Sec Pharm Update 130712

Indian Pharmaceutical
Long Term Drivers Intact; Valuation Stretched
July 12, 2012
Souvik Chatterjee
souvikchatterjee@smcindiaonline.com
+91 22 6651451/ Ext:118
Mitesh Shah
miteshpshah@smcindiaonline.com
Revenue drivers intact; expect CAGR 20%

Our positive outlook is based on the incrementally
balanced growth with a rising contribution from India and
other generic pharmerging markets (GEM), compared
with the largely-US focused growth.
US to continue to be the major revenue driver for Indian
pharma companies. The base business is likely to grow at
CAGR 18-20% over the next 3-5 years.
The Indian domestic pharma market is likely to be strong
(14%-16%, in line with last five years) driven by increasing
affordability, launch of new formulations and increase in
the incidence, diagnosis/treatment of chronic diseases.
Growth in the acute segment (~6%-8%) is substantially
below that of the chronic category (~20%) driven by the
absence of infection outbreak and food price inflation.
Company
Dr reddy
Lupin
Glenmark
Sun Pharma
Torrent Pharma
Cadila
Biocon
Apollo Hospital
CMP (INR)
1,647
548
396
625
623
765
242
653
Rating
Outperformer
Market performer
Under performer
Under performer
Under performer
Under performer
Under performer
Under performer
Target price
1,985
631
435
668
629
705
263
683
MCap (INR bn)

278
245
107
648
53
157
48
81
Geographical breakup
60%
53%
50%
40%
40%
38%
35%
41%
32%
32%
32%
30%
21%
23%
20%
10%
0%
Dr reddy
Cadila
Sun
Domestic
Lupin
Glanmark
US
EPS (INR)
PE (x)
EV/EBITDA (x)
FY13E
FY14E
FY13E
FY14E
FY13E
FY14E
104.5
124.4
15.2
12.8
13.8
11.7
28.7
34.6
18.3
15.2
13.3
11.0
24.2
31.6
16.3
12.3
13.0
9.6
27.8
30.0
21.9
20.3
16.3
14.6
44.9
53.1
14.7
12.4
10.2
8.7
35.2
45.0
20.9
16.3
13.7
11.1
16.5
20.5
21.8
17.4
12.3
9.9
23.2
27.80*
27.3
23.15*
15.4
11.87*
* CMP as on 11/07/2012
* Bloomberg
1QFY13 PREVIEW- PHARMACEUTICALS
Strong Earnings Growth; Valuation Stretched

Exports (~65% of revenues) growth of 12-15% will according to us, be key to sustain the strong
revenue and earnings growth of 15% and 18% CAGR in FY12E-FY14E.
We believe the sector valuations are near to peak. Most of the Indian pharma sector stocks are
trading at the higher end of the valuation chart of 17x-21x of 1yr fwd P/E i.e. ~20% premium to
the broader market.
No clarity on the new proposed pricing policy (NPPP) or an acceptable alternative will allow
manufacturers to garner higher margins in the domestic market.
Dr. Reddys Lab and Lupin remains our top pick on account of sharp stock correction resulting
in a severe discount to its peers.
Global pharmaceutical market CAGR of 7% over
2010-14E
1,140
1,200
1,060
USD Bn
800
781
808
875
10%
9%
990
1,000
GEM to drive future generic pharma growth
920
30%
25%
8%
7%
20%
6%
600
5%
4%
400
15%
10%
3%
2%
200
5%
1%
0
0%
2008
2009
2010E
2011E
Total World Market
Source: Company, SMC Research
2012E
2013E
2014E
Growth Rate
0%
China
Russia
India
Brazil
Japan
US
EU
Canada
Pharmaceutical growth in CY11
FTF attractiveness in US dipping out.

Lower patent expiry opportunity to shrink US opportunity by ~85% post FY12
US generic market turning a volume play with lower margin; Penetration levels are above
80% and negative generic inflation hampers growth
Higher para-IV approval and better than expected US generic market growth act as a
potential risk to our estimates
Expect slower CAGR of 7% for the generic market in the US over FY11-20E
Sharp drop in the US patent expiry opportunity
30
26.5
25
c85% fall in overall patent expiry

opportunity
USD Mn
20
c55% fall in patent expiry

opportunity
15
9.7
10
6.2
5
6.0
4.3
4.0
7.0
13.8
13.0
9.7
8.5
6.9
4.0
2.6
3.2
2.5
1.6
0.8
0
2003
04
05
06
07
2008
09
10
11
12
13
14
2015
16
17
18
19
Source: Company, SMC Research
2020
. while base revenue to grow

We expect Indian generics firms to retain their importance as low-cost providers of generic
drugs continued market share growth in the critical US generics market
US base business to register CAGR 18-20% over 2011-15 on the back of better product
mix and increased opportunity from the patent expiry regime
Generic TRx in US to grow at a 6.4% CAGR in 2011-14E
USD Mn
Generic TRx share in US has doubled from 7% (2007)

to ~14% (2011)

Source: Industry, SMC Research
GEM opportunity to drive future growth

We include India, Japan, China, CIS and LatAm to be part of our GEM growth analysis. We
estimate Generic Pharmerging Markets (GEM) to account for ~40% of global healthcare
revenue by 2015 at a 15-17% (CAGR) and to reach USD 200-250bn.
INDIA: The rise income level coupled with a rise in chronic diseases in the tier-II/III cities
are likely to lead 50% rise in healthcare spending by FY15E growing at ~15-16% till
2015.
JAPAN: By 2050 the senior citizen population will account for ~50% (22% currently) of
the total population and is expected to reach 15% of GDP. Generic drugs accounts for
less than ~10% in value terms and we expect the Japanese generic industry to reach
USD10-15bn by 2015 at a CAGR 9-12%.
CHINA: With a GDP (nominal) of USD ~6.5tn and population of 1.4bn is poised to be the
second largest pharmaceutical market the world after the US by 2015. Generic drugs
account to ~63% (USD 29bn) of the total pharmaceutical market and rising at a CAGR of
13% over 2014.
RUSSIA: Expected to reach USD22bn by 2015 (USD8.6bn currently) at CAGR 21%. The
per capita pharmaceutical spend atUSD130 is among the lowest in the CIS suggesting
tremendous growth potential of pharmaceutical industry in Russia.
Latin America: Entire Latin American market is expected to expand at CAGR of 10-12%
over 2010-15. One of the major drivers of growth for the pharmaceutical markets is
national governments stepped up efforts to increase access to healthcare for its citizens.
Stretched Valuation; Near term upside capped

DRRD and LPC trading at discount to its peers
Near term upside capped; sector at its best

valuation
DRRD and Lupin remain our top pick on account of

sharp stock correction resulting in a severe discount
to its peers
25
Sun
20
1 yr fwd PE
Historically traded in a band of 17x-21x 1yr fwd PE

which is ~20% premium to the broader market.
30
Cadila
Glenmark
15
Lupin
Dr reddy
Biocon Torrent
10
5
We expect these two stocks to deliver the better

earnings growth against their peers
0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
EPS Growth FY12-15E (%)
BSE HC underperformed in June due to overall

improvement in market sentiment
1yr fwd PE reflects stretch valuations

BSETHC index
SENSEX Index
30
25
20
15
10
5
0
Jun-08
Jun-09

Source: Bloomberg, Company , SMC Research
Jun-10
Jun-11
Jun-12
1QFY13 Preview
Strong revenue growth to sustain; Earnings to remain muted
Revenue growth in 1QFY13 is to be driven by limited competition opportunities in the US, niche
segment launches and favourable currency movement. Expect domestic business to grow at
~16% y-o-y on the back of a recovery in acute segment. We expect our Pharma universe
revenue to grow by robust 32% y-o-y majorly on account of strong growth in SUNP, DRRD and
LPC.
Expect absolute EBITDA to increase by 27% on the back of high margin on exclusivities, niche
segment launches (particularly OCs) and recovery in the domestic market. Operating margin is
expected to remain steady at 23-24%.
We expect Net profit for our pharma coverage stocks to increase by just 8.7% in 1QFY13
majorly impacted by increase in financial cost on account of rupee depreciation and tax
amendment.
Healthcare services (Hospitals) universe is expected to report revenue growth of 29.1% on
account of bed expansion and better occupancy rates.
SMC view: We remain Positive on the Indian pharma sector growth in the near to medium term
on the back of higher patent expiry opportunity in the US and strong domestic growth. However
on the longer run, we expect US FTF opportunities to reduce posing significant challenges for
the industry.
1QFY13 Preview
Dr Reddy
Sales
EBITDA Margin (%)
PAT
Lupin
Sales
EBITDA Margin (%)
PAT
Glenmark
Sales
EBITDA Margin (%)
PAT
Sun Pharma
Sales
EBITDA Margin (%)
PAT
Torrent
Sales
EBITDA Margin (%)
PAT
Cadila
Sales
EBITDA Margin (%)
PAT
Biocon
Sales
EBITDA Margin (%)
PAT
Apollo Hospital
Sales
EBITDA Margin (%)
PAT
1QFY13
22,815
18
3,445
1QFY13
18,793
24
3,459
1QFY13
10,281
21
1,442
1QFY13
21,344
36
6,653
1QFY13
7,285
19
921
1QFY13
14,090
23
2,212
1QFY13
5,412
26
737
1QFY13
8,257
18
823
1QFY12
19,783
14
2,627
1QFY12
15,432
19
2,101
1QFY12
8,683
34
2,101
1QFY13
16,357
33
5,653
1QFY12
6,134
25
1,025
1QFY12
11,735
26
2,298
1QFY12
4,420
27
701
1QFY12
6,410
17
513
y-o-y (%)
15
377 bps
31
y-o-y (%)
22
503 bps
65
y-o-y (%)
18
(1,324) bps
(31)
y-o-y (%)
30
266 bps
18
y-o-y (%)
19
(626) bps
(10)
y-o-y (%)
20
(281) bps
(4)
y-o-y (%)
22
(123) bps
5
y-o-y (%)
29
194 bps
61
4QFY12
26,585
19
3,427
4QFY12
18,832
20
1,556
4QFY12
10,659
21
1,504
1QFY13
23,299
41
9,043
4QFY12
6,540
13
637
4QFY12
13,444
21
1,709
4QFY12
6,102
25
978
4QFY12
7,446
16
593
q-o-q (%)
(14)
(99) bps
1
q-o-q (%)
(0)
431 bps
122
q-o-q (%)
(4)
14 bps
(4)
q-o-q (%)
(8)
(492) bps
(26)
q-o-q (%)
11
571 bps
45
q-o-q (%)
5
192 bps
29
q-o-q (%)
(11)
75 bps
(25)
q-o-q (%)
11
234 bps
39
Company Update and 1QFY13 Preview
Outperformer
1500
15x
12x
1000
500
0
-500
Apr/12
Dec/11
Apr/11
Aug/11
Dec/10
Apr/10
Aug/10
Dec/09
Apr/09
Aug/09
Dec/08
Apr/08
Aug/08
-1000
Dec/07
Headwind in Europe to continue; Betapharm worry

remains (sales down to 5% of revenue in FY12)
20x
Aug/07
Increased contribution from GEM to add traction
2000
Apr/07
Strong biosimilar portfolio to support long-term growth
25x
2500
Dec/06
US base business growth to continue on back of Strong

product pipeline
3000
Aug/06
Gradual improvement in domestic performance; expect

12% growth in FY13
1-year fwd P/E
INR
Apr/06
Attractive valuation; Underperformed the CNX Pharma

index by ~13% over past 6M
TP: INR1,985
Dec/05
Dr Reddys Lab
Value Dr Reddys Lab at 19x FY13 overall earnings to

arrive at our target price of INR 1,985
Particulars
FY11
FY12
FY13E
FY14E
CAGR (%)
Net Sales (INRmn)
74,693
96,737
106,847
119,584
17
EBITDA (INRmn)
12,629
18,252
20,821
24,503
25
EPS (INR)
65.0
84.4
104.5
124.4
24
EV/EBITDA (x)
22.7
15.7
13.8
11.7
NM
ROE (%)
24.8
27.6
27.4
26.3
NM
PE (x)
24.6
18.9
15.2
12.8
NM
Souvik Chatterjee (souvikchatterjee@smcindiaonline.com ) +91 22 6651451/ Ext:118 | Mitesh Shah (miteshpshah@smcindiaonline.com)
Dr Reddys Lab
Outperformer
Under Performed compare to HC and SENSEX
TP: INR1,985
Improvement in the domestic formulation segment
15%
18.0
16.7
16.0
10%
14.0
5%
12.0
10.8
10.0
0%
Feb-12
-5%
Mar-12
Apr-12
May-12
Jun-12
9.5
8.0
6.0
4.0
-10%
5.7
5.1
2.0
0.0
-15%
BSETHC index
SENSEX Index
Q4FY11
DRRD In Equity
Q2FY12
Q3FY12
Q4FY12
US business supported growth; while Europe pulled back
Robust product pipeline in US

200
180
160
140
120
100
80
60
40
20
0
Q1FY12
160
140
79
71
71
100
80
74
68
42
49
71
21
35
48
16
FY05
FY06
FY07
FY08
83
101
60
68
48
40
FY09
FY10
FY11
(5)
Q4FY11
14
(1)
Q1FY12
(11)
Q2FY12
Q3FY12
(10)
Q4FY12
ANDAs Pending
US

Source: Bloomberg, SMC Research
48
42
20
(20)
ANDAs Approved
133
120
Europe
11
Dr Reddys Lab
Outperformer
3,000
45.0
25.0
Margin Performance
Revenue Performance
40.0
38.9
2,500
TP: INR1,985
35.0
2,000
20.0
30.0
29.5
25.0
1,500
20.0
1,000
19.5
18.9
16.9
15.0
16.5
14.8
20.5
17.6
14.7
15.0
11.9
10.4
500
6.3
FY09
FY10
0.0
FY11
Global Generics
FY12E
PSAI
10.0
5.0
1.2
10.0
FY13E
5.0
FY14E
FY11
Revenue Growth (%)
FY12E
EBITDA
FY13E
FY14E
Net profit
ROCE Vs ROE
30.0%
25.0%
27.6%
27.4%
17.7%
18.5%
24.8%
20.0%
18.2%
26.3%
18.8%
15.0%
10.0%
FY11
FY12E
FY13E
ROCE
ROE

Source: SMC Research
FY14E
12
Dr Reddys Lab
Outperformer
TP: INR1,985
1QFY13 Preview
Revenue growth driven by strong sales in the US and Russia. Fondaparinux, exclusivity of
gGeodon and strong OTC sales would support the US growth.
Russian growth is likely to be on the back of strong sales in OTC segment.
Expect domestic business to growth (10-12%), lower than industry growth of ~15% due to
product related issues.
INR mn
Net Sales
Other Operating Income
Total Income
Cost of sales
Gross Profit
Gross margin
S,G&A expenses
R&D Expenses
Total Expenditure
EBITDA
EBITDA margin
Amortization & Impairment
Other income / (Loss)
EBIT
Financial Expenses/ (Income)
PBT
Tax
Tax rate, %
Adj. PAT
Adj. PAT Margin
1QFY12
19,783
187
19,970
9,228
10,556
53%
6,757
1,197
17,182
2,789
14.1%
4
2,793
47
2,746
119
4%
2,627
13%
2QFY12
22,679
214
22,893
10,473
12,206
54%
7,216
1,459
19,148
3,745
16.5%
13
3,758
50
3,708
631
17%
3,077
14%
3QFY12
27,692
165
27,857
11,117
16,740
60%
7,678
1,514
20,310
7,547
27.3%
26
7,573
(174)
7,746
2,617
34%
5,130
19%
4QFY12
26,585
26,585
12,614
13,971
53%
7,217
1,740
21,571
5,014
18.9%
1,040
198
4,172
(82)
4,265
838
20%
3,427
13%
1QFY13
22,815
216
23,030
10,267
12,548
55%
7,433
1,255
18,954
4,076
17.9%
4,076
71
4,006
561
14%
3,445
15%
Y-o-Y
15%
15%
15%
11%
19%
164 bps
10%
5%
10%
46%
27%
NA
NA
46%
50%
46%
371%
967 bps
31%
182 bps
Q-o-Q
-14%
NA
-13%
-19%
-10%
245 bps
3%
-28%
-12%
-19%
-5%
-NA
NA
-2%
-186%
-6%
-33%
-564 bps
1%
221 bps
13
Dr Reddys Lab
Outperformer
Balance sheet (INR mn)
Profit and loss statement (INR mn)

Particulars
Net Sales
FY11
FY12P
FY13E
FY14E
74,693
96,737
106,847
119,584
COGS
62,064
78,485
86,026
95,081
EBITDA
12,629
18,252
20,821
24,503
EBIT
12,629
18,252
20,821
24,503
Interest expenses
Other income
TP: INR1,985
189
(160)
305
85
54
Particulars
FY11
FY12P
FY13E
FY14E
45,990
57,443
71,557
88,357
Long-term debt
5,271
16,335
16,335
16,335
Provisions
1,314
1,973
1,120
1,333
Short-term debt
18,220
15,876
15,876
15,876
Current liabilities
21,481
25,660
22,361
26,349
Other Liabilities
707
2,191
542
693
Total Liabilities
92,983
119,477
127,790
148,942
Intangible Assets
15,246
13,529
12,196
10,863
Net fixed assets
29,642
33,247
40,611
47,552
313
10,541
12,649
15,179
Inventories
16,059
19,352
20,433
21,759
Sundry debtors
17,615
25,339
30,617
34,232
Cash & cash equivalents
5,729
7,978
2,266
10,346
Other Current Assets
8,190
7,109
8,715
8,715
Total current assets
47,593
59,778
62,031
75,052
Deferred tax asset, net
(87)
Other assets
276
2,382
303
296
Total assets
92,983
119,477
127,790
148,942
Shareholder's equity
Investments
Profit before tax
11,040
14,262
20,515
24,418
Provision for tax
(1,403)
(4,204)
(2,872)
(3,419)
Net profit
11,040
14,262
17,643
20,999
Reported PAT
Adjusted Profit
11,040
11,040
14,262
14,262
17,643
17,643
20,999
20,999
14
Dr Reddys Lab
Outperformer
Cash flow statement (INR mn)

Particulars
Key ratios
FY11
Particulars
FY11
FY12P
FY13E
FY14E
EPS (INR)
65.0
84.4
104.5
124.4
227.2
261.6
299.5
342.0
ROE (%)
24.0
24.8
27.4
26.3
D/E (%)
51.1
56.1
45.0
36.5
Growth (%)
FY11
FY12P
FY13E
FY14E
6.3
29.5
10.5
11.9
EBITDA
529.0
44.5
14.1
17.7
Net profit
933.7
29.2
23.7
19.0
EPS
933.7
29.2
23.7
19.0
Margins (%)
FY11
FY12P
FY13E
FY14E
EBITDA
16.9
18.9
19.5
20.5
FY12P
FY13E
FY14E
11,040
14,262
17,643
20,999
Depreciation/Impairment
4,148
2,640
3,170
3,436
Change in working capital
(6,738)
(12,117)
(740)
305
85
9,002
23,780
Revenues
(5,804)
(6,411)
(7,175)
(10,228)
(2,108)
(2,530)
Net profit
TP: INR1,985
BV Per Share (INR)

(5,098)
Other non-cash adjustments
(441)
(160)
Operating cashflow
8,009
11,644
Capital expenditure
Change in investments
Other investing cashflow
Investing cashflow
Issue of equity
Change in borrowings
Dividend paid
Other financing cashflow
Financing cashflow
Net cash generated during year
(8,718)
3,642
(3,513)
(916)
(712)
(1,861)
(8,589)
(16,949)
(9,231)
(11,566)
29
EBIT
16.9
18.9
19.5
20.5
3,599
8,720
Net profit
14.8
14.7
16.5
17.6
(3,529)
(4,200)
Valuation ratios
FY11
FY12P
FY13E
FY14E
P/E (x)
24.6
18.9
15.2
12.8
(1,955)
66
P/BV(x)
7.0
6.1
5.3
4.7
M cap/sales (x)
3.6
2.8
2.5
2.2
3.8
3.0
2.7
2.4
22.7
15.7
13.8
11.7
4.1
5.3
6.6
7.8
(3,063)
(942)
(377)
(957)
(2,811)
1,644
7,554
(5,483)
(4,134)
2,249
(5,712)
8,081
EV/sales (x)
EV/EBITDA (x)
Cash at beginning of year
6,545
5,729
7,978
2,266
Cash at end of year
5,729
7,978
2,266
10,346
Earnings Yield (%)
15
Market performer
TP: INR631
Particulars
20x
400
15x
300
12x
200
100
Jun/11
Dec/10
Jun/10
Dec/09
Jun/09
Dec/08
0
Jun/08
Value Lupin at 22x FY13E earnings of INR28.7 to arrive at

our target price of INR631.
500
Dec/07
Expect CAGR 21% earnings over FY12-14 on the back of

strong product pipeline and aggressive marketing strategy
25x
Jun/07
Lupin to command valuation premium on the back of high

earnings visibility and diversified business and aggressive
management
600
Dec/06
Niche segment to boost US revenue. Japan (Kyowa) to

add traction; forecast 15% revenue CAGR over FY12-14
1-year fwd P/E
INR
Jun/06
Strong domestic sales driven by strong volume growth; JV

with Eli Lilly on anti-diab to help boost domestic sales
Dec/05
Lupin
FY11
FY12
FY13E
FY14E
CAGR (%)
Net Sales (INRmn)
58,320
70,829
84,623
100,421
20
EBITDA (INRmn)
11,911
14,447
18,194
21,591
22
EPS (INR)
19.3
19.4
28.7
34.6
21
EV/EBITDA (x)
20.3
17.0
13.3
11.0
NM
ROE (%)
29.5
23.8
28.1
26.9
NM
PE (x)
27.2
27.0
18.3
15.2
NM
Lupin
Market performer
TP: INR631
>40% market share in gGeodon
Steady growth in Suprex
120%
4.5
Weekly sales (USD Mn)
100%
80%
60%
40%
4
3.5
3
2.5
2
1.5
1
20%
0.5
0%
3/2/2012
4/2/2012
Pfizer
5/2/2012
Lupin
Greenstone
6/2/2012
Dr Reddy
Strong Simva sales despite Atorva Patent expired
LPC geographical revenue break-up

120
40%
100
30%
80
%
20%
10%
60
40
0%
20
0
FY09
LUPIN
ZYDUS PHARMA
TEVA
NORTHSTAR RX LL
DR.REDDY
AUROBINDO
US
FY10
EU
Japan

Source: Bloomberg, SMC Research
FY11
India
FY12
South Africa
FY13E
Others
FY14E
API
17
Lupin
Market performer
TP: INR631
Revenue Performance
Margin Performance
120,000
35
100,000
30
25%
21.5%
20.4%
21.5%
20.4%
19.1%
60,000
20
21.5%
20.2%
20%
25
%
INR Mn
80,000
15.4%
40,000
15%
15
14.8%
14.8%
15.2%
14.0%
20,000
10
12.5%
10%
5
FY08
FY09
Advance Market
FY10
FY11
FY12
Emerging Margin
FY13E
API
12.3%
FY08
FY14E
FY09
FY10
FY11
FY12E
FY13E
FY14E
Revenue Growth
EBITDA
Net Profit
ROCE Vs ROE
45%
40%
39.8%
35.6%
35%
34.1%
30%
29.5%
25%
20%
21.7%
20.4%
22.4%
21.7%
23.8%
28.1%
26.9%
22.1%
22.4%
17.8%
15%
10%
FY08
FY09
FY10
FY11
ROCE
FY12E
FY14E
ROE

Source: SMC Research,
FY13E
18
Lupin
Market performer
TP: INR631
1QFY13 Preview
Revenue growth driven by ~20% growth in the domestic formulations on the back of JV with Elli
Lilly and the strong performance in chronic segment.
Revenue growth in US sales driven by gGeodon exclusivity sales and strong growth sales from
niche segment portfolio. Expect strong sales of Suprax and Antara to continue.
INR mn
Net sales
Total Income
COGS
Gross profit
Gross margin
Staff Cost
Other Expenditure
Total Expenditure
EBITDA
EBITDA margin (%)
Depreciation / Amortisation
Other Income
EBIT
Interest Expenses Net
PBT
Tax
Tax rate, %
Reported PAT
PAT Margin
1QFY12
15,432
246
15,677
6,169
9,508
62%
2,193
4,372
12,734
2,944
19.1%
471
12
2,484
58
2,426
286
12%
2,101
14%
2QFY12
17,417
307
17,724
5,979
11,438
66%
2,276
5,429
13,684
4,040
23.2%
522
16
3,535
66
3,468
751
22%
2,669
15%
3QFY12
17,917
272
18,189
6,259
11,658
65%
2,525
5,671
14,454
3,735
20.8%
576
33
3,192
86
3,106
701
23%
2,351
13%
4QFY12
18,832
407
19,239
7,632
11,200
59%
2,702
5,176
15,510
3,728
19.8%
706
82
3,105
145
2,960
1,348
46%
1,556
8%
1QFY13
18,793
376
19,169
6,910
11,883
63%
2,456
4,897
14,262
4,531
24.1%
657
250
4,124
91
4,033
574
14%
3,459
18%
y-o-y
22%
53%
22%
12%
25%
162 bps
12%
12%
12%
54%
503 bps
39%
NA
66%
57%
66%
101%
243 bps
65%
479 bps
q-o-q
0%
-8%
0%
-9%
6%
376 bps
-9%
-5%
-8%
22%
431 bps
-7%
203%
33%
-37%
36%
-57%
NA
122%
1014 bps
19
Lupin
Market performer
Profit and loss statement

Particulars (INR mn)
FY11
FY12P
FY13E
FY14E
Net Sales
58,320
70,829
84,623
100,421
Total operating expenses
46,410
56,382
66,429
78,831
EBITDA
11,911
14,447
18,194
21,591
1,712
2,275
2,628
3,010
Depreciation & Amortization

EBIT
TP: INR631
Particulars
FY11
FY12P
FY13E
FY14E
32,811
40,178
50,956
63,895
515
723
723
723
Long-term debt
1,206
4,330
1,529
1,597
Provisions
2,718
3,287
2,226
2,680
Short-term debt
10,418
10,479
10,701
10,862
Current liabilities
11,800
17,750
15,222
18,063
Minority interests
10,199
12,172
15,566
18,580
325
355
363
332
Total liabilities & equity
59,468
77,479
81,357
97,821
89
144
97
126
Net fixed assets
25,881
31,934
34,908
37,280
Profit before tax and extraordinary
9,963
11,961
15,299
18,375
32
28
28
28
Profit before tax
9,963
11,961
15,299
18,375
Inventories
12,000
17,327
15,619
18,532
Sundry debtors
12,558
17,318
17,081
21,230
tax
1,169
3,086
2,295
2,756
6,208
7,031
9,172
11,966
1,211
1,211
1,211
4,201
4,074
4,781
9,018
Current assets
34,967
46,960
47,864
61,955
Financial Charges
Other income
Investments
Loans & advances

Net profit
8,794
8,875
13,004
15,619
Other current assets
Minority Interest
(148)
(199)
(199)
(199)
20
Reported PAT
8,626
8,677
12,806
15,420
(1,411)
(1,442)
(1,442)
(1,442)
Adjusted Profit
8,646
8,677
12,806
15,420
Total assets
59,468
77,479
81,357
97,821
Income from JV/Associates
20
Lupin
Market performer
TP: INR631
Key ratios
Cash flow statement

FY11
FY12P
FY13E
FY14E
PAT
8,626
8,677
12,806
15,420
Depreciaiton
1,712
2,275
2,628
3,010
Particulars
FY11
FY12P
FY13E
FY14E
EPS (INR)
19.3
19.4
28.7
34.6
BV per share (INR)
73.5
90.0
114.2
143.2
ROE (%)
29.5
23.8
28.1
26.9
(1,510)
(5,601)
(3,785)
(6,559)
Growth (%)
FY11
FY12P
FY13E
FY14E
(2,195)
(2,700)
(1,932)
(2,425)
Revenues
19.7
21.4
19.5
18.7
EBITDA
21.1
21.3
25.9
18.7
7,969
5,935
12,211
12,401
Net profit
26.5
0.6
47.6
20.4
EPS
26.1
0.6
47.6
20.4
Margins (%)
FY11
FY12P
FY13E
FY14E
EBITDA
20.4
20.4
21.5
21.5
EBIT
17.5
17.2
18.4
18.5
Net profit
14.8
12.2
15.1
15.4
Valuation ratios
FY11
FY12P
FY13E
FY14E
P/E (x)
27.2
27.0
18.3
15.2
Price/BV(x)
7.1
5.8
4.6
3.7
Market cap/sales (x)
4.0
3.3
2.8
2.3
EV/sales (x)
4.1
3.5
2.9
2.4
EV/EBITDA (x)
20.3
17.0
13.3
11.0
Mcap/Sales (x)
4.0
3.3
2.8
2.3
Earnings Yiels (%)
3.7
3.7
5.5
6.6
Operating cashflow
Capital expenditure
Investing cashflow
Free cashflow to firm
Issue of equity
Dividend paid
Interest Paid
Financing cashflow
(4,276)
(8,328)
(5,603)
(5,382)
(51)
12
733
(733)
(4,315)
(7,592)
(6,335)
(5,382)
3,693
(2,393)
6,608
7,019
138
3,185
(2,579)
230
(1,432)
(1,508)
(2,226)
(2,680)
(312)
(147)
(363)
(332)
(1,605)
1,530
(5,168)
(2,782)
21
Under performer
Particulars
Net Sales
EBITDA (INRmn)
EPS (INR)
EV/EBITDA (x)
ROE (%)
PE (x)
BV per share
1-year fwd P/E
INR
800
700
600
25x
500
20x
400
300
15x
200
10x
100
FY11
29,491
5,923
16.8
16.2
20.6
26.4
FY12
40,217
8,470
17.0
13.6
20.7
21.5
FY13E
48,847
9,529
24.2
13.0
22.6
16.3
FY14E
59,060
12,612
31.6
9.6
24.3
12.3
CAGR (%)
26
29
24
NM
NM
NM
75.5
88.9
108.8
136.2
NM
Apr/12
Dec/11
Apr/11
Aug/11
Dec/10
Aug/10
Apr/10
Dec/09
Apr/09
Aug/09
Dec/08
Aug/08
Apr/08
Dec/07
Aug/07
Apr/07
Dec/06
Apr/06
0
Aug/06
Sustainable growth in the US to continue with one of the

highest number of product launches in FY12. Limited
competition in products to drive growth.
US and India to continue to remain key markets in the
specialty and generic segment.
Expect benefits from out-licensing and milestone
payments in the medium to long run on the back of its
strong research pipeline.
Balance sheet concerns easing. Gearing currently at 82%
(vs sectors 58%) against 130% in FY10. Expect it to
reduce further to sector levels by FY14E.
Expect revenue and earning CAGR of 21% and 32%
respectively over FY12-14E.
Value Glenmark at 18x FY13 earnings of INR 24.2 to
arrive at TP of INR435
TP: INR435
Dec/05
Glenmark
Glenmark
Under performer
TP: INR435
Research Pipeline
23
Glenmark
Under performer
Revenue Performance
70,000
180
35%
120
30%
40,000
100
25%
30,000
60
20,000
40
20
10,000
FY09
Specility Business
FY10
FY11
Generics Business
FY12
FY13E
API
25.0%
21.8%
20.1%
21.1%
15.4%
15%
12.2%
10%
11.4%
9.6%
19.5%
13.4%
21.4%
14.5%
5%
(20)
FY08
32.0%
20%
40.5%
140
50,000
80
Margin Performance
40%
160
60,000
INR Mn
45%
TP: INR435
0%
FY14E
FY08
FY09
Sales Growth (%)
FY10
EBITDA
FY11
FY12P
FY13E
FY14E
Net Profit
ROCE Vs ROE
70
60
57.4
50
%
40
30
25.8
20.6
20
12.8
7.0
10
15.3
9.7
11.3
20.7
15.8
24.2
25.2
12.2
13.7
0
FY08
FY09
FY10
FY11
RoE (%)
FY12P
FY13E
FY14E
RoCE (%)
24
Glenmark
Under performer
TP: INR435
1QFY13 Preview
Revenue growth to be supported by the strong growth in domestic market; expect growth of 18% in
1QFY13.
US market growth is likely to be led by limited competitive products. Apart from the core income the
licensing incomes also support the growth.
INR (mn)
Net sales
Total Income
COGS
Gross profit
Gross margin
Staff Cost
Other Expenditure
Total Expenditure
EBITDA
EBITDA margin (%)
Other Income
EBIT
Interest Paid
PBT
Tax
Tax rate, %
Reported PAT
PAT Margin
1QFY12
8,683
2
8,685
2,308
6,377
73%
1,346
2,062
5,716
2,969
34%
264
123
2,828
408
2,420
319
13%
2,101
24%
2QFY12
10,554
3
10,557
3,335
7,220
68%
1,575
3,391
8,301
2,256
21%
247
(81)
1,928
291
1,637
(238)
-15%
1,875
18%
3QFY12
10,311
2
10,313
3,703
6,611
64%
1,735
3,847
9,284
1,029
10%
231
105
903
357
545
84
15%
461
4%
4QFY12
10,659
3
10,662
4,109
6,553
61%
1,633
2,703
8,444
2,218
21%
236
23
2,005
410
1,595
73
5%
1,504
14%
1QFY13
10,281
10,281
3,598
6,683
65%
1,643
2,887
8,128
2,153
21%
272
100
1,982
379
1,602
160
10%
1,442
14%
y-o-y
18%
NA
18%
56%
5%
-845 bps
22%
40%
42%
-27%
-1324 bps
3%
-19%
-30%
-7%
-34%
-50%
-318 bps
-31%
-1017 bps
q-o-q
-4%
NA
-4%
-12%
2%
352 bps
1%
7%
-4%
-3%
14 bps
15%
326%
-1%
-7%
0%
121%
545 bps
-4%
-8 bps
25
Glenmark
Under performer
TP: INR435

FY11
FY12P
FY13E
FY14E
FY11
FY12P
FY13E
FY14E
Net Sales
29,491
40,217
48,847
59,060
20,372
24,016
29,916
37,831
23,568
31,747
39,318
46,448
267
250
250
250
6,344
13,125
13,325
13,525
5,923
8,470
9,529
12,612
44
509
695
739
Short-term debt
14,914
6,875
17,259
19,764
Current liabilities
7,560
11,780
7,402
8,988
49,501
57,334
68,847
81,096
Net fixed assets
22,123
24,856
26,268
26,628
281
182
182
182
8,070
7,877
17,609
21,084
11,308
12,436
16,120
19,490
4,689
685
788
906
5,390
1,949
3,200
5,473
10,852
26,016
29,588
39,990
52,332
1,081
2,674
2,407
1,954
Particulars)
Minority interests
Long-term debt
EBITDA
Provisions
Depreciation
947
979
1,088
1,140
EBIT
4,976
7,491
8,442
11,472
Interest expenses
1,605
1,466
1,517
1,916
Other income
1,444
171
500
500
PBT before extraordinary
4,816
6,197
7,424
10,056
Investments
Inventories
Extraordinary income
(1,317)
PBT
4,816
4,880
7,424
10,056
Tax
237
238
891
1,508
NP
4,578
5,959
6,533
8,547
(46)
(40)
Sundry debtors
Loans & advances
Current assets
Minority Interest

Reported PAT
4,532
5,919
6,533
8,547
Other assets
34
Adjusted Profit
4,532
7,236
6,533
8,547
Total assets
49,501
57,334
68,847
81,096
26
Glenmark
Under performer
Key ratios

Particulars
FY11
FY12P
FY13E
FY14E
4,816
4,880
7,424
10,056
947
979
1,088
1,140
Changes in working capital
3,528
2,363
(12,321)
(5,333)
Tax
(938)
(238)
(891)
(1,508)
Net Operating Cash Flow
9,303
7,857
(2,915)
6,723
(4,012)
(3,711)
(2,500)
(1,500)
100
(3,670)
(3,645)
(2,466)
(1,500)
41
Debt raised/ (repaid)
8,346
(1,258)
10,584
2,705
Dividends
(126)
(959)
(633)
(633)
PBT
Depreciation
Capex
Investments
Investing cash flows
Increase in equity
Others
(232)
723
(780)
Financing cash flow
(4,356)
(2,959)
7,654
156
Net change in cash
1,277
1,252
2,273
5,379
Closing cash balance
TP: INR435
1,948
3,200
5,473
10,852
Particulars
FY11
FY12P
FY13E
FY14E
EPS (INR)
16.8
17.0
24.2
31.6
BV per share (INR)
75.5
88.9
110.6
139.8
ROE (%)
20.6
20.7
24.2
25.2
Growth (%)
FY11
FY12P
FY13E
FY14E
Revenues
18.9
36.4
21.5
20.9
EBITDA
-4.4
43.0
12.5
32.3
Net profit
49.7
1.6
41.9
30.8
EPS
49.4
1.5
41.9
30.8
Margins (%)
FY11
FY12P
FY13E
FY14E
EBITDA
20.1
21.1
19.5
21.4
EBIT
16.9
18.6
17.3
19.4
Net profit
15.4
11.4
13.4
14.5
Valuation ratios
FY11
FY12P
FY13E
FY14E
P/E (x)
26.4
21.5
16.3
12.3
Price/BV(x)
5.9
4.1
3.3
2.6
4.1
2.5
2.0
1.7
EV/sales (x)
3.3
2.9
2.5
2.1
EV/EBITDA (x)
16.2
13.6
13.0
9.6
Mcap/Sales (x)
4.1
2.5
2.0
1.7
Earnings Yiels (%)
3.8
4.7
6.6
8.7
27
Under performer
Particulars
1-year fwd P/E
INR
30x
25x
600
20x
500
15x
400
300
200
100
Apr/12
Oct/11
Apr/11
Oct/10
Apr/10
Oct/09
Apr/09
Oct/08
Apr/08
Oct/07
Apr/07
0
Oct/06
US base business going strong; exclusivities and better

product mix to propel growth
Taro going strong; however expect current growth not to be
sustainable over the long term
Expect domestic business at CAGR 18% over FY12-14E on
the back of strong product portfolio in the niche segments
Margins remain healthy- steady OPM while marginal drop in
NPM due to tax changes
Do not expect any significant re-rating of the stock on
concerns of diminishing limited opportunities in the US
market (post 2015) and normalize Taro growth.
Value Sun Pharma at 24x FY13 earnings to arrive at our
target price of INR668
TP: INR668
Apr/06
Sun Pharma
FY11
FY12
FY13E
FY14E
CAGR (%)
Net Sales (INRmn)
57,214
80,057
98,899
110,859
25
EBITDA (INRmn)
19,700
32,507
36,263
38,861
25
EPS (INR)
17.5
25.0
27.8
30.0
20
EV/EBITDA (x)
22.4
18.2
16.3
14.6
NM
ROE (%)
21.0
24.5
22.4
20.1
NM
PE (x)
25.2
23.9
21.9
20.3
NM
Sun Pharma
Under performer
Revenue Performance
TP: INR668
Margin Performance
120,000
70
50%
60
45%
47.1%
100,000
40%
40
40.6%
34.0%
35%
30
60,000
42.7%
INR Mn
80,000
43.8%
45.2%
50
20
40,000
33.7%
30%
10
36.7%
34.4%
31.7%
35.1%
32.3%
29.1%
28.0%
25%
0
20,000
20%
-10
0
15%
-20
FY08
FY09
FY10
FY11
FY12
FY13E
FY14E
10%
FY08
Domestic
Export
API
FY09
FY10
FY11
FY12P
FY13E
FY14E
Revenue Growth (%)

EBITDA
Net Profit
ROCE Vs ROE
40
38.3
35
30.2
30
25
25.2
24.5
21.6
20
21.0
18.2
15
19.1
14.7
13.5
22.4
16.7
20.1
15.2
10
5
FY08
FY09
FY10
FY11
RoE (%)
FY12P
FY13E
FY14E
RoCE (%)
29
Sun Pharma
Under performer
TP: INR668
1QFY13 Preview
Revenue growth to be driven by the continuing sale of gLipodox in US and price increases by
Taro.
Domestic market continues to grow above industry average (~14-16%) in the current quarter.
Expect the company maintain its reach margin of ~30% despite the increase in tax expenses.
INR mn
Net sales
Raw material cost
Gross profit
Gross margin
Staff Cost
Other Expenditure
Total Expenditure
EBITDA
EBITDA margin (%)
Other income
Net interest income / (loss)
PBT
Tax
Tax rate
Reported PAT
PAT Margin
1QFY12
16,357
4,071
2QFY12
18,946
3,639
3QFY12
21,451
3,781
4QFY12
23,299
4,909
1QFY13
21,344
5,403
y-o-y
30%
33%
q-o-q
-8%
10%
12,287
75%
15,307
81%
17,670
82%
18,390
79%
15,941
75%
30%
-43 bps
-13%
-424 bps
2,786
4,026
2,727
4,740
2,885
5,148
3,480
5,346
3,399
4,831
22%
20%
-2%
-10%
10,883
5,474
33%
647
653
316
5,796
143
2%
5,653
35%
11,106
7,840
41%
668
765
417
8,355
1,281
15%
7,074
37%
11,814
9,638
45%
774
(863)
591
8,591
634
7%
7,957
37%
13,735
9,565
41%
823
2,181
(112)
10,811
1,768
16%
9,043
39%
13,633
7,711
36%
761
746
320
8,016
1,363
17%
6,653
31%
25%
41%
266 bps
18%
14%
1%
38%
855%
1454 bps
18%
-339 bps
-1%
-19%
-492 bps
-8%
-66%
-386%
-26%
-23%
64 bps
-26%
-764 bps
30
Sun Pharma
Under performer

Particulars
Revenue
TP: INR668

FY10
FY11
FY12P
FY13E
FY14E
40,075
57,214
80,057
98,899
110,859
Particulars
FY10
FY11
FY12P
FY13E
FY14E
78,289
94,833
116,373
140,984
167,824
1,932
8,472
12,326
15,177
18,248
459
2,049
2,049
2,049
2,049
Provisions
3,484
5,030
5,418
5,484
5,519
Short-term debt
1,252
2,207
1,281
1,281
1,281
Current liabilities
4,095
9,203
6,155
9,388
89,512
121,794
143,601
174,362
205,443
10,600
10,227
9,707
9,187
15,090
25,060
28,510
29,475
30,397
30,664
22,310
22,310
22,310
22,310
10,739
14,794
13,458
25,786
28,623
11,748
11,716
22,656
27,989
31,373
11,281
12,973
14,919
17,157
445
490
514
540
21,936
30,462
43,082
67,360
37,121
60,172
80,039
112,289
145,053
890
3,652
2,504
558
(1,539)
89,512
121,794
143,601
174,362
205,443
Minority interests

EBITDA
EBIT
Other income
Profit before tax and
extraordinary
(26,442)
(37,514)
(47,550)
(62,637)
(71,998)
13,632
19,700
32,507
36,263
38,861
(1,533)
(2,041)
(2,912)
(3,043)
(3,086)
12,099
17,659
29,595
33,220
35,775
2,048
2,699
3,958
4,942
5,337
14,147
20,358
33,554
38,162
41,112
199
Long-term debt

Net intangible assets
Net fixed assets
Investments
Inventories
Profit before tax
Provision for tax
14,347
20,358
33,554
38,162
41,112
(679)
(1,284)
(3,826)
(6,488)
(6,989)
Sundry debtors
Loans & advances
Net profit
Minority Interest
Reported PAT
13,469
41
13,510
19,074
29,727
31,675
34,123
(913)
(3,855)
(2,851)
(3,071)
18,161
25,873
28,824
31,052

Current assets
Total assets
Adjusted Profit
13,310
18,161
25,873
28,824
5,747
8,488
74
6,073
10,523
31,052
31
Sun Pharma
Under performer
Key ratios

Particulars
Profit before tax
Depreciation
Tax
Capex
Investments
Dividends
Others
FY10
FY11
FY12P
FY13E
FY14E
14,148
20,358
33,554
38,162
41,112
1,533
(4,356)
2,041
5,482
2,912
(14,002)
(1,745)
(1,077)
(3,826)
7,811
23,894
(2,841)
(4,454)
3,043
(16,331)
3,086
(7,315)
FY11
FY12P
FY13E
FY14E
EPS (INR)
13.0
17.5
25.0
27.8
30.0
BV per share (INR)
75.6
91.6
112.4
136.1
162.1
ROE (%)
18.2
21.0
24.5
22.4
20.1
Growth (%)
FY10
FY11
FY12P
FY13E
FY14E
Revenues
(5.8)
42.8
39.9
23.5
12.1
EBITDA
(26.9)
44.5
65.0
11.6
7.2
19,785
20,332
31,991
Net profit
(25.7)
34.4
42.5
11.4
7.7
EPS
(25.7)
34.4
42.5
11.4
7.7
(6,000)
(3,500)
(3,500)
Margins (%)
FY10
FY11
FY12P
FY13E
FY14E
EBITDA
34.0
34.4
40.6
36.7
35.1
EBIT
30.2
30.9
37.0
33.6
32.3
Net profit
33.7
31.7
32.3
29.1
28.0
Valuation ratios
FY10
FY11
FY12P
FY13E
FY14E
P/E (x)
27.5
25.2
24.4
21.9
20.3
Price/BV(x)
4.7
4.8
5.4
4.5
3.8
9.3
8.0
7.9
6.4
5.7
EV/sales (x)
8.7
7.7
7.6
6.0
5.1
EV/EBITDA (x)
25.7
22.4
18.6
16.3
14.6
Mcap/Sales (x)
9.3
8.0
7.9
6.4
5.7
Earnings Yiels (%)
3.6
4.0
4.1
4.6
4.9
(123,198)
(2,137)
(21,485)
(6,000)
(3,500)
(3,500)
(77)
(3,787)
(927)
(3,328)
(3,314)
(4,333)
(4,213)
(4,213)
(69)
(3,464)
(7,747)
(5,259)
(4,213)
(4,213)
Net change in cash
2,210
(5,338)
8,525
12,620
24,279
21,936
FY10
(6,989)
(165,747)
6,722
Particulars
(6,488)
Financing cash flow
TP: INR668
30,462
43,082
67,360
32
Torrent Pharma
Under performer
Revive in the domestic acute segment and focus toward

emerging markets (GEM) to drive 18% revenue CAGR.
TP: INR629
1-year fwd P/E
INR
800
700
Particulars
400
10x
300
8x
200
100
Apr/12
Dec/11
Apr/11
Aug/11
Dec/10
Apr/10
Aug/10
Dec/09
Aug/09
Dec/08
Apr/09
Apr/08
Aug/08
Dec/07
Aug/07
Dec/06
Apr/07
0
Apr/06
Value Torrent Pharma at 14x FY13 earnings to arrive at

our target price of INR629
12x
500
Aug/06
New markets (US and Mexico) and JV with Novo

Nordisk and AZ provides long term strength
15x
600
Dec/05
Concentrating on lifestyle diseases segment to drive

margins; expect margins to remain steady at 18% over
FY12-14E
FY11
FY12
FY13E
FY14E
CAGR (%)
Net Sales (INRmn)
22,265
26,959
31,620
36,762
18.2
EBITDA (INRmn)
4,092
5,007
5,602
6,492
16.6
EPS (INR)
31.9
33.6
44.9
53.1
18.5
EV/EBITDA (x)
13.8
10.7
10.2
8.7
NM
ROE (%)
29.2
25.6
28.8
28.0
NM
PE (x)
20.6
19.6
14.7
12.4
NM
Torrent Pharma
Under performer
TP: INR629
Margin Performance
Revenue Performance
40,000
25
25%
23.0%
35,000
20
30,000
20%
INR mn
25,000
19.3%
15
%
20,000
10
15,000
10,000
12.7%
12.6%
12.7%
18.2%
12.3%
12.6%
10.9%
10.3%
10%
18.3%
16.3%
15.5%
15%
19.3%
5,000
0
0
FY08
FY09
Domestic
FY10
International
FY11
FY12E
CRAMS
FY13E
5%
FY14E
FY08
FY09
Revenue Growth (%)
FY10
EBITDA
FY11
FY12P
FY13E
FY14E
Net Profit
ROCE Vs ROE
40
35
34.8
30
31.2
29.3
29.2
28.8
28.0
18.3
18.0
25.6
25
20
17.0
15
18.4
20.2
17.5
17.1
10
FY08
FY09
FY10
FY11
RoE (%)
FY12P
FY14E
RoCE (%)

FY13E
34
Torrent Pharma
Under performer
TP: INR629
1QFY13 Preview
Sales mainly driven by the robust 25-30% growth in Brazilian market and increase in revenue
contribution from the new segment specially US and Mexico.
Recovery in domestic market support margin.
Germany and Russian market revenue to grow at ~15%.
INR mn
Net sales
Total Income
COGS
Gross profit
Gross margin
Staff Cost
R&D Expenses
Other Expenditure
Total Expenditure
EBITDA
EBITDA margin (%)
Other Income/(Expenses)
EBIT
Interest Expenses Net
PBT
Tax
Tax rate
Adj. PAT
Adj. PAT Margin
1QFY12
6,134
341
6,475
1,959
4,516
74%
1,115
330
1,540
4,944
1,531
25%
202
24
1,354
41
1,313
287
22%
1,025
17%
2QFY12
6,578
256
6,833
2,221
4,612
70%
1,161
317
1,728
5,427
1,407
21%
201
43
1,249
29
1,219
212
17%
1,000
15%
3QFY12
6,755
211
6,966
2,223
4,743
70%
1,199
349
1,980
5,751
1,215
18%
197
23
1,041
2
1,040
201
19%
832
12%
4QFY12
6,540
203
6,743
2,228
4,515
69%
1,442
352
1,870
5,893
850
13%
218
124
757
89
668
24
4%
637
10%
1QFY13
7,285
226
7,511
2,404
5,107
70%
1,311
393
2,040
6,148
1,363
19%
202
127
1,288
107
1,181
260
22%
921
13%
y-o-y
19%
-34%
16%
23%
13%
-351 bps
18%
19%
32%
24%
-11%
-626 bps
0%
419%
-5%
164%
-10%
-10%
12 bps
-10%
-407 bps
q-o-q
11%
11%
11%
8%
13%
107 bps
-9%
12%
9%
4%
60%
571 bps
-7%
2%
70%
20%
77%
996%
1845 bps
45%
290 bps
35
Torrent Pharma
Under performer

Net Sales
FY11
FY12P
FY13E
FY14E
22,265
26,959
31,620
36,762
21,953
26,018
30,270
4,092
5,007
5,602
6,492
626
817
807
931
3,466
4,189
4,795
5,561
Financial Charges
387
395
428
437
Other income
347
445
506
663
3,427
4,240
4,874
5,786
654
3,427
3,586
4,874
5,786
725
723
1,072
1,273
2,702
2,863

EBIT
Profit before tax and extraordinary

Profit before tax
Tax
Net profit
Minority Interest
3,802
FY11
FY12P
FY13E
FY14E
10,224
11,938
14,274
17,827
16
35
35
35
Long-term debt
3,481
3,221
3,569
3,565
Provisions
1,427
1,807
1,419
1,567
Short-term debt
2,240
1,381
2,569
2,674
Current liabilities
7,479
11,545
8,513
9,897
38
38
38
24,867
29,964
30,416
35,604
Net fixed assets
8,541
9,157
10,497
12,061
Investments
1,460
1,240
1,240
1,240
Inventories
5,048
5,316
5,727
6,659
Sundry debtors
3,404
5,228
4,881
5,776
Loans & advances
1,428
1,178
2,446
3,203
678
1,155
1,155
1,155
4,788
6,743
4,540
5,581
15,346
19,620
18,750
22,373
(480)
(514)
(514)
(514)
(23)
(23)
(23)
Reported PAT
2,702
2,840
3,779
Adjusted Profit
2,702
3,471
3,756
Other liabilities

4,513
(0)
Income from JV/Associates
Minority interests
18,173
EBITDA
TP: INR629

Current assets
4,491
Other assets
463
463
463
4,468
Total assets
24,867
29,964
30,416
35,604
36
Torrent Pharma
Under performer
Key ratios
Cash flow statement

Particulars
FY11
FY12P
FY13E
FY14E
EPS (INR)
31.9
33.6
44.9
53.1
120.8
141.1
168.7
210.7
ROE (%)
29.2
25.6
28.8
28.0
Growth (%)
FY11
FY12P
FY13E
FY14E
Revenues
15.8
22.3
18.2
16.3
EBITDA
-2.8
22.3
11.9
15.9
Net profit
16.9
5.1
33.0
18.8
EPS
16.9
5.1
33.0
18.8
Margins (%)
FY11
FY12P
FY13E
FY14E
EBITDA
19.3
19.3
18.3
18.2
EBIT
16.3
16.1
15.6
15.6
Net profit
12.7
10.9
12.3
12.6
Valuation ratios
FY11
FY12P
FY13E
FY14E
P/E (x)
20.6
19.6
14.7
12.4
Price/BV(x)
5.4
4.7
3.9
3.1
2.6
2.1
1.8
1.6
EV/sales (x)
2.7
2.1
1.9
1.6
EV/EBITDA (x)
13.8
10.7
10.2
8.7
1,041
Mcap/Sales (x)
2.6
2.1
1.8
1.6
5,581
Earnings Yiels (%)
4.9
5.1
6.8
8.1
FY11
FY12P
FY13E
FY14E
2,702
2,840
3,779
4,491
Depreciation
626
817
807
931
621
2,762
(5,389)
(1,049)
(3)
223
255
312
Operating cash flow
3,945
6,642
(549)
4,684
Capital expenditure
(2,631)
(1,433)
(2,147)
(2,496)
(1,191)
219
236
(234)
195
148
(3,586)
(1,447)
(1,951)
(2,348)
1,315
5,209
(2,695)
2,189
463
(1,119)
1,536
102
Dividend paid
(591)
(1,780)
(789)
(938)
Interest Paid
(543)
(341)
(450)
(460)
Financing cash flow
(671)
(3,240)
297
(1,296)
Net change in cash
(312)
1,955
(2,203)
4,788
6,743
4,540
PAT
TP: INR629
BV per share (INR)
Other investing cash flow

Investing cashflow
Free cash flow to firm
Issue of equity
37
Under performer
1200
Synergy benefit from acquisition would generate post

FY14E.
1000
Expect the recent acquisition of Biochem and Nesher to

dent margins on account of high overhead cost.
600
Particulars
800
20x
15x
400
10x
200
Jun/12
Dec/11
Jun/11
Dec/10
Jun/10
Dec/09
Jun/09
Dec/08
Jun/08
Dec/07
0
Jun/07
We value Cadila Healthcare at 20x FY13 earnings to

arrive at our target price of INR705.
25x
Dec/06
USFDA resolution for Moriya facility is a key growth

driver for the near term.
1-year fwd P/E
INR
Jun/06
Domestic formulation is back on track and is expected to

grow at CAGR of 20% over FY 12-14E.
TP: INR705
Dec/05
Cadila
FY11
FY12E
FY13E
FY14E
CAGR (%)
Net Sales (INRmn)
46,302
52,633
58,302
70,262
15
EBITDA (INRmn)
10,262
10,839
11,983
14,636
13
34.7
31.8
35.2
45.0
9.4
15.3
13.7
11.1
NM
ROE (%)
37.4
27.5
25.5
26.8
NM
PE (x)
21.2
23.1
20.9
16.3
NM
EPS (INR)
EV/EBITDA (x)
Cadila
Under performer
Revenue Performance
TP: INR705
Margin Performance
30
80,000
25.0%
70,000
25
21.9%
20.0%
20
50,000
15
40,000
19.7%
11.5%
10,000
0
FY08
FY09
Domestic
FY10
Exports
FY11
FY12P
JVs
FY13E
12.4%
12.4%
20.8%
13.1%
10.4%
10.0%
20.6%
13.7%
10
20,000
20.6%
15.4%
15.0%
30,000
22.2%
20.7%
INR mn
60,000
5.0%
FY14E
FY08
FY09
Revenue Growth (%)
FY10
EBITDA
FY11
FY12E
FY13E
FY14E
Net Profit
ROCE Vs ROE
40
37.4
35.3
35
30
27.7
15.4
25.5
26.8
23.1
21.4
20
15
27.5
26.4
25
20.2
17.2
16.7
17.0
10
5
FY08
FY09
FY10
FY11
RoE (%)
FY12E
FY14E
RoCE (%)

FY13E
39
Cadila
Under performer
TP: INR705
1QFY13 Preview
Revenue growth supported by a recovery in the domestic market and JVs.
However margin remain under pressure on the back of increase in operational and financial due to
inorganic growth and increase in taxes.
INR mn
Net sales
Total Income
COGS
Gross profit
Gross margin
Staff Cost
Other Expenditure
Total Expenditure
EBITDA
EBITDA margin
Other Income
EBIT
Interest Paid
PBT
Total tax
Tax rate, %
Reported PAT
PAT Margin
1QFY12
11,735
722
12,457
3,620
8,837
75%
1,615
4,198
9,433
3,024
25.8%
347
18
2,695
112
2,584
285
11%
2,298
20%
2QFY12
12,196
168
12,364
3,906
8,291
68%
1,803
4,285
9,993
2,371
19.4%
375
110
2,106
769
1,337
235
18%
1,026
8%
3QFY12
13,525
308
13,832
4,520
9,312
69%
1,922
4,775
11,216
2,616
19.3%
465
182
2,333
594
1,739
174
10%
1,492
11%
4QFY12
13,444
536
13,980
4,748
8,696
65%
1,981
4,424
11,152
2,828
21.0%
391
176
2,613
375
2,238
436
19%
1,709
13%
1QFY13
14,090
NA
14,090
4,344
9,745
69%
1,808
4,702
10,855
3,235
23.0%
386
250
3,099
402
2,697
486
18%
2,212
16%
y-o-y
20%
NA
13%
20%
10%
-613 bps
12%
12%
15%
7%
-281 bps
11%
1259%
15%
260%
4%
70%
695 bps
-4%
-389 bps
q-o-q
5%
NA
1%
-8%
12%
448 bps
-9%
6%
-3%
14%
192 bps
-1%
42%
19%
7%
21%
11%
-150 bps
29%
299 bps
40
Cadila
Under performer
TP: INR705

FY10
FY11
FY12P
FY13E
FY14E
FY10
FY11
FY12P
FY13E
FY14E
Net Sales
36,868
46,302
52,633
58,302
70,262
16,285
21,715
25,737
30,907
37,979
28,782
36,040
41,795
46,320
55,626
392
669
904
1,190
1,476
Long-term debt
8,066
8,052
13,223
15,454
18,989
EBITDA
8,086
10,262
10,839
11,983
14,636
Provisions
1,951
2,233
3,037
5,088
5,197
1,339
1,269
1,579
1,543
1,648
Short-term debt
2,839
2,921
6,871
4,636
5,697
EBIT
6,747
8,993
9,260
10,440
12,988
Current liabilities
6,760
8,955
12,379
11,200
12,616
Interest expenses
821
699
1,849
1,607
1,791
36,293
44,545
62,608
68,476
81,954
Other income
159
131
532
Net fixed assets
19,326
22,636
33,318
34,668
36,437
207
207
242
1,500
1,500
PBT and extraordinary
6,085
8,425
7,942
8,833
11,197
Inventories
7,504
8,119
10,905
10,901
12,973
46
Sundry debtors
4,668
7,652
8,863
8,865
10,225
6,131
8,425
7,942
8,833
11,197
Loans & advances
3,120
4,106
5,377
6,990
9,087
741
1,064
1,130
1,325
1,680
421
442
464
Net profit
5,344
7,361
6,812
7,508
9,518
2,507
2,952
4,667
6,294
12,452
Current assets
17,799
22,829
30,233
33,492
45,201
Minority Interest
(238)
(251)
(286)
(286)
(286)
(1,141)
(1,127)
(1,185)
(1,185)
(1,185)
Reported PAT
5,097
7,110
6,526
7,222
9,232
102
36,293
44,545
62,608
68,476
81,954
Minority interests
Investments
PBT
Provision for tax

Miscellaneous expenditure
Adjusted Profit
5,051
7,110
6,526
7,222
9,232
Total assets
41
Cadila
Under performer
Cash flow statement

TP: INR705
Key ratios
FY10
FY11
FY12P
FY13E
FY14E
Particulars
FY10
FY11
FY12
FY13E
FY14E
Net Profit
5,051
7,110
6,526
7,222
9,232
EPS (INR)
24.6
34.7
31.8
35.2
45.0
Depreciaiton
1,339
1,269
1,579
1,543
1,648
BV Per Share (INR)
79.4
105.9
125.5
150.8
185.3
ROE (%)
35.3
37.4
27.5
25.5
26.8
Growth (%)
FY10
FY11
FY12
FY13E
FY14E
Revenues
25.9
25.6
13.7
10.8
20.5
EBITDA
33.5
26.9
5.6
10.6
22.1
Net profit
66.5
40.8
-8.2
10.7
27.8
EPS
66.5
40.8
-8.2
10.7
27.8
Margins (%)
FY10
FY11
FY12
FY13E
FY14E
EBITDA
21.9
22.2
20.6
20.6
20.8
EBIT
18.3
19.4
17.6
17.9
18.5
Net profit
13.7
15.4
12.4
12.4
13.1
Valuation ratios
FY10
FY11
FY12
FY13E
FY14E
P/E (x)
29.8
21.2
23.1
20.9
16.3
Price/BV(x)
9.3
6.9
5.9
4.9
4.0
4.1
3.3
2.9
2.6
2.1
EV/sales (x)
2.5
2.1
3.2
2.8
2.3
EV/EBITDA (x)
11.3
9.4
15.3
13.7
11.1
Mcap/Sales (x)
4.1
3.3
2.9
2.6
2.1
Earnings Yields (%)
3.4
4.7
4.3
4.8
6.1
(1,400)
(2,331)
(1,461)
(760)
(4,027)
1,964
648
2,193
1,893
2,077
Operating cashflow
6,954
6,696
8,837
9,898
8,929
Capital expenditure
Investing cashflow
Free cashflow to firm
(2,994)
Dividend paid
Other financing cashflow
Financing cashflow
Net cash generated during year
(12,261)
(5)
(542)
(180)
(35)
(2,892)
(1,258)
(359)
(3,417)
(3,716)
(4,530)
(12,296)
(4,150)
(3,417)
3,960
2,530
(3,425)
7,006
5,512
Issue of equity
(4,166)
248
403
9,121
(5)
4,597
(751)
(1,222)
(2,504)
(2,051)
(2,160)
(2,745)
(902)
(1,392)
(2,064)
(1,791)
(3,248)
(1,721)
5,225
(4,120)
645
(10)
445
1,766
1,628
6,157
Cash at beginning of year
2,517
2,507
2,952
4,667
6,294
Cash at end of year
2,507
2,952
4,667
6,294
12,452
42
Biocon
Under performer
Domestic and the EMs to lead the growth.
TP: INR263
INR
Uncertainty about the Insulin launch in developed

market (company expected 2013 launch in EU and
2015 launch in the US) would be the key area of
concern
600
500
25x
400
20x
300
15x
Particulars
10x
100
Jun/12
Dec/11
Jun/11
Dec/10
Jun/10
Dec/09
Jun/09
Dec/08
Jun/08
Dec/07
Jun/07
Dec/06
0
Jun/06
Value Biocon at 16x FY13 earnings to arrive at our

200
Dec/05
API growth supported by the steady growth of

Fidaxomicin
FY11
FY12
FY13E
FY14E
CAGR (%)
28,137
20,865
22,563
25,134
(4)
6,296
5,174
5,708
6,681
EPS (INR)
18.4
16.9
16.5
20.5
EV/EBITDA (x)
11.2
14.1
12.3
9.9
NM
ROE (%)
19.4
15.7
13.7
15.2
NM
PE (x)
19.5
21.2
21.8
17.4
NM
Net Sales (INRmn)

EBITDA (INRmn)
Biocon
Under performer
TP: INR263
Margin Performance
Revenue Performance (ex Axicorp)

30,000
30
INR mn
25,000
30.0%
28.2%
25
25.0%
20,000
23.8%
20
21.9%
20.0%
15,000
15
10,000
10
15.0%
5,000
10.0%
0
FY08
FY09
FY10
Biopharma
FY11
FY12
Research Services
FY13E
24.8%
21.4%
26.6%
25.3%
22.4%
18.8%
16.3%
16.2%
14.8%
14.6%
13.1%
5.0%
FY14E
FY08
FY09
FY10
Revenue Growth (%)
EBITDA
FY11
FY12
FY13E
FY14E
Net Profit
ROCE Vs ROE
25.0%
21.0%
20.0%
15.0%
18.1%
16.1%
21.8%
19.4%
17.6%
17.2%
16.8%
15.7%
12.7%
15.2%
13.7%
12.3%
10.8%
10.0%
5.0%
FY08
FY09
FY10
FY11
ROCE
FY12
FY14E
ROE

FY13E
44
Biocon
Under performer
TP: INR263
1QFY13 Preview
Revenue
growth
driven
by
consistently
better
performance
in
insulin, immunosuppresants, statins and branded formulations.
Expect 22% growth in revenue and 5% growth in earnings. While EBITDA margin is likely to
remain steady.
Net Sales
Raw material cost
Gross Profit
Gross margin
Staff Cost
R&D
Other Expenditure
Total Expenditure
EBITDA
EBITDA margin
Depreciation
Other income
EBIT
Interest exp
PBT
Tax
Tax rate
Reported PAT
PAT Margin
1QFY12
4,420
2,137
2QFY12
5,084
2,369
3QFY12
5,322
2,328
4QFY12
6,102
2,771
1QFY13
5,412
2,489
y-o-y
22%
16%
q-o-q
-11%
-10%
2,283
52%
644
203
229
3,213
1,207
27%
451
120
877
57
820
2,715
53%
724
306
351
3,750
1,334
26%
429
160
1,065
20
1,045
2,994
56%
732
330
508
3,898
1,424
27%
434
990
29
961
3,331
55%
761
726
298
4,556
1,546
25%
431
13
1,128
30
1,098
2,922
54%
645
325
541
4,000
1,411
26%
527
14
898
32
867
119
15%
701
16%
188
18%
857
17%
113
12%
848
16%
120
11%
978
16%
130
15%
737
14%
28%
235 bps
0%
60%
136%
25%
17%
-123 bps
17%
-89%
2%
-45%
6%
9%
3%
5%
-223 bps
-12%
-59 bps
-15%
-55%
82%
-12%
-9%
75 bps
22%
5%
-20%
5%
-21%
8%
37%
-25%
-241 bps
45
Biocon
Under performer

Revenue
TP: INR263
FY11
FY12
FY13E
FY14E
28,137
20,865
22,563
25,134
FY11
FY12
FY13E
FY14E
20,385
22,725
25,312
28,712
377
38
38
38
Long-term debt
2,039
699
1,232
1,532
Short-term debt
1,303
5,832
6,304
6,304
Current liabilities & Provisions
10,998
10,155
5,143
5,689
Minority interests
EBITDA
Depreciation
(21,841)
(15,691)
(16,854)
(18,453)
6,296
5,174
5,708
6,681
(1,568)
(1,744)
(2,107)
(2,203)
EBIT
4,728
3,430
3,601
4,478
35,102
39,449
38,030
42,275
Interest expenses
(257)
(123)
(179)
(192)
Net fixed assets
13,567
15,253
14,243
13,054
618
472
571
Net intangible assets
2,399
1,341
1,341
1,341
Profit before tax and

extraordinary
4,471
3,925
3,894
4,857
Investments
4,605
5,564
4,306
4,306
Inventories
4,137
3,783
3,616
4,028
Profit before tax
4,471
3,925
3,895
4,858
Sundry debtors
5,199
4,917
5,415
6,032
Loans & advances
1,279
95
105
115
4,413
5,132
9,005
13,399
15,028
13,927
18,140
23,574
(497)
78
35,102
39,449
38,030
42,275
Other income
Tax
Net profit
(721)
(541)
(604)
(753)
3,750
3,384
3,291
4,105
(75)
Reported PAT
3,675
3,384
3,291
4,105
Adjusted Profit
3,675
3,384
3,290
4,104
Total assets
Minority Interest
Current assets
46
Biocon
Under performer
Key ratios

Profit before tax
Depreciation
Change in working
capital
Tax
Net Operating Cash
Flow
Capex
Investments
Dividends
Financing cash flow
Net change in cash
TP: INR263
FY10
FY11
FY12
FY13E
FY14E
3,887
4,471
3,925
3,895
4,858
1,401
1,568
1,744
2,107
2,203
345
(4,345)
490
721
5,433
(2,417)
94
4,522
494
541
604
753
11,105
6,116
2,084
7,319
(1,582)
(3,687)
(1,097)
(1,014)
FY10
FY11
FY12
FY13E
FY14E
EPS (INR)
17.8
18.4
16.9
16.5
20.5
BV per share (INR)
88
102
114
127
144
ROE (%)
22
19
16
14
15
Growth (%)
FY10
FY11
FY12
FY13E
FY14E
Revenues
43.7
17.0
(25.8)
8.1
11.4
EBITDA
29.4
22.3
(17.8)
10.3
17.0
EBIT
30.3
26.2
(27.4)
5.0
24.4
(7.9)
(2.8)
(7.9)
(2.8)
Net profit
630
299
959
(1,258)
(4,306)
(1,787)
(1,283)
(2,728)
(2,355)
(5,320)
11
(702)
(1,794)
3,189
1,005
300
(701)
(1,044)
(703)
(704)
(691)
(2,495)
2,145
2,955
7,328
5,533
1,399
4,413
5,132
303
32
9,005
(403)
123.8
5.1
24.7
Diluted EPS
13.0
3.3
24.7
Margins (%)
FY10
FY11
FY12
FY13E
FY14E
EBITDA
21.4
22.4
24.8
25.3
26.6
EBIT
15.6
16.8
16.4
16.0
17.8
Net profit
14.5
13.1
16.2
14.6
16.3
Valuation ratios
FY10
FY11
FY12
FY13E
FY14E
P/E (x)
16.0
19.5
21.2
21.8
17.4
Price/BV(x)
3.2
3.5
3.2
2.8
2.5
2.4
2.5
3.4
3.2
2.8
EV/sales (x)
2.5
2.5
3.5
3.1
2.6
11.8
11.2
14.1
12.3
9.9
1,596
13,399
EV/EBITDA (x)
47
Under performer
Particulars
INR mn
140,000
1-year fwd EV/EBITDA
120,000
100,000
16x
80,000
13x
60,000
10x
40,000
20,000
FY10
FY11
FY12E
FY13E
CAGR (%)
20,265
23,320
28,001
34,361
19
3,013
3,770
4,644
6,076
26
EPS (INR)
10.6
14.6
18.7
23.2
30
EV/EBITDA (x)
17.0
17.2
19.9
15.4
NM
8.4
10.6
11.9
12.4
NM
34.3
32.4
33.9
27.3
NM
Net Sales (INRmn)

EBITDA (INRmn)
ROE (%)
PE (x)
Jun-12
Dec-11
Jun-11
Dec-10
Jun-10
Dec-09
Jun-09
Dec-08
Jun-08
Dec-07
Jun-07
Dec-06
0
Jun-06
We believe Apollo Hospitals to be the best play in the

Indian healthcare services industry with better focus on
tier II and III growth areas
We expect majority of these projects are to be under
Apollos Reach initiative, focusing on tier-II/III cities
across India.
Expect earnings to continue its strong performance
(CAGR 14%) over the next 2 years on the back of higher
occupancy and increased ARPOB. We expect Apollo's
core operating margin to remain between 16-18% in the
long term.
Value Apollo at 15x FY13 EV/EBITDA to arrive at our
TP: INR683
Dec-05
Apollo Hospitals
Apollo Hospitals
Under performer
Revenue Performance
40000
TP: INR683
Margin Performance
90%
INR mn
35000
80%
30000
70%
60%
25000
50%
20000
15000
20.0%
18.0%
12.0%
10.0%
40%
8.0%
6.0%
20%
4.0%
5000
10%
2.0%
Healthcare
Pharmacy
FY12E
Others
7.8%
8.4%
8.5%
6.5%
--
0%
FY11
14.9%
14.0%
30%
FY10
16.2%
16.0%
10000
17.7%
16.6%
FY10
FY13E
FY11E
EBITDA
Sales Growth
FY12E
FY13E
Profit Margin
ROCE Vs ROE
13.0%
11.9%
11.0%
12.4%
12.0%
10.6%
9.9%
9.1%
9.0%
8.4%
7.0%
7.3%
5.0%
FY10
FY11
FY12E
RoE
RoCE

FY13E
49
Apollo Hospitals
Under performer
TP: INR683
1QFY13 Preview
Expect revenue to grow by 18.1% y-o-y on account of better operating efficiency, particularly in its
'Reach' hospitals operating in the tier II/III cities.
We expect occupancy ratios to remain stable at ~78% for its standalone hospital segment.
Apollo intends to add five new specialty hospitals in tier-II/III cities in South and West India, which
are expected to be commissioned by FY13.
INR mn
1QFY12
2QFY12
3QFY12
4QFY12
1QFY13
Net Sales
Raw Material Consumed
Employee Expenses
General Administrative Exp
S&D Expenses
Other Expenses
Total Expenditure
EBITDA
EBITDA Margin
Depreciation
Other Income
Interest
PBT
Tax
Tax rate
Reported PAT
PAT Margin
6410
3381
962
752
101
155
5351
1059
17%
198
47
149
759
246
32%
513
8%
6998
3616
1095
790
154
145
5800
1197
17%
228
70
210
829
271
33%
557
8%
7148
3732
1086
858
145
142
5964
1184
17%
243
104
127
918
272
30%
647
9%
7446
3825
1142
0
130
1149
6245
1200
16%
241
65
155
869
276
32%
593
8%
8257
4227
1155
1052
116
183
6732
1524
18%
172
47
170
1229
405
33%
823
10%
y-o-y
q-o-q
29%
11%
25%
11%
20%
1%
40%
NA
15%
-11%
18%
-84%
26%
8%
44%
27%
194 bps
234 bps
-13%
-28%
0%
-28%
14%
10%
62%
41%
65%
47%
56 bps
125 bps
61%
39%
197 bps
200 bps
50
Apollo Hospitals
Under performer
Balance sheet

Income from operations
EBITDA
Depreciation
EBIT
FY10
20,265
FY11
23,320
FY12E
28,001
FY13E
34,361
17,252
19,550
23,357
28,285
3,013
3,770
4,644
6,076
757
703
861
989
2,256
3,067
3,783
5,087
Interest expenses
587
587
654
1,310
Other income/Extraordinary
item
322
214
289
389
Profit before tax
1,992
2,693
3,417
4,165
Provision for tax
676
876
1,065
1,249
Net profit
Reported PAT
TP: INR683
1,315
1,315
1,817
1,817
2,352
2,352
2,915
FY10
FY11
FY12E
FY13E
Equity Capital
618
624
629
629
Reserves and surplus
15,917
17,098
21,195
24,528
Shareholders funds
16,535
17,722
21,824
25,157
Minorities
241
Borrowings
9,131
7,410
16,381
16,381
Net Deferred Tax
536
1,071
Total Liabilities
26,443
26,203
38,205
41,538
Gross block
17,449
15,930
18,320
21,828
Depreciation
4,231
4,933
5,339
6,502
Net block
13,219
10,997
12,981
15,326
Capital WIP
3,037
2,984
3,664
4,366
Total fixed assets
16,256
13,982
16,645
19,692
Investments
4,166
6,241
6,616
7,012
Total current assets
11,995
11,330
24,455
26,681
Total current liabilities
5,973
5,350
9,510
11,848
Net current assets
6,022
5,980
14,944
14,834
Total Assets
26,443
26,203
38,205
41,538
2,915
51
Apollo Hospitals
Under performer
Key ratios (%)
Cash flow statement

Profit before tax
Depreciation
FY10
FY11
FY12E
FY13E
1,976
2,693
3,417
4,165
752
703
861
989
(296)
(1,662)
Tax
(865)
(876)
(1,065)
(1,249)
1,976
858
4,265
2,719
Change In fixed Assets
(3,892)
1,572
(2,891)
(3,509)
Change In Investments
1,664

Increase in equity
TP: INR683
(1,975)
(504)
317
(2,446)
(2,556)
(2,940)
869
(630)
2,368
(1,721)
700
(100)
Dividends
(401)
(494)
(548)
Financing cash flow
2,237
(2,057)
206
(648)
Net change in cash
2,238
(1,702)
2,025
(869)
3,117
1,413
3,439
2,570
FY10
FY11
FY12E
FY13E
EPS (INR)
10.6
14.6
18.7
23.2
BV per share (INR)
126.3
137.3
157.1
186.6
ROE (%)
8.4
10.6
11.9
12.4
ROCE (%)
7.3
9.9
9.1
12.0
Net debt/Equity
0.6
0.4
0.8
0.7
Growth (%)
FY10
FY11
FY12E
FY13E
Revenues
23.9
15.1
20.1
22.7
EBITDA
21.3
25.1
23.2
30.8
EBIT
22.4
35.9
23.3
34.5
Net profit
25.1
35.2
26.9
21.9
Diluted EPS
10.6
14.6
18.7
23.2
Margins (%)
FY10
FY11
FY12E
FY13E
EBITDA
14.9
16.2
16.6
17.7
EBIT
11.1
13.2
13.5
14.8
Net profit
6.5
7.8
8.4
8.5
Valuation ratios
FY10
FY11
FY12E
FY13E
P/E (x)
34.3
32.4
33.9
27.3
P/BV(x)
2.9
3.4
4.0
3.4
2.2
2.5
2.8
2.3
EV/sales (x)
2.5
2.8
3.3
2.7
EV/EBITDA (x)
17.0
17.2
19.9
15.4
52
Institutional Equities
Board Line : 66651450
Name
Fax : 22877000
Designation
Sector
Land Line
Ext.
email ID
Vipul Sharma
AVP - Sales
NA
22877006
116
vipulsharma@smcindiaonline.com
Anuraj Benara
Sr. Manager
NA
22877003
110
anurajbenara@smcindiaonline.com
Kumudini Shah
Sr. Manager
NA
22877004 / 5
112
kumudinishah@smcindiaonline.com'
Dealer
NA
22877001 & 2
150
kumarsushil@smcindiaonline.com'
Souvik Chatterjee
Sr. Research Analyst
Healthcare
NA
118
souvikchatterjee@smcindiaonline.com
Pritesh Jani
Metal
NA
105
priteshujani@smcindiaonline.com
Jaisheel Garg
Power
NA
122
jaisheelgarg@smcindiaonline.com
Sushil Pathak
Research Analyst
Auto & Auto Ancillaries
NA
102
sushilpathak@smcindiaonline.com
Vishal Narnolia
Research Analyst
BFSI
NA
107
vishalpnarnolia@smcindiaonline.com
Mitesh Shah
Associate Analyst
Healthcare
NA
141
miteshpshah@smcindiaonline.com
Sales & Dealing
Sushil Kumar
Research
53
54

Sec Pharm Update 130712

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Indian Pharmaceutical

Long Term Drivers Intact; Valuation Stretched

July 12, 2012

Revenue drivers intact; expect CAGR 20%

MCap (INR bn)

1QFY13 PREVIEW- PHARMACEUTICALS

Strong Earnings Growth; Valuation Stretched

GEM to drive future generic pharma growth

Total World Market

Source: Company, SMC Research

Pharmaceutical growth in CY11

1QFY13 PREVIEW- PHARMACEUTICALS

FTF attractiveness in US dipping out.

c85% fall in overall patent expiry

c55% fall in patent expiry

1QFY13 PREVIEW- PHARMACEUTICALS

Source: Company, SMC Research

. while base revenue to grow

Generic TRx share in US has doubled from 7% (2007)

1QFY13 PREVIEW- PHARMACEUTICALS

GEM opportunity to drive future growth

Stretched Valuation; Near term upside capped

Near term upside capped; sector at its best

DRRD and Lupin remain our top pick on account of

Historically traded in a band of 17x-21x 1yr fwd PE

We expect these two stocks to deliver the better

EPS Growth FY12-15E (%)

BSE HC underperformed in June due to overall

1yr fwd PE reflects stretch valuations

1QFY13 PREVIEW- PHARMACEUTICALS

1QFY13 PREVIEW- PHARMACEUTICALS

Company Update and 1QFY13 Preview

1QFY13 PREVIEW- PHARMACEUTICALS

Headwind in Europe to continue; Betapharm worry

Increased contribution from GEM to add traction

Strong biosimilar portfolio to support long-term growth

US base business growth to continue on back of Strong

Gradual improvement in domestic performance; expect

1-year fwd P/E

Attractive valuation; Underperformed the CNX Pharma

Value Dr Reddys Lab at 19x FY13 overall earnings to

Net Sales (INRmn)

Souvik Chatterjee (souvikchatterjee@smcindiaonline.com ) +91 22 6651451/ Ext:118 | Mitesh Shah (miteshpshah@smcindiaonline.com)

Under Performed compare to HC and SENSEX

Improvement in the domestic formulation segment

US business supported growth; while Europe pulled back

Robust product pipeline in US

1QFY13 PREVIEW- PHARMACEUTICALS

Revenue Growth (%)

1QFY13 PREVIEW- PHARMACEUTICALS

1QFY13 PREVIEW- PHARMACEUTICALS

Profit and loss statement (INR mn)

Net fixed assets

Cash & cash equivalents

Other Current Assets

Total current assets

Deferred tax asset, net

Provision for tax

1QFY13 PREVIEW- PHARMACEUTICALS

Cash flow statement (INR mn)

Change in working capital

BV Per Share (INR)

Other non-cash adjustments

Cash at beginning of year