 59.1 71.2 37.6 37.6 32.5 26.9 25.5 25.5 22.1 22.8 19.4 19.4 17.0 17.6

Dr Reddy's LabsDRREDD 3189 3,000 Hold 52968 114.8 114.8 140.0 166.7 27.8 27.8 22.8 19.1 11.1 11.1 13.9 16.9 13.6 13.6 12.7 13.5

Glenmark PharmaGLEPHA 356 410 Hold 10049 26.9 26.9 36.7 46.1 13.2 13.2 9.7 7.7 15.3 15.3 15.0 17.0 13.5 13.5 14.0 15.1

Hikal HIKCHE 130 140 Buy 1255 6.3 8.4 9.7 11.7 20.8 15.6 13.4 11.2 12.2 14.3 13.0 14.2 11.5 13.6 14.2 14.8

Ipca LaboratoriesIPCLAB 1232 1,355 Buy 15562 35.1 35.1 60.7 75.3 35.1 35.1 20.3 16.4 15.0 15.0 19.9 21.2 14.2 14.2 18.0 18.9

Indoco remediesINDREM 226 240 Hold 2082 -0.3 3.0 8.4 15.1 -718.0 76.5 26.9 14.9 1.0 4.6 9.3 15.3 -0.4 4.0 10.1 15.4

Lupin LUPIN 758 810 Hold 34330 16.5 16.5 35.0 37.1 45.8 45.8 21.7 20.4 9.4 9.4 9.9 12.1 5.4 5.4 8.4 8.3

Narayana HrudalayaNARHRU 354 360 Buy 7244 2.9 2.9 9.8 13.3 122.1 122.1 36.3 26.6 7.7 7.7 13.9 16.5 5.5 5.5 14.5 16.7

Natco PharmaNATPHA 655 595 Hold 11905 34.9 34.9 23.7 22.0 18.7 18.7 27.6 29.7 21.3 21.3 12.2 10.5 18.5 18.5 10.0 8.6

Sun Pharma SUNPHA 448 470 Hold 107584 15.9 15.9 20.2 24.7 28.3 28.3 22.2 18.1 10.3 10.3 11.3 12.5 9.2 9.2 9.9 11.3

Syngene Int. SYNINT 311 360 Buy 12428 8.3 8.3 9.6 12.0 37.0 37.0 31.7 25.6 14.8 14.8 13.1 15.1 16.8 16.8 14.1 14.9

Torrent PharmaTORPHA 2027 2,020 Hold 34304 48.9 48.9 71.5 91.8 41.4 41.4 28.4 22.1 14.2 14.2 18.4 21.2 17.5 17.5 19.1 20.7

RoE (%)EPS (|) PE(x) RoCE (%)





RATING RATIONALE

ICICI Direct endeavours to provide objective opinions and recommendations. ICICI Direct assigns ratings to its

stocks according to their notional target price vs. current market price and then categorises them as Buy, Hold,

Reduce and Sell. The performance horizon is two years unless specified and the notional target price is defined as

the analysts' valuation for a stock

Buy: >15%;

Hold: -5% to 15%;

Reduce: -5% to -15%;

Sell: <-15%

Pankaj Pandey Head – Research [email protected]

ICICI Direct Research Desk,

ICICI Securities Limited,

1st Floor, Akruti Trade Centre,

Road No 7, MIDC,

Andheri (East)

Mumbai – 400 093

[email protected]




ANALYST CERTIFICATION

We /I, Siddhant Khandekar, Inter CA, Mitesh Shah, CFA, Sudarshan Agarwal, PGDM(Finance), 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. It is also confirmed that above mentioned Analysts of this report have not received any compensation from the companies mentioned

in the report in the preceding twelve months and do not serve as an officer, director or employee of the companies mentioned in the 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 Limited SEBI Registration is INZ000183631 for stock broker. ICICI

Securities is a 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.

Recommendation in reports based on technical and derivative analysis centre on studying charts of a stock's price movement, outstanding positions, trading volume etc as opposed to focusing

on a company's fundamentals and, as such, may not match with the recommendation in fundamental reports. Investors may visit icicidirect.com to view the Fundamental and Technical

Research Reports.

Our proprietary trading and investment businesses may make investment decisions that are inconsistent with the recommendations expressed herein.

ICICI Securities Limited has two independent equity research groups: Institutional Research and Retail Research. This report has been prepared by the Retail Research. The views and opinions

expressed in this document may or may not match or may be contrary with the views, estimates, rating, target price of the Institutional Research.

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 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.

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.

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.

torrent pharmaceuticalsjanuary 28,...

Documents