unichem laboratories (unilab) - icici...

January 24, 2017

ICICI Securities Ltd | Retail Equity Research

Result Update

Exports drive growth; margins still below par • Revenues grew 17.5% YoY to | 360 crore (I-direct estimate: | 361

crore) mainly on account of 31.5% growth in export sales to | 123 crore (I-direct estimate: | 115 crore). Domestic revenues grew 7.8% YoY to | 204 crore (I-direct estimate: | 217 crore)

• EBITDA margins improved 121 bps YoY to 12.3% (I-direct estimate: 12.5%) mainly due to lower other expenditure. EBITDA increased 30% YoY to | 44 crore in line with I-direct estimate of | 45 crore

• Net profit increased 15% YoY to | 26 crore lower than I-direct estimate of | 31 crore mainly due to higher-than-expected taxation and lower other income

Domestic formulations crawling back to normal post NLEM, realignment Domestic formulations, which constitute ~56% of total revenues, are at the core of the overall performance. The acute: chronic: sub-chronic ratio for the company was 46:51:3. Despite having higher proportion of chronic therapies, the core business has grown at a CAGR of just ~10% in FY10-16. This was on account of 1) restructuring exercise & inventory rationalisation, 2) NLEM implementation and the resulting channel disturbances in FY13, FY14. The situation is likely to change, going ahead, as the company plans to convert from a distribution-driven model to C&F driven model for better working capital management. It plans to realign its portfolio to minimise losses on account of NLEM by rationalising the MR team and pushing for more non-NLEM products (~13% of domestic portfolio is currently under NLEM). However, it is taking much more time than earlier estimated. We expect branded formulations to grow at a CAGR of ~14% to | 1092 crore in FY16-19E. Formulation exports still evolving but growing Export formulations (~28% of total revenues) have grown at ~24% CAGR in FY12-16 on the back of significant investment in infrastructure to push exports. New product launches in US and a ramp-up in CRAMS for US, EU based customers have contributed to growth. CRAMS business, of late, has struggled though, with customers postponing or cancelling requirements. For the rest of exports, the company is looking for US generics traction. It has filed 38 ANDAs with USFDA and received approval for 21. We expect formulation exports to grow at a CAGR of 25% in FY16-19E to | 711 crore on the back of incremental US launches. Despite revenue traction, optimum operating leverage still wanting The 9MFY17 demonstrated strong revenue growth on a robust export performance and recovery in domestic formulation growth. On the domestic formulations front, the company seems to have overcome sticky issues of NLEM, FDCs. This was on the heels of ~15% growth in FY16. However, in Q3, domestic growth was impacted by demonetisation. The management’s focus on restructuring the matured portfolio, which comprises legacy but slow moving brands, seems to be working. Also, foray in OTC segment (Unienzyme) in the domestic market augurs well to grow in the non-prescription space. Export formulations are likely to maintain the growth tempo mainly on the back of incremental US launches. However, EBITDA margin constraints continue due to 1) manpower addition at Goa plant 2) increase in R&D 3) foray in domestic OTC and 4) high cost base in the US. We continue to monitor the margin scenario. We believe this could be the main trigger for valuation. Our new target price is | 285 (12x FY19E EPS of | 18.9). We maintain HOLD.

Rating matrix Rating : HoldTarget : | 285Target Period : 12-15 monthsPotential Upside : 3%

What’s Changed? Target Changed from | 305 to | 285EPS FY17E Changed from | 15 to | 13.2EPS FY18E Changed from | 18.9 to | 17.5EPS FY19E Changed from | 25.4 to | 23.7Rating Unchanged

Quarterly Performance

Q3FY17 Q3FY16 YoY (%) Q2FY17 QoQ (%)Revenue 359.9 306.3 17.5 368.0 -2.2EBITDA 44.4 34.1 30.3 39.6 12.2EBITDA (%) 12.3 11.1 121 bps 10.8 159 bpsAdj. Net Profit 26.1 22.7 15.1 20.5 27.2

Key Financials (| crore) FY16 FY17E FY18E FY19ERevenues 1334.6 1551.3 1799.5 2097.4EBITDA 163.9 195.1 242.9 314.6Adj. Net Profit 111.6 119.4 158.7 214.9Adj. EPS (|) 12.3 13.2 17.5 23.7

Valuation summary

FY16 FY17E FY18E FY19EPE (x) 23.2 20.9 15.8 11.6Target PE (x) 23.2 21.6 16.3 12.0EV to EBITDA (x) 15.3 12.9 10.4 7.7Price to book (x) 2.6 2.4 2.1 1.8RoNW (%) 11.7 11.3 13.3 15.6RoCE (%) 13.8 14.5 16.2 18.9

Stock data ParticularMarket CapitalisationDebt (FY16)Cash (FY16)EV52 week H/L (|) 320/189Equity capitalFace value | 2

| 18.2 crore

| 2536 crore

Amount| 2507 crore

| 36 crore| 6 crore

Price performance (%)

1M 3M 6M 1YUnichem Labs -7.7 -2.8 11.3 0.4Indoco Remedies -6.8 -8.0 11.2 -3.7Alembic Pharma -5.0 -0.1 9.8 -4.8

Research Analyst

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

Unichem Laboratories (UNILAB) | 276


mpany Analysis

Established in 1944, the company has five subsidiaries and one associate company. It remained confined to selected therapeutic groups such as Anti-hypertensives, Anti-infectves, Neurology, Gastrointerology etc. with some legacy products Losar, Telsar and Trika. Despite having higher proportion of chronic therapies in domestic market, slow growth in domestic Pharma over past five years was mainly due to restructuring and NLEM impact. However, as per the management, the situation is likely to change going ahead as the company has converted majority of its domestic business from distribution-driven model to C&F driven model for better working capital management. Also, It focus on restructuring the matured portfolio which accounts for 46% of the overall pie and comprises of legacy but slow moving brands started providing traction. Export business is largely driven by the US followed by Europe and Brazil. Despite being in the business for a long period, the company is yet to achieve the kind of scalability achieved by other Indian peers with similar pedigree given the infrastructure it owns i.e. four formulation plants (two USFDA, UKMHRA approved) with no critical observations from USFDA and two USFDA approved API plants. However, US sales have started giving tractions, which increased more six fold to US$ 33 million from 12-16 mainly due to enhanced USFDA approvals and improvement in product pipeline. Emerging traction especially from the US is likely to neutralize the self-inflicted pains in the domestic formulations. Overall we expect revenues to grow at a CAGR of 17.1% in FY16-FY19E to | 2141.9 crore.

Variance analysis Q3FY17 Q3FY17E Q3FY16 Q2FY17 YoY (%) QoQ (%) Comments

Revenue 359.9 361.3 306.3 368.0 17.5 -2.2 YoY growth was mainly driven by 31.5% YoY growth in export formulations

Raw Material Expenses 129.4 132.6 108.4 135.8 19.5 -4.7Employee Expenses 70.8 67.8 58.9 69.0 20.1 2.5 YoY increase was mainly due to addition of manpower at Goa plant

Other Expenditure 115.3 115.6 104.9 123.7 10.0 -6.8 Sequential decline was mainly due to lower marketing spend in Unienzyme OTC

EBITDA 44.4 45.3 34.1 39.6 30.3 12.2EBITDA (%) 12.3 12.5 11.1 10.8 121 bps 159 bps YoY growth was mainly due to lower other expenditureInterest 0.5 0.6 0.4 0.6 3.8 -25.8Depreciation 10.4 10.5 8.7 10.5 19.7 -0.4Other Income 4.1 5.3 4.6 3.5 -9.9 18.8PBT before Exceptional Items 37.6 39.6 29.5 32.0 27.5 17.8EO 0.0 0.0 2.8 0.0 0.0 0.0PBT after Exceptional Items 37.6 39.6 26.7 32.0 40.8 17.8Tax 11.5 8.7 6.2 11.4 86.1 0.9 Increased mainly due to higher deferred tax. Normalised tax rate was ~21%

Effective Tax Rate (%) 30.7 22.0 23.2 35.8 32.2 -14.4Adj. Net Profit 26.1 30.9 22.7 20.5 15.1 27.2 Lower YoY growth vis-à-vis EBITDA growth was largely due to higher taxation and

lower other incomeEPS (|) 2.9 3.4 2.3 2.3 27.4 27.2Key MetricsDomestic formulations 203.6 217.3 188.9 227.0 7.8 -10.3 Lower than I-direct estimates mainly due to de-stocking of inventories by

distributors owing to demonetisation

Exports formulations 123.3 114.7 93.8 113.4 31.5 8.8 In constant currency terms, US, UK and Brazil revenue increased 16%, 41% and -9% to US$10.3 million, £2.5 million and Real 0.5 million, respectively

APIs 25.3 22.3 21.2 24.5 19.4 3.2

Source: Company, ICICIdirect.com Research Change in estimates

(| Crore) Old New % Change Old New % Change CommentsRevenue 1,579.1 1,551.3 -1.8 1,847.8 1,799.5 -2.6EBITDA 205.9 195.1 -5.3 258.7 242.9 -6.1EBITDA Margin (%) 13.0 12.6 -43 bps 14.0 13.5 -50 bps Trimmed down margins mainly due to higher-than-expected overhead expenses

PAT 135.6 119.4 -11.9 171.1 158.7 -7.3 Changed mainly to lower operational performance and higher taxationEPS (|) 15.0 13.2 -12.1 18.9 17.5 -7.4

FY17E FY18E

Source: Company, ICICIdirect.com Research Assumptions

(| crore) FY15 FY16 FY17E FY18E FY17E FY18EDomestic formulations 651.0 745.6 840.5 958.2 868.4 989.9Exports formulations 312.8 368.1 462.4 571.3 466.2 590.3

APIs 113.1 94.0 91.8 96.4 88.8 93.2

Current Earlier

Source: Company, ICICIdirect.com Research


Company Analysis Established in 1944, the company has five subsidiaries and one associate company. It remained confined to selected therapeutic groups such as anti-hypertensives, anti-infectives, neurology, gastroenterology, etc. with some legacy products Losar, Telsar and Trika. Despite having higher proportion of chronic therapies in the domestic market, slow growth in domestic pharma over the past five years was mainly due to restructuring and NLEM impact. However, as per the management, the situation is likely to change, going ahead, as the company has converted a majority of its domestic business from distribution-driven model to clearing and forwarding (C&F) driven model for better working capital management. Also, its focus on restructuring the matured portfolio, which accounts for 46% of the overall pie and comprises legacy but slow moving brands, started providing traction. The export business is largely driven by the US followed by Europe and Brazil. Despite being in the business for a long time, the company is yet to achieve the kind of scalability achieved by other Indian peers with similar pedigree given the infrastructure it owns i.e. four formulation plants (two USFDA, UKMHRA approved) with no critical observations from USFDA and two USFDA approved API plants. However, US sales have started showing traction, which increased more than six-fold to US$33 million from FY12-16 mainly due to enhanced USFDA approvals and improvement in product pipeline. Emerging traction, especially from the US, is likely to neutralise the self-inflicted pain in domestic formulations. Overall, we expect revenues to grow at a CAGR of 16.3% in FY16-19E to | 2097 crore. Exhibit 1: Revenue growth to be driven by traction from formulation exports

875.51080.8 1133.4 1201.8

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Domestic formulations - The company is ranked 29th in IPM with a market share of 0.90%. Domestic formulations constitute ~56% of the standalone turnover. The acute: chronic: sub-chronic ratio for the company is 46:51:3. Despite having a higher proportion of chronic therapies, the core business have grown at a CAGR of 10.2% in FY12-16 on account of 1) restructuring exercise and inventory rationalisation and 2) NLEM implementation and the resulting channel disturbances in FY13, FY14. The situation is likely to change, going ahead, as the company plans to convert from a distribution-driven model to C&F driven model for better working capital management. It plans to realign its portfolio to minimise losses on account of NLEM by strengthening the MR team and pushing for more non-NLEM products (~13% of domestic portfolio is under NLEM). However, it is taking much more time than earlier estimated. We expect branded formulations to grow at 13.6% CAGR to | 1092 crore in FY16-19E.

12.5% CAGR

16.3% CAGR


Formulation exports Export formulations (~28% of total revenue) have grown at a CAGR of 23.6% in FY12-16 on the back of significant investments in the infrastructure to push exports. New product launches in the US and a ramp-up in CRAMS for US and EU based customers have contributed to growth. CRAMS business, of late, has struggled though, with customers postponing or cancelling requirements. For the rest of exports, the company is looking at US generics traction. Unichem has filed 38 ANDAs with the USFDA and received approval for 21. It has, so far, launched 14 products. We expect formulation exports to grow at a CAGR of 24.5% in FY16-19E to | 711 crore on the back of incremental US launches. Exhibit 3: US to provide impetus for formulation exports growth

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Exhibit 2: Domestic formulation growth likely to improve, going ahead

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23.6% CAGR

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Exhibit 6: Adjusted net profit to grow at CAGR of 24.4% in FY16-19E

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Exhibit 4: API to grow at 2.5% CAGR in FY16-FY19E es

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Exhibit 5: EBITDA to grow at CAGR of 24.3% in FY16-19E es

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Exhibit 7: Trends in return ratios

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Exhibit 8: Trends in quarterly financials (| crore) Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 YoY (%) QoQ (%)Net Sales 263.0 237.5 288.5 274.9 262.9 250.6 304.5 303.5 303.9 292.1 334.9 364.9 352.3 15.9 -3.5Other Operating income 1.9 6.6 2.5 3.2 3.0 5.4 4.3 2.0 2.3 9.4 2.5 3.2 7.6 228.1 141.5Revenues 264.9 244.1 291.0 278.2 265.9 256.0 308.8 305.6 306.3 301.5 337.4 368.0 359.9 17.5 -2.2Raw Material Expenses 91.07 89.82 114.66 110.32 106.24 96.58 118.27 121.15 108.37 107.81 128.38 135.77 129.45 19.5 -4.7% to revenues 34.4 36.8 39.4 39.7 40.0 37.7 38.3 39.6 35.4 35.8 38.0 36.9 36.0 58 bps -93 bpsGross Profit 173.8 154.3 176.3 167.8 159.6 159.4 190.5 184.4 197.9 193.7 209.0 232.3 230.5 16.5 -0.8Gross Profit Margin (%) 65.6 63.2 60.6 60.3 60.0 62.3 61.7 60.4 64.6 64.2 62.0 63.1 64.0Employee Expenses 40.0 39.4 49.9 46.1 49.0 46.3 54.8 55.5 58.9 56.3 63.2 69.0 70.8 20.1 2.5% to revenues 15.1 16.1 17.2 16.6 18.4 18.1 17.7 18.2 19.2 18.7 18.7 18.8 19.7 42 bps 91 bpsOther Expenditure 85.8 83.2 82.7 88.3 102.1 98.3 96.4 94.4 104.9 106.2 106.1 123.7 115.3 10.0 -6.8% to revenues 32.4 34.1 28.4 31.7 38.4 38.4 31.2 30.9 34.2 35.2 31.5 33.6 32.0 -220 bps -157 bpsTotal Expenditure 216.8 212.4 247.3 244.8 257.4 241.2 269.5 271.1 272.2 270.3 297.7 328.5 315.5 15.9 -3.9% to revenues 81.8 87.0 85.0 88.0 96.8 94.2 87.3 88.7 88.9 89.6 88.2 89.2 87.7EBITDA 48.1 31.7 43.7 33.4 8.5 14.8 39.3 34.4 34.1 31.2 39.7 39.6 44.4 30.3 12.2EBITDA margins ( %) 18.2 13.0 15.0 12.0 3.2 5.8 12.7 11.3 11.1 10.4 11.8 10.8 12.3 121 bps 159 bpsOther Income 3.3 24.5 5.2 5.6 5.0 5.5 6.2 6.1 4.6 5.8 5.0 3.5 4.1 -9.9 18.8Interest 0.6 0.6 0.7 0.6 0.7 0.4 0.5 0.5 0.4 0.8 0.6 0.6 0.5 3.8 -25.8Depreciation 10.1 10.9 8.5 10.7 10.5 8.0 8.8 8.7 8.7 8.8 9.8 10.5 10.4 19.7 -0.4EO 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0PBT 40.7 44.7 39.6 27.6 2.3 11.9 36.2 31.3 29.5 27.4 34.4 32.0 37.6 27.5 17.8Total Tax 15.7 14.0 9.5 5.3 0.2 2.1 10.8 8.2 6.2 -0.7 13.2 11.4 11.5 86.1 0.9Tax rate (%) 38.5 31.4 23.8 19.3 9.1 17.7 29.8 26.2 21.0 -2.6 38.3 35.8 30.7PAT 25.0 30.6 30.2 22.3 2.1 9.8 25.4 23.1 23.3 28.1 21.2 20.5 26.1 11.9 27.2PAT Margin (%) 9.4 12.6 10.4 8.0 0.8 3.8 8.2 7.6 7.6 9.3 6.3 5.6 7.3EPS (|) 2.8 3.4 3.3 2.5 0.2 1.1 2.8 2.5 2.6 3.1 2.3 2.3 2.9 12.2 27.2



SWOT Analysis Strengths - Chronic focus, clean balance sheet, decent dividend payout ratio, availability of facilities to scale up operations. Weakness - One of the lowest MR productivity, matured domestic portfolio. US traction is still in a nascent state. Opportunities - The US generics space. Threats - Increased USFDA scrutiny across the globe regarding cGMP issues, pricing pressure due to client consolidation in the US, pricing probe by the Department of Justice (DoJ) in the US, proposed tightening by the new regime by adapting to the bidding process and imposition of border adjustment tax on imported drugs in the US. Increased competition in the domestic formulations space.


Conference Call Highlights

• Impact of demonetisation was felt in Q3FY17 on the domestic formulations front. Primarily, de-stocking of inventories was observed during the quarter which has now normalised. Overall growth was impacted by 7-7.5% as per the management

• Cumulative ANDA filing was at 38 of which, the company has launched 14 products and is awaiting approval for 17 ANDAs. The company also reported cumulative DMF filings of 47

• Unichem has got approval for one ANDA in Q3FY17. It plans to maintain a run-rate of one or two ANDA filings each quarter, going ahead

• NLEM portfolio grew 20.6% while non-NLEM portfolio grew 13.9% (AIOCD-AWACS).

• The company’s OTC product Unienzyme is marketed by Boehringer Ingelheim in India. Unichem has already incurred the testing expenditure for bringing its Unienzyme drug to the OTC market and is now reviewing the next leg of expenditure for increasing its sales growth trajectory

• The management is contemplating on pushing prescription drugs from other segments via OTC route

• Total ~13% of revenues in domestic formulations are under price control (~9% attributed to Telsar and Trika group). Losar group has come out of price control

• On the Goa plant expansion front, as per the management, the manufacturing capacity has been expanded. However, certain warehousing work is still pending, which will be completed in the current quarter or the next fiscal

• R&D spends in the quarter constituted ~4.5% of total sales • Guided for 25-28% tax rate including normalised tax rate of 21%

in FY17 • The company expects single digit price erosion in the US • The company expects 50-100 bps YoY EBITDA margins

improvement in FY17. The company expects FY18 domestic formulations growth to be higher than industry growth

Exhibit 9: Facilities Location Segment Regulatory Approvals TypeGoa Formulations USFDA, MCC-SA, UKMHRA, TGA-Aus,

ANVISA-Brazil, WHO GenevTablets, Capsules

Baddi Formulations WHO (Geneva), MCC-SA, UKMHRA Tablets, Capsules, Dry Syrup, Vials

Ghaziabad Formulations USFDA, UKMHRA, ANVISA-Brazil, WHO-Geneva

Tablets, Capsules, Injectables, Liquid Syrup

Sikkim Formulations Tablets, Capsules

Roha API ISO 9001 - 2000, WHO cGMP, TGA, USFDA, ISO 14001 - 2004, ISO 18001 – 1999, EDQM

Pithampur API USFDA , EUGMP, COFEPRIS

Ireland Formulations Irish Medical Board and Kazakhstan



Valuation The 9MFY17 demonstrated strong revenue growth on a robust export performance and recovery in domestic formulation growth. On the domestic formulations front, the company seems to have overcome sticky issues of NLEM, FDCs. This was on the heels of ~15% growth in FY16. However, in Q3, domestic growth was impacted by demonetisation. The management’s focus on restructuring the matured portfolio, which comprises legacy but slow moving brands, seems to be working. Also, foray in OTC segment (Unienzyme) in the domestic market augurs well to grow in the non-prescription space. Export formulations are likely to maintain the growth tempo mainly on the back of incremental US launches. However, EBITDA margin constraints continue due to 1) manpower addition at Goa plant 2) increase in R&D 3) foray in domestic OTC and 4) high cost base in the US. We continue to monitor the margin scenario. We believe this could be the main trigger for valuation. Our new target price is | 285 (12x FY19E EPS of | 18.9). We maintain HOLD. Exhibit 10: One year forward PE [

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

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Exhibit 12: Valuation Revenues Growth Adj. EPS Growth P/E EV/EBITDA RoNW RoCE

(| crore) (%) (|) (%) (x) (X) (%) (%)FY16 1334.6 11.0 12.3 43.3 23.1 15.3 11.7 13.8FY17E 1551.3 16.2 13.2 10.6 20.9 12.9 11.3 14.5FY18E 1799.5 16.0 17.5 32.9 15.8 10.4 13.3 16.2FY19E 2097.4 16.6 23.7 35.4 11.6 7.7 15.6 18.9



Recommendation history vs. Consensus

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Source: Reuters, Company, ICICIdirect.com Research Key events Date EventMay-09 Launches new divisions for nephrology and cardiology segments

Nov-09 Pithampur (Indore) API manufacturing facility receives USFDA approval

Feb-10 Ghaziabad formulation facility receives UK MHRA approval

May-10 Commissions manufacturing facilities at Baddi (oral dosages) and Sikkim (oral dosages)

Nov-10 Kick starts inventory rationalisation at the distributor level to improve internal process and reduce tax related issues for GST rollout

Sep-11 Finalises contract manufacturing businesses from Ghaziabad facility with two Europe customers

Dec-11 Completes inventory rationalisation at the distribution level

Feb-13 Mylan acquires Unichem’s Indore SEZ formulation facility for | 160 crore on a slump sales basis

Oct-13 Completes sale of Indore SEZ formulation facility

Jun-14 The European Commission imposes fines of | 324 crore to prevent entry of generic version of Perindopril in the EU

Apr-15 USFDA successfully inspects Ghaziabad and Goa facilities for formulations and Roha API facility

Feb-16 Goa and Ghaziabad plants receive establishment inspection report (EIR) from USFDA

Source: Company, ICICIdirect.com Research Top 10 Shareholders Shareholding Pattern Rank Investor Name Latest Filing Date % O/S Positionosition Change1 Mody (Prakash Amrut) 30-Sep-16 46.5 42.3m 0.02 ICICI Prudential Asset Management Co. Ltd. 30-Nov-16 6.1 5.5m -0.73 Reliance Nippon Life Asset Management Limited 31-Dec-16 2.3 2.1m 0.04 Mody (Anita Prakash) 30-Sep-16 1.5 1.3m 0.05 Dimensional Fund Advisors, L.P. 31-Oct-16 1.2 1.1m 0.06 L&T Investment Management Limited 30-Nov-16 1.2 1.1m 0.07 Mody (Suparna Prakash) 30-Sep-16 1.1 0.9m 0.08 Mody (Supriya Prakash) 30-Sep-16 1.1 0.9m 0.09 Birla Sun Life Asset Management Company Ltd. 31-Dec-16 1.0 0.9m 0.010 UTI Asset Management Co. Ltd. 30-Nov-16 0.2 0.2m 0.0

(in %) Dec-15 Mar-16 Jun-16 Sep-16 Dec-16Promoter 50.1 50.1 50.1 50.1 50.1Others 49.9 49.9 49.9 49.9 49.9

Source: Reuters, ICICIdirect.com Research Recent Activity

Investor Name Value ($) Shares Investor Name Value ($) SharesNordea Funds Oy 0.1m 0.0m Sundaram Asset Management Company Limited -0.2m 0.0mBlackRock Institutional Trust Company, N.A. 0.0m 0.0m Dimensional Fund Advisors, L.P. -0.1m 0.0mSells NULL NULL BlackRock Advisors (UK) Limited 0.0m 0.0m

Goldman Sachs Asset Management (India) Private Ltd. 0.0m 0.0m

BUYS SELLS

Source: Reuters, ICICIdirect.com Research


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Financial summary

Profit and loss statement | Crore (Year-end March) FY16 FY17E FY18E FY19ERevenues 1,334.6 1,551.3 1,799.5 2,097.4Growth (%) 11.0 16.2 16.0 16.6Raw Material Expenses 458.0 559.9 638.8 734.1Employee Expenses 272.1 296.9 338.3 377.5Other Expenditure 440.6 499.4 579.4 671.2Total Operating Expenditure 1,170.7 1,356.2 1,556.6 1,782.8EBITDA 163.9 195.1 242.9 314.6Growth(%) 61.7 19.0 24.5 29.5Depreciation 39.0 44.1 50.8 57.7Interest 2.9 2.9 2.9 2.9Other Income 19.2 16.7 19.6 28.7PBT before Exceptional Items 141.2 164.8 208.8 282.7Less: Exceptional Items 3.5 0.0 0.0 0.0PBT 137.7 164.8 208.8 282.7Total Tax 29.3 45.3 50.1 67.9PAT 108.0 119.4 158.7 214.9Growth(%) 43.3 10.6 32.9 35.4Adjusted PAT 111.6 119.4 158.7 214.9EPS (Adjusted) 12.3 13.2 17.5 23.7


Cash flow statement | Crore (Year-end March) FY16 FY17E FY18E FY19EProfit/(Loss) after taxation 106.4 119.4 158.7 214.9Add: Depreciation 39.0 44.1 50.8 57.7(Inc)/dec in Current Assets -80.7 -67.6 -88.7 -105.2Inc/(dec) in CL and Provisions 46.5 38.2 31.5 37.8Others 0.6 0.0 0.0 0.0CF from operating activities 111.9 134.2 152.2 205.2(Inc)/dec in Investments 29.9 0.0 0.0 -100.0(Inc)/dec in Fixed Assets -140.4 -145.0 -125.0 -57.0Inc/(dec) Deferred tax liability 0.0 5.0 5.0 5.0Others 25.1 10.0 -10.0 -10.0CF from investing activities -85.3 -130.0 -130.0 -162.0Inc / (Dec) in Total Debt 9.9 0.0 0.0 0.0Dividend paid & dividend tax -43.3 -17.9 -23.8 -32.2Others 0.0 0.0 0.0 0.0CF from financing activities -33.4 -17.9 -23.8 -32.2Net Cash flow -6.8 -13.7 -1.5 11.0Opening Cash 27.0 20.1 6.4 4.9Closing Cash 20.1 6.4 4.9 15.9Free Cash Flow -28.5 -10.8 27.2 148.2


Balance sheet | Crore (Year-end March) FY16 FY17E FY18E FY19ELiabilitiesEquity Capital 18.2 18.1 18.1 18.1Reserve and Surplus 936.7 1,038.2 1,173.1 1,355.8Total Shareholders funds 954.8 1,056.3 1,191.3 1,374.0Total Debt 36.0 36.0 36.0 36.0Net Deferred Tax Liability 21.2 26.2 31.2 36.2Other 31.9 41.9 51.9 61.9Total Liabilities 1,043.8 1,160.3 1,310.3 1,508.0AssetsGross Block - Fixed Assets 724.7 819.7 944.7 1,071.7Accumulated Depreciation 321.5 365.6 416.5 474.2Net Block 403.1 454.0 528.2 597.5Capital WIP 237.1 287.1 287.1 217.1Total Fixed Assets 640.3 741.1 815.3 814.6Investments 13.5 13.5 13.5 113.5Long term loans and advances 30.5 30.5 50.5 70.5Inventory 230.6 261.4 303.1 353.3Debtors 220.7 250.2 290.2 338.2Cash 20.1 6.4 4.9 15.9Loans and Advances 105.8 111.1 116.1 121.1Other current assets 12.7 14.7 16.7 18.7Total Current Assets 589.9 643.8 731.0 847.2Creditors 173.7 196.9 228.3 266.1Provisions 5.8 5.8 5.8 5.8Other Current Liabilities 50.8 65.8 65.8 65.8Net Current Assets 359.7 375.3 431.1 509.5Application of Funds 1,043.8 1,160.4 1,310.3 1,508.0


Key ratios (Year-end March) FY16 FY17E FY18E FY19EPer share data (|)Adjusted EPS 12.3 13.2 17.5 23.7BV per share 105.4 116.6 131.4 151.6Dividend per share 2.3 2.0 2.6 3.5Operating Ratios (%)Gross Margin 65.7 63.9 64.5 65.0EBITDA margin 12.3 12.6 13.5 15.0PAT Margin 9.4 9.7 10.7 12.3Inventory days 63.1 61.5 61.5 61.5Debtor days 60.4 58.9 58.9 58.9Creditor days 47.5 46.3 46.3 46.3Asset Turnover 1.3 1.3 1.4 1.4EBITDA Conversion Rate 68.3 68.8 62.7 65.2Return Ratios (%)RoE 11.7 11.3 13.3 15.6RoCE 13.8 14.5 16.2 18.9RoIC 16.0 17.6 19.0 22.0Valuation Ratios (x)P/E 23.1 20.9 15.8 11.6EV / EBITDA 15.3 12.9 10.4 7.7EV / Net Sales 1.9 1.6 1.4 1.2Market Cap / Sales 1.9 1.6 1.4 1.2Price to Book Value 2.6 2.4 2.1 1.8Solvency RatiosDebt / EBITDA 0.2 0.2 0.1 0.1Debt / Equity 0.0 0.0 0.0 0.0Current Ratio 2.5 2.4 2.4 2.5



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 1784 2,220 Buy 15697.0 45.4 58.7 67.9 79.2 39.3 30.4 26.3 22.5 42.9 39.5 36.1 33.4 34.2 32.7 29.0 26.6

Apollo Hospitals APOHOS 1149 1,440 Buy 15985.6 22.2 23.1 33.0 47.1 51.8 49.7 34.9 24.4 8.2 8.4 10.7 13.7 8.9 8.7 11.2 14.0

Aurobindo Pharma AURPHA 692.8 1,100 Buy 40537.6 33.9 41.5 48.0 54.8 20.4 16.7 14.4 12.6 23.3 24.5 25.4 25.1 28.1 26.0 23.5 21.5

Alembic Pharma ALEMPHA 588 700 Hold 11084.7 38.2 20.3 24.3 31.9 15.4 29.0 24.2 18.4 51.5 23.7 23.1 25.9 44.9 20.4 20.8 22.9

Biocon BIOCON 999.3 1,030 Hold 19985.0 23.0 31.0 34.0 45.2 43.4 32.3 29.4 22.1 9.1 12.4 13.6 17.0 11.3 13.8 13.6 15.8

Cadila Healthcare CADHEA 357 450 Buy 36552.7 15.0 13.8 18.2 22.7 23.9 25.9 19.6 15.8 26.7 19.6 24.1 27.2 28.6 22.1 23.9 24.4Cipla CIPLA 576.9 575 Hold 46402.6 18.5 19.0 25.2 31.9 31.2 30.4 22.9 18.1 12.0 11.3 14.1 16.4 12.5 11.6 13.5 14.9

Divi's Lab DIVLAB 687 1,415 Buy 18243.0 41.8 43.6 51.9 59.3 16.4 15.8 13.2 11.6 30.7 28.0 28.4 27.1 25.9 22.6 22.3 21.2

Dr Reddy's Labs DRREDD 2974 3,300 Hold 48509.1 142.1 61.1 133.0 164.9 20.9 48.7 22.4 18.0 17.3 5.6 13.3 16.0 20.7 8.3 15.7 16.7

Glenmark Pharma GLEPHA 858 1,200 Buy 24720.8 32.2 44.0 54.4 62.4 26.7 19.5 15.8 13.8 16.2 19.0 21.9 22.6 21.2 22.7 22.2 20.4

Indoco Remedies INDREM 272.6 365 Buy 2511.6 9.4 11.0 15.4 20.2 29.0 24.7 17.7 13.5 12.9 12.0 16.5 20.0 14.8 15.3 18.2 20.1

Ipca Laboratories IPCLAB 552 605 Buy 6967.5 10.0 15.3 25.7 33.7 55.1 36.2 21.5 16.4 5.7 10.0 12.7 14.9 5.5 7.9 12.0 13.9

Jubilant Life VAMORG 675.8 795 Buy 10765.5 26.0 43.2 53.8 66.3 26.0 15.6 12.6 10.2 12.0 15.7 17.4 19.0 14.2 19.4 19.7 19.8

Lupin LUPIN 1483 1,890 Buy 66932.8 50.4 62.9 67.1 85.7 29.4 23.6 22.1 17.3 18.6 19.6 20.6 24.3 20.7 21.3 19.1 20.3

Natco Pharma NATPHA 612.9 750 Buy 10683.3 8.5 14.9 13.4 15.5 72.1 41.2 45.8 39.6 16.0 22.2 17.5 17.9 11.9 17.7 14.0 14.2

Sun Pharma SUNPHA 635 850 Buy 152709.6 23.4 30.1 31.9 38.7 27.1 21.1 19.9 16.4 18.6 19.6 18.2 18.8 18.0 19.4 17.6 18.1

Syngene Int. SYNINT 574 570 Hold 11470.0 11.1 15.9 17.8 21.8 51.9 36.1 32.2 26.3 13.2 18.1 18.6 21.5 21.0 23.7 21.5 21.3

Torrent Pharma TORPHA 1286 1,700 Buy 21760.0 107.8 57.4 68.4 84.9 11.9 22.4 18.8 15.1 46.7 22.6 25.6 28.1 53.8 23.6 23.2 23.7

Unichem Lab UNILAB 275.9 285 Hold 2506.8 12.3 13.2 17.5 23.7 22.4 20.9 15.8 11.6 13.8 14.5 16.2 18.9 11.7 11.3 13.3 15.6

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



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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

[email protected]


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