Result Update

April 27, 2016

Rating matrix
Rating : Buy Syngene International (SYNINT) | 373
Target : | 445
Target Period : 15-18 months Robust numbers, capex to support long term growth
Potential Upside : 18%
Revenues grew 31.7% YoY to | 331.5 crore (I-direct estimate: | 316.1
Whats Changed? crore) on account of expansion in services for dedicated clients,
strong biological services growth and growth in chemical
Target Unchanged
development group
EPS FY16P Changed from | 11.3 to | 11.1
EBITDA margins declined 202 bps YoY to 31.1% (I-direct estimate:
EPS FY17E Changed from | 14.9 to | 15.6
33.6%) due to lower gross margin and higher employee expenses as
EPS FY18E Unchanged
percentage of sales. EBITDA grew 23.6% to | 103.1crore (I-direct
Rating Unchanged
estimate: | 106.2 crore)
Net profit increased 19.6% to | 66.5 crore, lower than I-direct
Quarterly Performance
Q4FY16 Q4FY15 YoY (%) Q3FY16 QoQ (%)
estimate of | 70.6 crore
Revenue 331.5 251.8 31.7 280.4 18.2 During the quarter, the company raised a debt of US$100 million by
EBITDA 103.1 83.4 23.6 94.0 9.7 way of ECB to finance the upcoming Mangaluru facility as well as
EBITDA (%) 31.1 33.1 -202.0 33.5 -242.2 other capex plans
Net Profit 66.5 55.6 19.6 58.8 13.1 Global pharma landscape conducive to incremental R&D outsourcing
Global pharmaceutical players are facing structural issues from the
Key Financials impending patent cliff, shrinking product pipeline, rising R&D costs and
(|crore) FY15 FY16P FY17E FY18E growing competition. At the one end, these companies are shrinking in
Revenues 859.9 1107.0 1411.6 1707.0 size due to loss of blockbuster exclusivities while, at the other, new
EBITDA 281.1 357.8 458.2 575.2 product approvals by the USFDA are also on the rise. Hence, to maintain
Net Profit 175.0 221.2 311.7 371.0 the structural balance and improve probability of success they are
EPS (|) 8.8 11.1 15.6 18.5 inclined to outsource a substantial part of the R&D work. Similarly, the
innovative/virtual companies that are extensively working on new
Valuation summary products and which may not have the required capital/manpower also
FY15 FY16P FY17E FY18E
tend to outsource a substantial part of their R&D. As per a Frost & Sullivan
report, global pharma R&D spend in CY14 was at ~US$140 billion of
PE (x) 43.3 34.2 24.3 20.4
which the outsourced pie was estimated at US$40-45 billion.
M.Cap/ Revenues (x) 8.8 6.8 5.4 4.4
EV to EBITDA (x) 26.6 20.9 17.0 13.3 Integrated business model, customer stickiness to the core
P/B (x) 9.0 7.3 5.7 4.6 SILs revenues grew at ~28% CAGR in FY11-16P to | 1086.9 crore due to
ROE (%) 20.7 21.2 23.5 22.4 a sharp increase in new client addition and scaled-up revenues from
RoCE (%) 19.5 13.3 16.7 18.2 existing clients led by integrated service offerings, high data integrity
ethos and continuous endeavour to move up the value chain. The
Stock data
capabilities have been vindicated by proven customer stickiness as eight
of the top 10 global pharma companies have been availing the services
Particular Amount
for the last five years. The proposed foray in contract manufacturing
Market Capitalisation | 7537 crore
(CMO) services from FY17E will further strengthen its service offering to
Debt (FY16P) | 891 crore
clients. The company has a pool of 2571 scientists. As of FY16, the
Cash (FY16P) | 710 crore company has a client base of 256.
EV | 7718 crore
Compelling non-generic option with thrust on capex
52 week H/L 436/295
Equity capital | 200.0 crore In the crowded Indian pharma space dominated by generic exporters, SIL
Face value | 10
stands out as an atypical candidate with new molecular entity (NME)
focus. Syngene is well poised to capture opportunities in the global CRO
space on account of strategic outsourcing by global innovators in the
Price performance (%)
backdrop of structural challenges such as an impending patent cliff,
1M 3M 6M 1Y
controlling costs and keeping new products introduction flow intact. Its
Syngene Int. -1.0 -4.6 1.5 NA
Divi's Laboratories 9.2 -2.6 -3.2 19.2 proven capabilities have been backed by robust financials, which have
been fairly consistent, thanks to regular customer addition and stickiness
of existing customers. This is also on account of continuous broadening
Research Analyst of services offering by the company since inception. We expect sales,
Siddhant Khandekar EBITDA and PAT to grow at a CAGR of 24.2%, 26.8% and 29.5% to
siddhant.khandekar@icicisecurities.com | 1707.0 crore, | 575.2 crore and | 371.0 crore, respectively, between
Mitesh Shah
FY16P and FY18E. We have ascribed a target price of | 445 based on 24x
mitesh.sha@icicisecurities.com
FY18E EPS of | 18.5.
Nandan Kamat
nandan.kamat@icicisecurities.com

ICICI Securities Ltd | Retail Equity Research

Variance analysis
Q4FY16 Q4FY16E Q4FY15 Q3FY16 YoY (%) QoQ (%) Comments
Revenue 331.5 316.1 251.8 280.4 31.7 18.2 YoY growth was on account of expansion in services for dedicated clients,
strong biological services growth and growth in chemical development group

Raw Material Expenses 89.9 90.2 66.4 81.4 35.4 10.4

Employee Expenses 74.6 63.0 52.8 60.5 41.3 23.3 YoY increased due to new recruitments and annual increments
Other Expenditure 63.9 55.3 49.2 44.5 29.9 43.6
EBITDA 103.1 106.2 83.4 94.0 23.6 9.7
EBITDA (%) 31.1 33.6 33.1 33.5 -202 bps -242 bps Decline mainly due to higher employee cost and lower gross margins
Interest 1.0 1.2 0.4 1.2 150.0 -16.7
Depreciation 26.0 27.5 22.4 25.3 16.1 2.8
Other Income 2.7 5.3 2.3 0.3 17.4 800.0
PBT before EO & Forex 78.8 82.8 62.9 67.8 25.3 16.2
Forex & EO 0.0 0.0 0.0 0.0 NA NA
PBT 78.8 82.8 62.9 67.8 25.3 16.2
Tax 12.3 12.2 7.3 9.0 68.5 36.7
PAT before MI 66.5 70.6 55.6 58.8 19.6 13.1
Net Profit 66.5 70.6 55.6 58.8 19.6 13.1 YoY growth mainly in sync with EBITDA, which was partially offset by higher
taxation
Source: Company, ICICIdirect.com Research

Change in estimates
FY17E FY18E
(| Crore) Old New % Change Old New % Change Comments
Revenue 1,336.5 1,411.6 5.6 1,587.7 1,707.0 7.5 Enhanced on the back of higher-than-expected FY16 sales and higher-than-expected
increase in client addition
EBITDA 456.3 458.2 0.4 550.7 575.2 4.4
EBITDA Margin (%) 34.1 32.5 -168 bps 34.7 33.7 -99 bps Changed as per management guidance
PAT 297.1 311.7 4.9 371.0 371.0 0.0
EPS (|) 14.9 15.6 4.6 18.5 18.5 0.3

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 2

 Company Analysis
Incorporated in 1993 as a subsidiary of Biocon, Syngene International
(SIL) is a leading contract research organisation (CRO), which supports
R&D programmes of global innovative companies. SIL offers outsourced
Revenue Bifurcation (FY16P) services to support discovery and development for organisations across
industrial sectors like pharmaceuticals, biopharmaceuticals,
neutraceuticals, animal health, agro-chemicals, etc. It currently caters to
256 global players including Bristol-Myers Squibb (BMS), Abbott and
Dedicated
Development Baxter, among others.
& Services
Manufacturing (FTEs)
Services 33% SIL derives ~95% of its revenues from exports. In terms of classification
(FFSs) on a contractual basis, it derives ~36% of revenues from long term
40%
Discovery dedicated contracts with a contractual commitment of five years and
Services more. In this case, the company offers a dedicated, customised and ring-
(FTEs)
27%
fenced infrastructure in line with clients requirements. These dedicated
centres are generally multi-disciplinary, full time engagements, which
support the R&D requirements of clients.
Source: Company, ICICIdirect.com; Research

The remaining 64% come from full time equipment (FTE) and fee for
Facilities service (FFS) contracts. In FTE contracts, the company does billing based
Regulatory on the number of scientists deployed. In this case, there is an agreement
Lab Segment Approvals with clients for minimum utilisation of a specific number of scientists
Biocon SEZ, Bommasandra, CRO USFDA & Others dedicated to their work. The scope of services and deliverables under FTE
Bengaluru contracts generally evolves over time. The FTE contracts are generally
Bommasandra Industrial APIs & USFDA & Others renewable annually. FFS contracts are mostly short-term in nature. In FFS
Area, Bengaluru Intermediates contracts, the agreement is for fixed price for agreed services within a
Mangaluru (SEZ) CMO
defined scope.
Source: Company, ICICIdirect.com; Research

Exhibit 1: Revenues to grow at CAGR of 24.2% in FY16P-18E

1800 1707.0
1600 1411.6
1400
1200 1107.0

1000 859.9
(| crore)

800 699.5
550.0
600 416.7
400 321.9

200
0
FY11 FY12 FY13 FY14 FY15 FY16P FY17E FY18E
Revenues

Source: Company, ICICIdirect.com Research

SILs revenues grew at 28% CAGR in FY11-16P to | 1107 crore mainly

due to a sharp increase in new client addition and scaled-up revenues
from existing clients led by integrated service offerings, high data
integrity ethos and continuous endeavour to scale up the value chain. The
client base has grown to 256 in FY16 from 103 in FY12. A sharp increase
in clientele was mainly due to offering of a complete basket of services
from discovery, development and pilot manufacturing under one roof
through flexible business models customised to clients requirements.
Also, a flexible business model allows SIL to meet the discovery and
development needs of a wide range of clients, from small biotechnology
companies to large pharmaceutical companies. The company has been
able to take advantage of Indias large, low-cost scientific talent pool to

ICICI Securities Ltd | Retail Equity Research Page 3

 deliver its services to multinational companies at competitive rates,
especially when compared with costs for comparable services in
developed countries.

Exhibit 2: BMS Services to grow at CAGR of 9.5% in FY16P-18E

500

400 357
334
298

(US$ million)
300 259
235
208
183
200

100

0
FY12 FY13 FY14 FY15 FY16P FY17E FY18E
BMS

Source: Company, ICICIdirect.com Research; * excludes branded formulations and licensing income

The company has developed long-term relationships with many clients,

USFDA Inspections including three long-duration multi-disciplinary partnerships, each with a
dedicated research centre, with three of the worlds leading global
Period USFDA facility Inspections
healthcare organisations Bristol-Myers Squibb Company (BMS), Abbott
2010 Clinical and Bio- analytical facilities of CIL Laboratories (Singapore) Pte Ltd (Abbott) and Baxter International Inc.
2013 Control Testing Laboratory (Baxter).
2014 Syngene API manufacturing facility
Source: Company, ICICIdirect.com Research BMS The first dedicated centre was set up for BMS in 2009 and engages
over 400 of scientists. It has recently extended the BMS dedicated centre
engagement to 2020.
Abbott - In 2012, it set up a dedicated research centre for Abbott. The
Abbott Nutrition R&D centre engages about 30 scientists focused on
maternal, paediatric, neo-natal nutrition and diabetes care in line with
emerging market needs.
Baxter Dedicated centre developed in 2013. The Baxter Global Research
Centre has a multidisciplinary team of about 150 of scientists who work
on product and analytical development, preclinical evaluation in
parenteral nutrition and renal therapy.

Exhibit 3: Top 10 client revenues (ex-BMS) to grow at CAGR of 27.9% in FY16P-18E

1000

781
800
625
600
(US$ million)

477

400 351
250
184
200 146

0
FY12 FY13 FY14 FY15 FY16P FY17E FY18E
Top 10 (ex BMS)

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 4

 Exhibit 4: Revenues from other CROs to grow at CAGR of 15.9% in FY16P-18E

500
460 410
420
362
380
340 305

(US$ million)
300 250
260
220
180
140
100
60
20
-20
FY15 FY16P FY17E FY18E
Other CROs

Source: Company, ICICIdirect.com Research

The company owns the largest CRO facility in India, spread over 900,000
sq ft, in Bengaluru. The facility has been accredited with major regulatory
compliance. It operates laboratory and manufacturing facilities to
standards that are consistent with the requirements of its large global
clients. In the last three years, the USFDA has cleared five audits without
483 observations.
Apart from this, it is in process of establishing a new commercial-scale
facility in Mangaluru (SEZ) to manufacture novel small molecules for
innovator companies as it plans to foray into commercial manufacturing
for customers.
The company has signed commercial contracts for late stage products
with existing clients. Of this, two molecules have already been
commercialised and the company has started supply of intermediates for
these products. The companys existing facility at Bengaluru would
initially support SILs CMO business. It has also started developing the
new CMO facility at Mangalore at a capex of US$100 million. This novel
CMO business would extend the companys services to existing
customers. The CMO business is expected to start meaningful
contribution from FY17E. In addition, the company is in the process of
setting up a new unit for biologic manufacturing in Bengaluru. We believe
the CMO business would be an add-on driver for the company over
medium to long term.
The company intends to evolve from a CRO into a contract research and
manufacturing services (CRAMS) organisation with commercial-scale
manufacturing capabilities. This is in keeping with SILs plan to leverage
its existing relationships with clients and provide forward integration on
the discovery and development continuum.

ICICI Securities Ltd | Retail Equity Research Page 5

 Exhibit 5: Revenue growth drivers
2000.0
125.6 1707.0
135.0
303.5
1600.0

59.2
1200.0 217.8 1080.7

| crore
331.5

800.0
416.7 114.6

400.0

0.0
Revenues BMS Top 10 Others Revenues BMS Top 10 Others CMOs Revenues
(FY12) (ex-BMS) (FY16P) (ex-BMS) (FY18E)

Source: Company, ICICIdirect.com Research

Exhibit 6: Trends in EBITDA margins

700 35
575.233.7
600
32.9 32.7 33
500 32.3 458.232.5

400 30.8 357.8 31

30.6 30.7
(| crore)

(%)

281.1
300 29
214.4
200 168.5
137.1
99.0 27
100

0 25
FY11 FY12 FY13 FY14 FY15 FY16P FY17E FY18E
EBITDA EBITDA Margins (%)

Source: Company, ICICIdirect.com Research

Exhibit 7: Net profit to grow at CAGR of 29.5% in FY16P-18E

400 371.0

350 311.7
300
250 221.2
200 175.0
(| crore)

134.8
150
102.1
100 71.0
50 27.2

0
FY11 FY12 FY13 FY14 FY15 FY16P FY17E FY18E
Net Profit

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 6

 Exhibit 8: Return ratios

30

25
23.9
19.7 20.7 22.4
23.5
20 19.6 20.4 19.5 18.2
21.2
12.3 18.3 17.8
16.7
15
13.3

(%)
11.7
10

0
FY11 FY12 FY13 FY14 FY15 FY16P FY17E FY18E
RoCE (%) RoNW (%)

Source: Company, ICICIdirect.com Research

SWOT Analysis
Strengths - Strong pool of scientists to support long clientele, time tested
infrastructure with major approvals and dedicated centres for customised,
ring-fenced infrastructure

Weakness- Low presence in development phases of research

Opportunities - Starting the commercialisation business would complete

SILs chain of business from discovery and development to now
commercialisation of products.

Threats - High dependency on limited customers, client consolidation,

CMO business prone to higher USFDA scrutiny

ICICI Securities Ltd | Retail Equity Research Page 7

Exhibit 9: Trends in quarterly performance
(| Crore) Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16 Q3FY16 Q4FY16 YoY (%) QoQ(%)
Total Operating Income 178.6 201.9 227.6 251.8 233.7 261.4 280.4 331.5 31.7 18.2
Raw Material Expenses 46.6 63.7 68.9 66.4 65.5 79.1 81.4 89.9 35.4 10.4
% to revenues 26.1 31.6 30.3 26.4 28.0 30.3 29.0 27.1
Gross Profit 132.0 138.2 158.7 185.4 168.2 182.3 199.0 241.6 30.3 21.4
Gross Profit Margin (%) 73.9 68.4 69.7 73.6 72.0 69.7 71.0 72.9 -75 bps 191 bps
Employee Expenses 46.7 50.8 51.6 52.8 57.7 57.5 60.5 74.6 41.3 23.3
% to revenues 26.1 25.2 22.7 21.0 24.7 22.0 21.6 22.5 153 bps 93 bps
Other Manufacturing Expenses 28.2 23.9 29.5 49.2 35.6 39.0 44.5 63.9 29.9 43.6
% to revenues 15.8 11.8 13.0 19.5 15.2 14.9 15.9 19.3 -26 bps 341 bps
Total Expenditure 121.5 138.4 150.0 168.4 158.8 175.6 186.4 228.4 35.6 22.5
% to revenues 68.0 68.6 65.9 66.9 68.0 67.2 66.5 68.9
EBIDTA 57.1 63.5 77.6 83.4 74.9 85.8 94.0 103.1 23.6 9.7
EBITDA Margin (%) 32.0 31.4 34.1 33.1 32.0 32.8 33.5 31.1 -202 bps -242 bps
Depreciation 70.4 73.6 77.4 80.9 80.0 83.4 87.4 88.1 8.9 0.8
Interest 0.9 9.3 7.7 0.4 8.4 5.1 2.7 2.5 525.0 -7.4
Other Income 21.3 18.3 10.8 19.1 25.6 25.6 20.0 22.8 19.0 13.8
PBT 7.1 -1.1 3.3 21.2 12.1 22.9 23.9 35.3 66.3 47.6
Total Tax 8.4 3.1 9.8 7.3 7.2 8.5 9.0 12.3 68.5 36.7
PAT -1.3 -4.2 -6.5 13.9 4.9 14.4 14.9 23.0 65.1 54.2
PAT Margin (%) -0.7 -2.1 -2.9 5.5 2.1 5.5 5.3 6.9 140 bps 161 bps
Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 8

 Conference call highlights

The company has reiterated its FY18 revenue guidance of

~US$250 million with EBITDA margins of ~33% (including other
income) and PAT margins of ~20%
Realisation was muted in FY16 as the company passed on the
currency benefits to customers. The company has guided ~3%
annual increment in realisation
In FY16, revenues were booked at an average rate of | 64.0/US$.
The company has taken hedges at | 67/US$ (net of Put option) for
FY17
In Q4FY16, Syngene raised US$100 million ECB loan for the
development of Mangalore facility and other capex projects. The
rate of interest ~2.5% (~140 bps over Libor rate)
In FY16, it increased its client base to 256 from 221 in FY15.
Number of scientists has gone up from 2227 in FY15 to 2571 in
FY16 with total employees from 2656 in FY15 to 2967 in FY16
During FY16, the company cleared three USFDA inspections
without any major observations
The company has planned a capex of US$200 million from FY16
to FY18 for 1) setting up a commercial scale manufacturing centre
in Mangaluru (~US$100 million) 2) new research centre (~US$50
million) 3) capacity expansion in its developmental services and
cGMP drug substance manufacturing and 4) biologics plant, viral
testing services and antibody-drug conjugate (ADCs). The
company has already spent ~US$50 million in FY16
Phase 1 of the research centre has already become operational.
Biological centre to start commercial operations from FY18
Late stage (phase IIb and phase III) molecules are currently at high
single digit in the development pipeline
In FY16, top 10 clients contributed 69% to revenues as compared
to 71% in FY15
Dedicated services, discovery services and development &
manufacturing services contributed ~33%, ~27% and ~40%
respectively to FY16 revenues.
The company expects its Mangaluru facility to be operational
from FY19 and reach its peak occupancy (~70%) by FY21
The company gave tax rate guidance of ~14% for FY17 and
~16% for FY18

ICICI Securities Ltd | Retail Equity Research Page 9

 Valuation
In the crowded Indian pharma space dominated by generic exporters, SIL
stands out as an atypical candidate with new molecular entity (NME)
focus. The company is well poised to capture opportunities in the global
CRO space on account of strategic outsourcing by global innovators in
the backdrop of structural challenges such as an impending patent cliff,
controlling costs and keeping new products introduction flow intact. Its
proven capabilities have been backed by robust financials, which have
been fairly consistent, thanks to regular customer addition and stickiness
of existing customers. This is also on account of continuous broadening
of services offering by the company since inception. We expect sales,
EBITDA and PAT to grow at a CAGR of 24.2%, 26.8% and 29.5% to
| 1707.0 crore, | 575.2 crore and | 371.0 crore, respectively, between
FY16P and FY18E. We have ascribed a target price of | 445 based on 24x
FY18E EPS of | 18.5.
Exhibit 10: One year forward PE

600
550
500
450
400
(|)

350
300
250
200
Sep-15

Sep-15

Feb-16

Feb-16

Apr-16

Apr-16
Aug-15

Aug-15

Oct-15

Oct-15

Nov-15

Nov-15

Dec-15

Dec-15

Jan-16

Jan-16

Mar-16

Mar-16
Price 27.9x 26.9x 22.6x 20.5x
[

Source: Company, ICICIdirect.com Research

Exhibit 11: One year forward PE of company vs. CNX Pharma Index
34

30

26
PE (x)

22

18

14

10
Feb-16

Apr-16
Aug-15

Oct-15

Dec-15

Syngene CNX Pharma

Source: Company, ICICIdirect.com Research

Exhibit 12: Valuation

Revenues Growth Adj. EPS Growth P/E EV/EBITDA RoNW RoCE
(| crore) (%) (|) (%) (x) (X) (%) (%)
FY15 860 23 8.8 30 43.3 26.6 20.7 19.5
FY16P 1107 29 11.1 26 34.2 20.9 21.2 13.3
FY17E 1412 28 15.6 41 24.3 17.0 23.5 16.7
FY18E 1707 21 18.5 19 20.4 13.3 22.4 18.2
Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 10

Company snapshot

500
480
460 Target Price: | 445
440
420
400
380
360
340
320
300
Feb-16

Apr-16

Feb-17

Apr-17
Aug-15

Oct-15

Dec-15

Jun-16

Aug-16

Oct-16

Dec-16
Source: Bloomberg, Company, ICICIdirect.com Research

Key events
Period Event
2009 Expansion of manufacturing services with a new plant which is cGMP compliant
2009 Initiates operations in safety assessment and large molecules development services
2010 Acceptance of clinical and bio- analytical facilities of CIL by Department of Health & Human Services, FDA
2011 Endo Pharmaceuticals and Syngene collaborate to develop novel biological therapeutic molecules against cancer
2012 Abbott and Syngene collaborate to establish Abbott's nutrition research and development centre in India and the second R&D centre
2012 Certification of the clinical facilities by ANVISA
2012 Acquires 100% stake in Clinigene International from Biocon
2013 Crosses annual turnover of over | 500 crore in FY13
2013 Baxter International Inc collaborates with Syngene to establish Baxter Global Research Center, the third dedicated R&D centre
2013 Acceptance of the control testing laboratory by Department of Health & Human Services, FDA
2014 Bristol Myers Squibb and Syngene extend collaboration for its dedicated R&D centre till 2020
2014 Acceptance of Syngene API manufacturing facility by Department of Health & Human Services, FDA
2014 Establishes a 75,000 square feet centre to provide stability and analytical services
2015 Clinigene International amalgamated with Syngene
2015 Syngene raises | 550 crore through its IPO
Source: Company, ICICIdirect.com Research

Top 10 Shareholders Shareholding Pattern

Rank Investor Name Latest Filing Date % O/S Positionosition Change (in %) Sep-15 Dec-15 Mar-16
1 Biocon India Ltd Employee Welfare Trust 31-Dec-15 72.6 145.2m 0.0m Promoter 74.6 74.6 74.6
2 India Value Fund Advisors Private Limited 31-Dec-15 9.9 19.9m 0.0m Public 25.5 22.4 22.5
3 Goldman Sachs Asset Management International 31-Dec-15 1.1 2.2m 0.0m Others 0.0 0.0 3.0
4 Shaw (Kiran Mazumdar) 31-Dec-15 1.0 2.0m 0.0m Total 100.0 96.9 100.0
5 Columbia Threadneedle Investments (US) 31-Mar-16 0.9 1.8m 0.0m
6 The Vanguard Group, Inc. 29-Feb-16 0.5 1.0m 1.0m
7 Jupiter Asset Management Ltd. 31-Dec-15 0.5 0.9m 0.0m
8 Wasatch Advisors, Inc. 31-Dec-15 0.5 0.9m 0.6m
9 OppenheimerFunds, Inc. 29-Feb-16 0.3 0.5m 0.1m
10 Thomas White International, Ltd. 29-Feb-16 0.2 0.4m 0.1m
Source: Reuters, ICICIdirect.com Research

Recent Activity
BUYS SELLS
Investor Name Value ($) Shares Investor Name Value ($) Shares
The Vanguard Group, Inc. 5.8m 1.0m HSBC Global Asset Management (Hong Kong) Limited -3.5m -0.7m
Wasatch Advisors, Inc. 3.8m 0.6m Reliance Capital Asset Management Ltd. -4.1m -0.7m
BlackRock Asset Management North Asia Limited 2.0m 0.3m ICICI Prudential Asset Management Co. Ltd. -2.0m -0.4m
Thomas White International, Ltd. 0.5m 0.1m Chinappa (M B) -0.4m -0.1m
OppenheimerFunds, Inc. 0.5m 0.1m BOI AXA Investment Managers Private Limited -0.1m 0.0m
Source: Reuters, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 11

Financial summary
Profit and loss statement | Crore Cash flow statement | Crore
(Year-end March) FY15 FY16P FY17E FY18E (Year-end March) FY15 FY16E FY17E FY18E
Total Operating Income 859.9 1,107.0 1,411.6 1,707.0 Profit/(Loss) after taxation 175.0 221.2 311.7 371.0
Growth (%) 22.9 28.7 27.5 20.9 Add: Depreciation & Amortization 81.4 97.3 111.2 139.9
Raw Material Expenses 239.0 310.4 388.2 469.4 Net Increase in Current Assets -133.7 -28.0 -99.1 -78.7
Gross Profit 620.9 796.6 1,023.4 1,237.5 Net Increase in Current Liabilities 31.3 31.4 258.7 48.8
Gross Profit Margins (%) 72.2 72.0 72.5 72.5 CF from operating activities 154.0 321.9 582.6 481.0
Employee Expenses 201.9 250.3 325.3 372.2
Other Expenditure 281.1 357.8 458.2 575.2 (Inc)/dec in Investments 206.1 -130.4 -50.0 -50.0
Total Operating Expenditure 66.8 27.3 28.1 25.5 (Inc)/dec in Fixed Assets -277.9 -307.4 -653.0 -318.0
Operating Profit (EBITDA) 281.1 357.8 458.2 575.2 Other Investing Activities -97.3 -4.1 -193.9 -30.7
Growth (%) 27.3 28.1 25.5 CF from investing activities -169.1 -441.9 -896.9 -398.7
Interest 7.9 8.4 8.5 27.2
Depreciation 81.4 97.3 111.2 139.9 Inc / (Dec) in Equity Capital 173.0 0.1 0.0 0.0
Other Income 11.7 6.1 28.2 33.5 Inc / (Dec) in Loan funds 0.1 736.0 -50.0 0.0
PBT after Exceptional Items 203.5 258.2 366.7 441.6 Dividend & Dividend Tax -133.1 -22.1 -31.1 -37.0
Total Tax 28.5 37.0 55.0 70.7 Others -0.8 0.0 0.0 0.0
PAT before MI 175.0 221.2 311.7 371.0 CF from financing activities 39.2 714.0 -81.1 -37.0
Minority Interest 0.0 0.0 0.0 0.0 Net Cash flow 24.1 594.0 -395.4 45.3
PAT 175.0 221.2 311.7 371.0 Opening Cash 91.6 115.7 709.7 314.4
Growth (%) 29.8 26.4 40.9 19.0 Closing Cash 115.7 709.7 314.4 359.7
EPS (Adjusted) 8.8 11.1 15.6 18.5 FCF -123.9 14.5 -70.4 163.0
Source: Company, ICICIdirect.com Research
Source: Company, ICICIdirect.com Research

Balance sheet | Crore Key ratios

(Year-end March) FY15 FY16E FY17E FY18E (Year-end March) FY15 FY16E FY17E FY18E
Equity Capital 199.1 199.2 199.2 199.2 Per share data (|)
Reserve and Surplus 645.8 844.9 1,125.6 1,459.5 EPS 8.8 11.1 15.6 18.5
Total Shareholders funds 844.9 1,044.1 1,324.8 1,658.7 BV 42.2 52.2 66.2 82.9
Total Debt 155.0 891.0 841.0 841.0 DPS 6.7 1.1 1.6 1.8
Net Deferred Tax Liability 4.9 4.8 9.5 12.1 Cash Per Share 5.8 35.5 15.7 18.0
Long Term Provisions 13.2 18.1 17.2 16.3 Operating Ratios (%)
Other Non Current Liabilities 64.7 52.6 50.0 47.5 Gross Profit Margins 72.2 72.0 72.5 72.5
Source of Funds 1,082.7 2,010.6 2,242.4 2,575.7 EBITDA margins 32.7 32.3 32.5 33.7
Gross Block 938.0 988.0 1,236.0 1,554.0 Net Profit margins 20.4 20.0 22.1 21.7
Accumulated Depreciation 434.7 532.0 643.2 783.1 Inventory days 16.3 12.4 11.0 11.0
Net Block 503.3 456.0 592.8 770.9 Debtor days 76.4 61.1 58.8 58.8
Capital WIP 105.1 362.5 767.5 767.5 Creditor days 29.4 24.5 41.6 41.6
Fixed Assets 608.4 818.5 1,360.3 1,538.4 EBITDA Conversion Rate 54.8 90.0 127.1 83.6
Investments 146.0 276.4 326.4 376.4 Return Ratios (%)
Long Term Loans and Advances 114.2 142.3 217.3 217.3 RoE 20.7 21.2 23.5 22.4
Other Non current asets 113.1 81.8 201.8 231.8 RoCE 19.5 13.3 16.7 18.2
Inventory 38.4 37.7 42.6 51.5 RoIC 40.9 59.5 83.6 69.9
Debtors 179.9 185.2 227.6 275.2 Valuation Ratios (x)
Loans and Advances 33.8 31.9 31.9 31.9 P/E 43.3 34.2 24.3 20.4
Other Current Assets 72.0 97.3 149.1 171.3 EV / EBITDA 26.6 20.9 17.0 13.3
Cash 115.7 709.7 314.4 359.7 EV / Revenues 8.7 6.8 5.5 4.5
Total Current Assets 439.8 1,061.8 765.5 889.5 Market Cap / Revenues 8.8 6.8 5.4 4.4
Creditors 69.2 74.4 161.0 194.7 Price to Book Value 9.0 7.3 5.7 4.6
Provisions 9.4 19.4 19.4 19.4 Solvency Ratios (x)
Other Current Liabilities 260.2 276.4 448.5 463.6 Debt / Equity 0.2 0.9 0.6 0.5
Total Current Liabilities 338.8 370.2 628.9 677.8 Debt/EBITDA 0.6 2.5 1.8 1.5
Net Current Assets 101.0 691.6 136.6 211.8 Current Ratio 1.0 1.0 0.7 0.8
Application of Funds 1,082.7 2,010.6 2,242.4 2,575.7 Asset Turnover (x) 0.9 1.1 1.1 1.1
Source: Company, ICICIdirect.com Research Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 12

ICICIdirect.com coverage universe (Healthcare)
Company I-Direct CMP TP Rating M Cap EPS (|) PE(x) EV/EBITDA (x) RoCE (%) RoE (%)
Code (|) (|) (| Cr) FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E
Ajanta Pharma AJAPHA 1542 1,780 Buy 13569.4 36.0 45.0 50.0 42.8 34.3 30.8 24.2 20.2 18.0 50.3 46.3 40.5 37.8 34.3 29.2
Apollo Hospitals APOHOS 1328 1,420 Hold 18468.9 23.7 27.6 34.6 55.9 48.1 38.3 27.6 23.9 18.9 9.9 11.2 13.0 10.4 11.1 12.5
Aurobindo Pharma AURPHA 775.5 990 Buy 45377.0 28.1 33.9 37.7 27.6 22.9 20.6 30.7 25.1 22.0 23.4 24.7 25.0 31.7 28.7 24.7
Alembic Pharma ALEMPHA 615 790 Buy 11590.9 15.1 38.2 28.8 40.8 16.1 21.3 32.2 12.9 17.3 30.7 56.4 33.4 32.1 51.5 30.5
Biocon BIOCON 564.3 510 Hold 11286.0 20.4 23.3 26.0 27.6 24.3 21.7 7.2 6.3 5.3 10.4 11.7 13.0 12.5 12.5 12.7
Cadila Healthcare CADHEA 329 405 Buy 33670.9 11.2 14.7 15.3 29.4 22.4 21.5 19.9 14.8 14.4 20.7 26.2 24.4 27.0 28.0 23.9
Cipla CIPLA 540.4 690 Buy 43410.9 14.7 21.5 25.7 36.7 25.2 21.0 19.4 15.6 13.1 13.8 14.8 16.5 10.9 14.1 14.8
Divi's Laboratories DIVLAB 1059 1,320 Buy 28110.5 32.1 40.2 46.7 33.0 26.4 22.7 22.3 18.7 15.9 29.4 31.3 31.1 24.4 25.6 25.1
Dr Reddy's Labs DRREDD 3120 3,880 Buy 53227.0 129.0 146.8 143.3 24.2 21.3 21.8 14.5 11.8 11.6 16.7 18.0 16.6 22.3 20.3 16.5
Glenmark Pharma GLEPHA 832 975 Buy 23467.1 23.1 28.9 39.7 36.0 28.8 21.0 20.7 15.7 12.9 13.3 17.7 21.1 21.7 21.7 23.3
Indoco Remedies INDREM 277.4 390 Buy 2555.8 9.0 9.3 15.6 30.9 29.9 17.8 15.9 14.8 10.7 16.4 15.4 22.2 16.0 14.7 20.8
Ipca Laboratories IPCLAB 495 515 Hold 6248.8 19.9 12.1 24.7 24.9 40.9 20.0 13.5 18.2 12.2 11.5 6.7 11.7 11.4 6.6 12.2
Jubilant Life Sciences VAMORG 401.7 375 Hold 6398.3 -0.6 31.0 43.0 NA 13.0 9.3 15.9 8.1 6.5 5.8 13.4 15.8 NA 17.1 19.5
Lupin LUPIN 1577 2,200 Buy 71088.4 53.6 50.5 71.2 29.4 31.2 22.2 17.8 19.6 13.3 35.1 22.4 28.7 27.1 21.2 24.0
Natco Pharma NATPHA 487.2 630 Buy 8485.8 8.3 7.5 11.6 58.6 65.4 41.8 35.3 29.3 21.6 15.4 13.0 16.5 17.9 10.0 13.8
Sun Pharma SUNPHA 814 845 Hold 195931.8 19.8 23.6 28.4 41.1 34.5 28.7 24.5 21.6 18.0 18.8 20.0 21.1 18.6 18.8 19.1
Syngene International SYNINT 399 445 Buy 7971.0 8.8 11.1 15.6 43.3 34.2 24.3 26.6 20.9 17.0 19.5 13.3 16.7 20.7 21.2 23.5
Torrent Pharma TORPHA 1428 1,650 Buy 24169.7 44.4 115.3 67.1 32.2 12.4 21.3 24.4 8.4 13.3 20.1 43.7 24.4 30.2 50.3 24.0
Unichem Laboratories UNILAB 238.5 310 Buy 2166.6 8.3 11.5 15.9 28.7 20.8 15.0 19.5 12.1 9.8 8.5 13.6 16.7 8.7 11.0 13.8

ICICI Securities Ltd | Retail Equity Research Page 13

RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns
ratings to its stocks according to their notional target price vs. current market price and then categorises them
as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional
target price is defined as the analysts' valuation for a stock.

Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;

Pankaj Pandey Head Research pankaj.pandey@icicisecurities.com

ICICIdirect.com Research Desk,

ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai 400 093
research@icicidirect.com

ICICI Securities Ltd | Retail Equity Research Page 14

ANALYST CERTIFICATION
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ICICI Securities Ltd | Retail Equity Research Page 15