Please refer to important disclosures at the end of this report

1


Y/E March (` cr) 4QFY2014 3QFY2014 % chg (qoq) 4QFY2013 % chg (yoy)
Net Sales 463 484 (4.4) 375 23.4
Other Income 3 1 254.1 2 121.0
Operating Profit 91 101 (10.7) 64 41.4
Interest 2 3 (34.2) 2 25.1
Net Profit 61 66 (7.0) 44 40.4
Source: Company, Angel Research
For 4QFY2014, Alembic Pharmaceuticals (Alembic) delivered numbers much
ahead of our estimates on the OPM front; however, the net profit came in below
expectations. The net sales came in at `463cr V/s an expected `492cr, registering
a yoy growth of 23.4%. The company's OPM came in at 19.6% V/s 18.7%
expected, posting an expansion of 248bp yoy, which led the company to post a
net profit growth of 40.4% yoy to `61cr V/s our expectation of `69.9cr. We
maintain our Neutral rating on the stock.
Results better than expectations on the OPM front: For 4QFY2014, Alembic
delivered numbers much above our expectations on the OPM front. Net sales
came in at `463cr V/s an expected `492cr, registering a yoy growth of 23.4%.
The growth was driven by exports, which rose 58.6% yoy. Domestic sales on the
other hand stood at `199.5cr V/s `175.3cr in the corresponding quarter of last
year, registering a yoy growth (with domestic formulation growth) of 14%. The
company's OPM came in at 19.6% V/s an expected 18.7%, posting an expansion
of 248bp yoy, which led the company to post a net profit growth of 40.4% yoy to
`61cr V/s our expectation of `69.9cr.
Outlook and valuation: Alembics growth and profitability profile has improved
post the restructuring carried out by the Management. Over FY2014-16, we
expect the company to post a CAGR of 16.1% and 14.6% in sales and net profit
respectively. We recommend a Neutral rating on the stock.
Key Financials (Consolidated)
Y/E March (` cr) FY2013 FY2014 FY2015E FY2016E
Net Sales 1,516 1,886 2,188 2,542
% chg 5.0 24.4 16.0 16.2
Net Profit 165 248 286 325
% chg 26.7 50.2 15.6 13.5
EPS (`) 8.8 13.1 15.2 17.3
EBITDA Margin (%) 16.4 18.7 18.8 18.3
P/E (x) 33.8 22.5 19.5 17.2
RoE (%) 36.8 42.1 36.2 31.2
RoCE (%) 29.6 39.4 33.3 30.5
P/BV (x) 11.1 8.3 6.2 4.7
EV/Sales (x) 3.8 3.0 2.6 2.2
EV/EBITDA (x) 23.1 15.9 13.8 12.0
Source: Company, Angel Research; Note: CMP as of April 28, 2014

NEUTRAL
CMP `296
Target Price -
Investment Period -

Stock Info
Sector
54
Bloomberg Code
ALPM@IN
Shareholding Pattern (%)
Promoters 74.1
MF / Banks / Indian Fls 2.2
FII / NRIs / OCBs 9.4
Indian Public / Others 14.3
Abs. (%) 3m 1yr 3yr*
Sensex 9.4 17.3 17.3
Alembic Pharma 31.4 166.4 -
*Since listed on Septeber 20, 2011
Face Value (`)
BSE Sensex
Nifty
Reuters Code
Pharmaceutical
Avg. Daily Volume
Market Cap (` cr)
Beta
52 Week High / Low
5,583
0.8
316/111
93,489
Net Debt (` cr)
2
22,632
6,761
ALEM.BO











Sarabjit Kour Nangra
+91- 22- 36357600 6806
sarabjit@angelbroking.com

Alembic Pharma
Performance Highlights
4QFY2014 Result Update | Pharmaceutical
April 29, 2014



Alembic Pharma | 4QFY2014 Result Update
April 29, 2014
2
Exhibit 1: 4QFY2014 performance (Consolidated)
Y/E March (` cr) 4QFY2014 3QFY2014 % chg(qoq) 4QFY2013 % chg (yoy) FY2014 FY2013 % chg (yoy)
Net sales 463 484 (4.4) 375 23.4 1,861 1,517 22.6
Other income 3 1 254.1 2 121.0 6 7 (18.8)
Total income 367 367

378 (3.1) 1,866 1,524

Gross profit 286 309 (7.3) 208 37.9 1147 837 37.2
Gross margin 61.9 63.8

55.4

61.7 55.1

Operating profit 91 101 (10.7) 64 41.4 355 249 42.7
Operating margin (%) 19.6 21.0

17.1

19.1 16.4

Interest 2 3 (34.2) 2 25.1 10 15 (32.7)
Depreciation 11 10 8.6 9 27.2 40 35 15.8
PBT 81 89 (9.1) 55 46.4 311 206 50.5
Provision for taxation 19 23 (14.9) 12 69.0 75 41 82.7
PAT before Extra-ordinary item 61 66 (7.0) 44 40.4 236 165 42.5
Extra-Ordinary Expenses 0 0

0

0 0

PAT after Extra-ordinary item & MI 61 66 (7.0) 44 40.4 236 165 42.5
EPS (`) 3.3 3.5

2.3

12.5 8.8

Source: Company, Angel Research

Exhibit 2: 4QFY2014 Actual vs Angel estimates
` cr Actual Estimates Variation (%)
Net Sales 463 492 (5.9)
Other Income 3 2 73.5
Operating Profit 91 92 (1.5)
Interest 2 3 (18.2)
Tax 19 11 71.4
Net Profit 61 70 (12.3)
Source: Company, Angel Research
Sales below expectations: For 4QFY2014, Alembic delivered numbers much below
our expectations. The net sales came in at `463cr V/s an expected `492cr,
registering a yoy growth of 23.4%. The growth was driven by exports, which
posted a yoy growth of 58.6%. Domestic sales on the other hand stood at
`199.5cr V/s `175.3cr in the corresponding quarter of last year, registering a yoy
growth (with domestic formulation growth) of 14%. Exports grew on account of
international generics and branded formulations, which grew by 99% and 32% yoy
respectively.
The company has filed for 61 abbreviated new drug applications (ANDAs) in
the US year till date and received 32 approvals. During the quarter, the
company received approval for 1 ANDA.






Alembic Pharma | 4QFY2014 Result Update
April 29, 2014
3
Exhibit 3: Sales trend
375
426
484 484
463
280
300
320
340
360
380
400
420
440
460
480
500
4QFY2013 1QFY2014 2QFY2014 3QFY2014 4QFY2014
(
`
c
r
)
Source: Company, Angel Research
OPM came higher than expected: The OPM came in at 19.6% (up 248bp yoy) Vs
our expectation of 17.1%. The expansion in the OPM came on the back of an
expansion in gross margins by 648bp yoy, on back of higher proportion of
formulation sales. This came in spite of the high R&D expenditure during the
quarter. The R&D expenditure during the period was at 6.7% of sales V/s 5.9% of
sales in 4QFY2013. The employee and other expenditure rose by 32.0% and
37.0% yoy respectively during the quarter.
Exhibit 4: OPM Trend
17.1
16.7
19.1
21.0
19.6
10.0
12.0
14.0
16.0
18.0
20.0
22.0
4QFY2013 1QFY2014 2QFY2014 3QFY2014 4QFY2014
(
%
)

Source: Company, Angel Research
Net profit below expectation: A higher-than-expected expansion in the OPM, aided
the PAT to rise by 40.4% yoy. On the net profit front, the company posted a net
profit of `61.3cr V/s an expected `70cr. The, net profit came in much lower than
expected on account of higher-than-expected tax provisioning during the quarter.



Alembic Pharma | 4QFY2014 Result Update
April 29, 2014
4
Exhibit 5: Net profit trend
44
47
62
66
61
0
10
20
30
40
50
60
70
4QFY2013 1QFY2014 2QFY2014 3QFY2014 4QFY2014
(
`
c
r
)

Source: Company, Angel Research
Concall highlights
The company filed 1 ANDA in 4QFY2014.
The company posted higher-than-market growth in its India branded
formulation business.
The share of the specialty segment declined from 55% in 4QFY2013 to 51% in
4QFY2014. The specialty segment posted a yoy growth of 11%, while the
Acute segment remained stagnant.
R&D expenses are expected to be around 6-7% of sales in FY2015.
Capex for FY2015 is expected to be to the tune of `250cr for API,
international and domestic formulations. The reason cited for the high
capex has been strong growth in exports formulations business.
EBDITA growth of 20% p.a. estimated on a sustainable basis.
Investment arguments
Focus on chronic segment to drive domestic formulation growth: Alembic has been
restructuring its business portfolio, which would aid in improving the companys
growth and operating performance. The companys domestic formulation business
contributed 46% to its total sales in FY2014.The company has a strong field force
of ~3,600 medical representatives. Going forward, the company expects its
domestic formulation business to at least grow in line with the industry growth rate,
before it sees an improvement in the share of the high growth chronic segment.
For FY2014-16, we expect the domestic formulation business to grow at a CAGR
of 15.0%.
Exports- US the key growth driver: On the exports front, the formulation business
contributed 20% to the total turnover, with majority of the contribution coming
from Europe and the US. In the US, the company has filed for 61 ANDAs year till
date and received 32 approvals. The company, going forward, expects to keep its
momentum high in terms of number of filings, by filing around 12-18 ANDAs per
annum. For FY2014-16, we expect the exports to register a CAGR of 34.2%.




Alembic Pharma | 4QFY2014 Result Update
April 29, 2014
5
Outlook and valuation: Alembics growth and profitability profile has improved
post the restructuring carried out by the Management. Over FY2014-16, we expect
the company to post a CAGR of 16.1% and 14.6% in sales and
net profit respectively. We recommend a Neutral rating on the stock.
Exhibit 6: Key assumptions
FY2015E FY2016E
Domestic formulation sales growth (%) 15.0 15.0
Exports sales growth (%) 20.0 20.0
R&D as % of sales 6.0 6.0
Operating margins (%) 18.8 18.3
Capex (` cr) 100 100
Net Debt/Equity (x) 0.1 0.0
Source: Company, Angel Research

Exhibit 7: Recommendation summary
Company Reco. CMP Tgt Price Upside FY2016E FY14-16E FY2016E

(`) (`) (%) PE (x)
EV/Sales
(x)
EV/EBITDA
(x)
CAGR in EPS
(%)
RoCE (%) RoE (%)
Alembic Pharma. Neutral 296 - - 17.0 2.1 11.6 14.6 31.5 31.1
Aurobindo Pharma Accumulate 589 616 4.6 17.2 1.8 12.6 (14.5) 12.3 18.6
Cadila Healthcare Accumulate 982 1064 8.3 18.5 2.2 14.2 19.4 16.1 22.6
Cipla Buy 407 495 21.7 14.8 2.2 10.3 21.8 16.7 16.9
Dr Reddy's Buy 2,672 3,634 36.0 14.7 2.4 10.2 12.2 21.3 23.2
Dishman Pharma Buy 93 116 25.2 5.6 0.8 3.7 13.4 11.9 10.3
GSK Pharma* Neutral 2,423 - - 40.8 6.5 31.9 0.4 25.9 25.7
Indoco Remedies Neutral 134 - - 13.8 1.3 8.4 28.1 16.7 16.0
Ipca labs Accumulate 820 886 8.0 13.9 2.2 9.6 17.7 26.4 25.0
Lupin Accumulate 999 1,122 12.3 17.8 2.6 11.5 18.6 30.1 25.3
Ranbaxy Neutral 480 - - 30.3 1.7 19.5 5.2 5.2 11.9
Sanofi India* Neutral 3,075 - - 24.6 2.7 15.9 7.7 18.9 21.0
Sun Pharma Neutral 635 661 - 23.0 3.7 12.5 0.6 25.7 25.1
Source: Company, Angel Research; Note: *December year end
Background
Alembic Pharmaceuticals is a leading pharmaceutical company in India. The
company is vertically integrated to develop pharmaceutical substances and
intermediates. The company is a market leader in the Macrolides segment of
anti-infective drugs in India. Its manufacturing facilities are located in Vadodara
and in Baddi (Himachal Pradesh; for the domestic and non-regulated export
market). The Panelav facility houses the API and formulation manufacturing (both
USFDA approved) plants.






Alembic Pharma | 4QFY2014 Result Update
April 29, 2014
6
Profit & Loss Statement (Consolidated)
Y/E March (` cr) FY2012 FY2013 FY2014 FY2015E FY2016E
Gross sales 1,455 1,526 1,897 2,201 2,558
Less: Excise duty 11 10 11 13 15
Net sales 1,444 1,516 1,886 2,188 2,542
Other operating income 17.4 3.1 19.2 22.6 2.0
Total operating income 1,461 1,519 1,905 2,210 2,544
% chg 22.5 4.0 25.4 16.0 15.1
Total expenditure 1,241 1,267 1,533 1,776 2,078
Net raw materials 708 681 895 1,039 1,207
Other mfg costs 63 67 83 96 112
Personnel 168 194 198 175 203
Other 301 326 357 466 555
EBITDA 203 249 353 411 465
% chg 42.7 22.5 41.7 16.6 13.0
(% of Net Sales) 14.1 16.4 18.7 18.8 18.3
Depreciation& amortisation 34 35 39 45 47
Interest & other charges 26 15 11 9 12
Other income 0 4 0 0 -
(% of PBT) 0 2 0 0 -
Share in profit of Associates - - - - -
Recurring PBT 161 206 304 358 406
% chg

Extraordinary expense/(Inc.) - - - - -
PBT (reported) 161 206 304 358 406
Tax 31 41 56 71 81
(% of PBT) 19.2 19.9 18.3 19.9 19.9
PAT (reported) 130 165 248 286 325
Add: Share of earnings of asso. - - - - -
Less: Minority interest (MI) - - - - -
Prior period items - - - - -
PAT after MI (reported) 130 165 248 286 325
ADJ. PAT 130 165 248 286 325
% chg 52.3 26.7 50.2 15.6 13.5
(% of Net Sales) 9.0 10.9 13.1 13.1 12.8
Basic EPS (`) 6.9 8.8 13.1 15.2 17.3
Fully Diluted EPS (`) 6.9 8.8 13.1 15.2 17.3
% chg 52.3 26.7 50.2 15.6 13.5






Alembic Pharma | 4QFY2014 Result Update
April 29, 2014
7
Balance Sheet (Consolidated)
Y/E March (` cr) FY2012 FY2013 FY2014 FY2015E FY2016E
SOURCES OF FUNDS

Equity share capital 37.7 37.7 37.7 37.7 37.7
Preference Capital - - - - -
Reserves & surplus 357 465 638 869 1,140
Shareholders funds 395 503 676 907 1,177
Minority Interest

Other Long Term Liabilities 12.3 12.8 12.7 13.3 14.3
Long Term Provisions 5.4 6.1 6.7 6.4 7.4
Total loans 353 187 78 150 150
Deferred tax liability 10 14 23 23 23
Total liabilities 775 722 795 1,100 1,372
APPLICATION OF FUNDS

Gross block 463 572 652 902 1,052
Less: acc. depreciation 195 228 267 312 359
Net block 268 344 384 589 693
Capital work-in-progress 58 32 33 33 33
Goodwill

Long Term Loans and Advances 35 36 42 42 42
Investments 3.3 3.3 3.4 3.3 3.3
Current assets 688 632 755 1,023 1,287
Cash 47 16 24 45 151
Loans & advances 182 116 147 284 330
Other 459 500 584 693 806
Current liabilities 277 325 422 591 686
Net current assets 411 307 333 432 601
Mis. Exp. not written off - - - - -
Total assets 775 722 795 1,100 1,372






Alembic Pharma | 4QFY2014 Result Update
April 29, 2014
8
Cash Flow Statement (Consolidated)
Y/E March (` cr) FY2012 FY2013 FY2014 FY2015E FY2016E
Profit before tax 161 206 304 358 406
Depreciation 34 35 39 45 47
(Inc)/Dec in Working Capital (11) (78) (84) (147) 10
Less: Other income - - - - -
Direct taxes paid 31 41 56 71 81
Cash Flow from Operations 152 121 203 184 382
(Inc.)/Dec.in Fixed Assets (76) (84) (80) (250) (150)
(Inc.)/Dec. in Investments - - - - -
Other income - - - - -
Cash Flow from Investing (76) (84) (80) (250) (150)
Issue of Equity - - - - -
Inc./(Dec.) in loans 26 (165) (109) 73 2
Dividend Paid (Incl. Tax) (22) (55) (55) (55) (55)
Others 91 (39) (34) (85) (84)
Cash Flow from Financing 95 (259) (198) (67) (137)
Inc./(Dec.) in Cash 41 (31) 8 21 106
Opening Cash balances 6 47 16 24 45
Closing Cash balances 47 16 24 45 151







Alembic Pharma | 4QFY2014 Result Update
April 29, 2014
9
Key Ratios
Y/E March FY2012 FY2013 FY2014 FY2015E FY2016E
Valuation Ratio (x)

P/E (on FDEPS) 42.9 33.8 22.5 19.5 17.2
P/CEPS 34.1 27.9 19.5 16.8 15.0
P/BV 14.1 11.1 8.3 6.2 4.7
Dividend yield (%) 0.5 0.8 0.8 0.8 0.8
EV/Sales 4.1 3.8 3.0 2.6 2.2
EV/EBITDA 28.9 23.1 15.9 13.8 12.0
EV / Total Assets 7.6 7.9 7.1 5.2 4.1
Per Share Data (`)
EPS (Basic) 6.9 8.8 13.1 15.2 17.3
EPS (fully diluted) 6.9 8.8 13.1 15.2 17.3
Cash EPS 8.7 10.6 15.2 17.6 19.7
DPS 1.4 2.5 2.5 2.5 2.5
Book Value 21.0 26.7 35.8 48.1 62.5
Dupont Analysis
EBIT margin 11.7 14.1 16.6 16.7 16.4
Tax retention ratio 80.8 80.1 81.7 80.1 80.1
Asset turnover (x) 2.1 2.1 2.6 2.4 2.2
ROIC (Post-tax) 20.3 23.9 35.0 32.5 29.5
Cost of Debt (Post Tax) 6.2 4.5 6.5 6.4 6.4
Leverage (x) 0.9 0.6 0.2 0.1 0.1
Operating ROE 33.3 34.8 41.0 35.0 30.8
Returns (%)
ROCE (Pre-tax) 21.9 29.6 39.4 33.3 30.5
Angel ROIC (Pre-tax) 26.4 31.9 44.4 41.6 37.9
ROE 37.6 36.8 42.1 36.2 31.2
Turnover ratios (x)
Asset Turnover (Gross Block) 3.3 2.9 3.1 2.8 2.6
Inventory / Sales (days) 59.7 63.1 55.3 61.0 68.9
Receivables (days) 50.1 51.9 45.4 50.2 56.6
Payables (days) 60.4 72.6 69.0 80.7 87.0
WC cycle (ex-cash) (days) 86.9 78.6 57.4 57.5 60.1
Solvency ratios (x)
Net debt to equity 0.8 0.3 0.1 0.1 (0.0)
Net debt to EBITDA 1.5 0.7 0.2 0.3 (0.0)
Interest Coverage (EBIT / Int.) 6.5 14.3 29.7 40.2 34.8







Alembic Pharma | 4QFY2014 Result Update
April 29, 2014
10







Research Team Tel: 022 - 4040 3800 E-mail: research@angeltrade.com Website: www.angeltrade.com

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Disclosure of Interest Statement Alembic Pharma
1. Analyst ownership of the stock No
2. Angel and its Group companies ownership of the stock No
3. Angel and its Group companies' Directors ownership of the stock No
4. Broking relationship with company covered No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors.



Ratings (Returns): Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)
Reduce (-5% to 15%) Sell (< -15%)