Pharma Companies - Management Meet Note - SBICAP Securities

Management meeting > HYDERABAD | Pharmaceuticals KEY HIGHLIGHTS
Pharmaceuticals; Sector Overweight

KEY HIGHLIGHTS
We recently met the management of 4 pharma companies in Hyderabad to reassess the latest developments. We also visited the production facility of Aurobindo Pharma - Unit VII (SEZ) at Jadcherla, Andhra Pradesh, which is spread over 75 acres. This brief report contains key highlights of the visit with our analysis and recommendation. The overall feel of our trip has been positive.
Management Meetings HYDERABAD
Companies visited 1) 2) 3) 4) Aurobindo Pharma Divis Laboratories Dr. Reddys Suven Life Sciences (N/C)* (I/C) (I/C) (N/C)
* N/C ( coverage) I/C (i iti ti coverage) (no ) (initiation )
Pharma universe*
Company Sun Pharma Dr Reddys Ranbaxy* Lupin Cadila HC Biocon Ipca Generics agg. Rating Buy Reduce Buy Buy Accumulate Buy Buy Accumulate Reduce Reduce M. Cap Price Tgt (` bn) (`) 433 552 270 1,659 190 621 173 548 157 842 64 421 35 358 82 26 8 724 219 108 Upside 32% 4% 38% 40% 10% 31% 28% 25% 17% 35% 7% 20%
Top 2 picks in Generics: Sun Pharma Lupin
Analyst | Vivek Kumar email | vivek.kumar@sbicapsec.com (+91 22 4227 3312)
Divis Labs Jubilant Life Dishman CRAMS agg.

* Decemeber ended
Top picks in CRAMs: Divis Labs
* Price as on 11-March 2011 / SBICAP Securities Research
March, 2011
Please refer last page for Disclaimer
Contents
Key Highlights | Management Meetings Aurobindo Pharma.. Divi s Laboratories Divis Laboratories Dr. Reddys.. Suven Life Sciences. 2 4 5 6
Company Financials 7 Disclaimer
March, 2011
Aurobindo Pharma (APL)

Rating: CMP: Not rated `390
Overall guidance & outlook Revenues guidance for FY11 and FY14 at $1bn and $2bn, implying a CAGR of 26%. New SEZ-Unit VII augments timely future growth strategy (potential to expand 4x vs its current SEZ Unit vs. capacity). EBITDA margin to improve to 22-24% in FY14 (vs 18% in FY11), owing to increased capacity utilisation, backward sourcing of key raw materials and focus on high value/complex products. Regulated markets (~33% of Sales), growth led by ramp up in new capacities: / g $ / y , $ / US/EU generics to reach $650mn/200mn by FY14, from current sales of $240mn/80mn. Plans to file 100 incremental ANDAs through FY14 across therapies (India/US at 60/40). Of the total filings from US, filings for controlled substances and high value products seen at 34 and 16. EU growth largely driven by integrated marketing operations and focus on new markets. Potential trigger from Unit VII SEZ- next growth pillar: Unit VII (non-betalactum) is FDA approved and commenced its operations in June10. Management expects peak revenues of $450mn by FY14 from $80mn currently, owing to a pick up in the utilisation rate to ~80% from 30% currently, and commencement of new capacities in the next 2 years. Better placed for future- of the 75 acre plot area, the company has utilized only ~13%. Our understanding suggests that the free space would accommodate ~4 x its existing capacity. Till date, ~40-50 ANDAs have been filed/ inspected twice by USFDA (Nov09 and Aug10). Inspection during Aug10 was triggered from first ANDA approval; Levofloxacin likely US launch in Mar11 Aug 10 Levofloxacin, Mar 11. The company is also setting up Oral contraceptive capacity in existing SEZ, which is likely to be commercialized in FY14. Unit-wise key details
Segments Plants Unit III Unit VII Unit VI Unit XII Other Units FY11 Revenues ($ mn) 400 80 60 60 400 % Sales 40% 8% 6% 6% 40% FDA, Last inspected Oct 10 Oct'10 Aug'10 Dec'10 Feb'10 FDA Action + tive + tive - tive + tive + tive
Key data
Market Cap (` Bn) Shares O/S (Mn) 1-Year 1 Year Avg Vol (Mn) 52 Week Range (H / L) Bloomberg Code Promoters (%) Free float (%) 56.8 278.6 1.4 14 275.3 / 156.2 ARBP IN Equity 54.4 45.6
Relative Performance e a e e o a ce
200 150 100 50 Mar-10 a 0 Ju 0 Jul-10
Aurobindo
Nov-10 o 0
Nifty
Source: Company, SBICAP Securities Research

Formulation APIs
March, 2011
Impact of Import alert-Unit VI, minimal financial implication/prioritizing FDA resolution: The Unit will have revenues and EBITDA loss of ~$35mn and ~$6mn (including $2mn for inventory in transit). The import ban would impact ~4% of current revenues revenues. Total 25 ANDAs have been filed from Unit VI , with 6 pending approvals. The management would continue to cooperate with FDA once the formal communication happens, but the resolution would take at least one year. Financial Summary: For FY06-FY10, the company has consistently shown strong sales and PAT CAGR of 22% and 86% respectively, largely led from organic growth and i i d in-time capacity management. i Economies of scale coupled with backward integrated operation continue to play a key role in the improvement in margins. The management expects gradual EBITDA margin improvement to 22-24% in FY14 (vs. 18% in FY11), owing to increased capacity utilisation, backward sourcing of key raw material and focus on high value/complex products. Capex plans for FY12 and FY13 at `2.5bn each, mainly towards expansion and up-gradation of existing products (API blocks, Unit IV nonbetallactum injectables, Penams at Bhiwandi , and Unit VII SEZ). O/s FCCBs f $210 O/ FCCB of ~$210mn (i l di (including accrued i t d interest of $50 ) i not a concern, as th company h ti d up with t t f $50mn) is t the has tied ith two B k f FCNR l Banks for loans at t 3.5% annual interest rate. It will also partially utilize the funds received from the sale of its China subsidiary. Tax guidance given at 23% for FY12 and FY13. Valuation & Recommendation: We believe the promptness of FDA in issuing 483 import alerts for Unit VI seems to be a proactive measure, considering stances of inventory pushing by companies in the time gap between 483 issued and final communication from FDA. In light of the recently successfully completed FDA inspections/clean chit at some of its larger USFDA approved facilities, we are optimistic on the import alert resolution front. However, the management remains committed to fully cooperate with FDA for early resolution of the issues/compliance. Looking at the severity of the import alert and the potential revenues/earnings impact from Unit-VI, we believe the recent price correction of 25%, making the stock fall below its fair value, is unwarranted. The current price suggests the stock is undervalued and does not factor in the mediumterm b business momentum. While we are working on detailed financials, we remain positive on APL , based on our first meeting with the management.
March, 2011 Please refer last page for Disclaimer
Divis Laboratories (Divis)

Rating: CMP: Price Target: Upside:
Key data
Market Cap (` Bn) Shares O/S (Mn) 1-Year A Vol (Mn) 1Y Avg V l (M ) 52 Week Range (H / L) Bloomberg Code Promoters (%) Free float (%) 82.7 132.1 0.2 02 797.7 / 551 DIVI IN Equity 52.2 47.8
Accumulate `620 `724 17%
Overall guidance and outlook: Overall Sales growth guidance for FY12 and FY13 given at 20%. Segment-wise contribution from Generic APIs and CCS to remain equal in FY11. Divis continues to see revival in business, both from pick in the old supplies and fresh orders from US and EU customers. Carotenoid business update: Management expects revenues of `1250mn and `2500mn in FY12 and FY13 respectively. The total customers for this product are 200, mainly concentrated in US and Europe. Continues to face difficulty in breaking larger customers in the top 10, mainly due to long standing relationship with existing suppliers. The revenue guidance does not take into account any of these customers. Of the current market size of ~$1bn, top 10 customers account for 60% share. Financials: Q p g 4QFY11 is expected to see better sales and earnings momentum. Capex plans for FY12 and FY13 at `2bn and `500mn respectively. However, there could be some spilling over of the FY11 capex to next year. Overall tax guidance given at 20% for FY12 (lower rate due to utilisation of MAT credits). Other highlights: Vizag 2nd SEZ: Divis new 2nd SEZ facility for the regulated markets is likely to get commercialized Divi s in April 2012. Post the USFDA inspection, we expect major revenues from this facility to accrue in FY13 and onwards. Valuation & Recommendation: Positive on the stock owing to revival in the business, high degree of operating efficiency, improved earnings visibility and high capital return ratios visibility, ratios. We continue to maintain our Accumulate rating on the stock with a target price of `724(21x FY12E EPS).
e a e e o a ce Relative Performance
200 150 100 50 Mar 10 Mar-10 Jul 10 Jul-10
Divi Lab
Nov 10 Nov-10
Nifty
March, 2011
Dr. Reddys (DRL)

Rating: CMP: Price Target: Upside:
Key data
Market Cap (` Bn) Shares O/S (Mn) 1-Year A Vol (Mn) 1Y Avg V l (M ) 52 Week Range (H / L) Bloomberg Code Promoters (%) Free float (%) 269.3 168.8 0.5 05 1855 / 1145 DRRD IN Equity 25.7 74.3
Reduce `1,590 `1,659 `1 659 4%
Overall Revenue guidance for FY13 reduced to $2.5-2.7bn (from $3bn guided earlier). Management view on One-offs/FTFs Arixtra (fondaparinux): Managements expect the product approval to come anytime, as a large part of the approval process is already completed. The branded US Sales for the product is ~$180mn. Geodon (ziprasidone): The product is a shared exclusivity between 4-5 players and is already settled with Pfizer (Innovator)-US sales $964mn. The launch is expected only in FY13 end. Zyprexa (olanzapine): The product launch is not contingent on the outcome of the litigation. The g p g pp litigation on the product is almost settled and awaiting FDA approval. Russia; business strategy focused on OTC: DRL has its own marketing set up for Russian markets. Considering the reference pricing regulation, DRL would continue to embark upon marketing on its own, except for replacing the prescription with more OTCs as it does not fall under price regulation. DRL s DRLs share of revenues from OTC has gone up to 25% currently from 8% in FY10. Other highlights: Allegra D-24 - ramp up slower than expected: DRLs market share here is witnessing a decline due to reduction in the overall prescription volumes, as innovators plan to launch lower cost OTC. On account of early competition, the management now expects lower than anticipated revenues. Allegra D-24 OTC: US launch to happen as behind the counter product due to narcotics content D 24 happen, content. Management expects US approval to come anytime in April 2011; however, Sanofis OTC version is already approved by FDA and will be introduced in the US market during March 2011. GSK alliance: As per the management, full product basket rollout under alliance to happen by FY14. Currently these products are in filing stage, with few already launched. Valuation & Recommendation: We remain positive on the stock owing to DRLs effort to revive the Betapharm business (through production shift and sales force rationalization). However, given the current valuation/near-term triggers, we believe most of the growth is fully priced in. We maintain our Reduce rating with SOTP based target price of `1,659 (implied P/E multiple of ~23x FY12E).
Please refer last page for Disclaimer 5
200 150 100 50 Mar 10 Mar-10 Jul 10 Jul-10
Dr Reddys
Nov 10 Nov-10
Nifty
March, 2011
Management meeting > HYDERABAD | Pharmaceuticals
Suven Life Sciences (Suven)

Rating: CMP: Not rated `18
KEY HIGHLIGHTS
Key data
Market Cap (` Bn) Shares O/S (Mn) 1-Year 1 Year Avg Vol (Mn) 52 Week Range (H / L) Bloomberg Code Promoters (%) Free float (%) 2.1 115.7 0.0 00 36.4 / 16.7 SVLS IN Equity 63.3 36.7
Currently not looking at any equity dilution to raise funds for its lead molecule SUV-502. Suven has 3 major molecules undergoing clinical trials viz; SUVN-502, SUVN-507, and SUVN-911. The combined market size for these molecules is ~US$11bn US$11bn. Lead molecule SUVN-502, Ph II (proof of concept) to be initiated in 1QFY12. Management expects to out-license SUVN-502 by FY12. According to the management, the monetization potential post successful Ph IIa is pegged at $1.6bn (based on similar deals in recent past). The management claims the SUVN 502 molecule has been found interesting by many global pharma majors who have seen its results so far shall get strong interest if it completes Ph IIa far, IIa.
200 150 100 50 Mar 10 Mar-10 Jul 10 Jul-10
Suven
Nov 10 Nov-10
Nifty
Valuation & Recommendation We believe S W b li Suvens R&D portfolio i th neurodegenerative di d i promising, b t th f t tf li in the d ti disorder is i i but the future potential upsides would largely depend upon mobilization of the required funds and the successful out-licensing of its first late stage molecule SUVN-502 (currently in Phase 2a). At CMP, the stock is trading at trailing P/E of 30x based on FY10 EPS.
Please refer last page for Disclaimer 6
March, 2011
Company Financials i i l
March, 2011
Company Financials: Aurobindo Pharma (APL)

(` millions) Net Revenue EBITDA
Profit & Loss Statement (Ye March )

FY 06 15,936 1,776 1 776 721 1,054 691 313 676 274
YoY (%) YoY (%)
FY 07 21,230 3,022 3 022
33 70
FY 08 24,359 3,411 3 411
15 13
FY 09 30,773 5,174 5 174
26 52
FY 10 35,754 8,232 8 232
16 59
Depreciation & Amortisation EBIT Interest Other incomes Pre-tax Income Less: Taxation
Effective tax rate (%) YoY (%)
41
997 2,025 454 366 1,937 5
1,004 2,408 432 249 2,224 328
15
1,276 3,898 839 167 3,227 964
30
1,493 6,738 678 389 6,450 1,592
25
Recurring Net Profit
402 14 (310) 698
1,932
380
1,896
(2)
2,263
19
4,858
115
(` millions) Total Assets Net Block Add: Capital Work in Progress Goodwill Investments Cash & Bank balance Inventory Sundry Debtors Loans and Advances Net Current Assets Total Liabilities Paid up Equity Share Capital
BalanceSheet (Ye March)
No. of Shares o/s (mn)
FY 06 22,629 10,838 1,497 1 497 3 2,019 4,718 5,822 1,997 10,291 22,629 266 53 7,882 24 8,173 13,731 726
FY 07 30,359 11,526 2,187 2 187 3 5,825 6,544 6,261 2,719 16,643 30,359 267 53 8,594 35 8,896 20,781 682
FY 08 30,475 13,003 2,146 2 146 604 2,826 7,950 6,650 3,164 14,722 30,475 269 54 10,972 32 11,273 18,470 732
FY 09 36,544 13,988 5,363 5 363 3 1,277 8,776 8,898 3,869 17,190 36,544 269 54 12,145 32 12,445 23,330 769
FY 10 40,792 17,109 5,701 5 701 3 728 11,025 9,560 3,713 17,980 40,792 279 56 18,013 43 18,335 21,546 912
Exceptional items Less: Minority Interest Less: Share of Gain / Loss in Ass Reported PAT
EBITDA Margin PAT Margin
11.1 2.5
89 11 2,010
14.2 9.1
485 (3) 2,385
14.0 7.8
(1,750) (1) 514
16.8 7.4
751 (3) 5,612
23.0 13.6
Reserves & Surplus General & Other Reserve Minority Interest Net Worth Debts Deferred Tax Liability
Performance & Market Ratio (Ye March)

FY 06 Per Share Data (`) EPS CEPS BV DPS Valuation Ratios Basic PE (x) P/BV (x) EV/EBITDA (x) EV/Sales (x) Dividend Yield (%) Profitability Ratios (%) RoCE RoNW Turnover Ratios Avg Collection Period (days) Avg Payment Period (days) d (d ) Solvency Ratios (x) Debt Equity Ratio Interest Coverage Ratio 1.4 4.0 29.3 0.3 94.9 4.7 28.1 3.1 0.2 5 5 125 107 0 1.7 1.5
FY 07 6.9 10.5 31.9 0.6 20.0 4.4 17.8 2.5 0.4 7 22 133 118 8 2.3 4.5
FY 08 6.8 10.4 40.5 0.7 8.5 1.4 9.1 1.3 1.3 8 17 108 102 02 1.6 5.6
FY 09 8.1 12.7 44.7 1.0 4.7 0.9 6.3 1.1 2.7 11 18 100 101 0 1.9 4.6
FY 10 17.4 22.8 65.8 1.2 11.0 2.9 9.0 2.1 0.6 17 26 106 95 9 1.2 9.9
(` millions) Profit After tax Add: Dep & Amor. Deferred Taxes Net Extra-ordinary income W. C Inflow / (Outflow) Operating Purchase of Fixed Assets Purchase of Investments Acquisition of Goodwill Investing Issue of Share Capital Proceeds from fresh borrowings Buyback of Shares Dividend paid including tax Others Financing Net Extra-ordinary income d Opening Cash & Bank bal. Closing Cash & Bank bal. Inc/(Dec) in Cash & Bank bal.
Cash Flow Statement (Ye March)
FY 06 697 580 159 (1,879) (443) (1,807) (0) (1,807) 13 3,390 (93) 365 3,675 594 2,019 1,425
FY 07 2,010 431 (41) (127) (2,547) (273) (1,810) 0 (1,809) 0 7,051 (156) (1,134) 5,761 127 2 2,019 5,825 3,805
FY 08 2,385 1,022 52 (693) (1,078) 1,687 (2,457) (602) (3,059) 2 (2,311) (206) 194 (2,321) 693 93 5,825 2,826 (2,999)
FY 09 1,003 1,572 38 2,500 (4,017) 1,095 (5,774) 602 (5,172) 4,859 (122) 290 5,028 (2,500) (2 00) 2,826 1,277 (1,549)
FY 10 5,634 1,220 146 (1,073) (1,338) 4,589 (4,678) (0) (4,678) 10 (1,784) (158) 401 (1,531) 1,073 0 3 1,277 728 (548)
March, 2011
Company Financials: Divis Laboratories (Divis)


FY 08 10,387 4,260 4 260
YoY (%) YoY (%)
41 68
FY 09 11,849 5,229 5 229
14 23
FY 10 9,499 4,136 4 136
(20) (21)
FY 11E 11,700 4,349 4 349
23 5
FY 12E 14,501 5,826 5 826
24 34
357 3,903 102 79 3,881 331
479 4,750 72 175 4,853 430
515 3,621 28 178 3,771 425
11
550 3,799 28 289 4,061 487
12 7
588 5,237 28 346 5,555 1,000
18 27
ecu g et o t Recurring Net Profit
3,550
90
4,4 3 4,423
25
3,346
(24)
3,5 3 3,573
4,555 4,555
(` millions) Total Assets Net Block Add: Capital Work in Progress Goodwill Investments Cash & Bank balance Inventory Sundry Debtors Loans and Advances Net Current Assets Total Liabilities Paid up Equity Share Capital ad qu ty S a e Cap ta
FY 08 9,858 4,971 631 556 142 2,814 2,095 574 3,701 9,858 129 9 65 8,486 8,615 861 383
FY 09 13,374 5,899 195 1,718 148 4,213 2,660 647 5,562 13,374 130 30 65 12,286 12,415 526 432
FY 10 15,982 5,898 238 4,413 165 4,985 2,232 655 5,433 15,982 264 6 132 14,915 15,179 328 474
FY 11E 18,679 5,948 238 6,413 79 5,609 2,725 655 6,081 18,679 265 65 133 17,611 17,877 328 474
FY 12E 22,172 5,960 238 9,413 133 5,959 3,178 655 6,562 22,172 265 65 133 21,104 21,369 328 474
(74) 3,476
41.0 34.2
(257) 4,166
44.1 37.3
58 3,403
43.5 35.2
3,573
37.2 30.5
40.2 31.4

FY 08 Per Share Data (`) EPS CEPS BV DPS Valuation Ratios Basic PE (x) P/BV (x) EV/EBITDA (x) EV/Sales (x) Dividend Yield (%) Profitability Ratios (%) RoCE RoNW Turnover Ratios Avg Collection Period (days) Avg P A Payment P i d (days) t Period (d ) Solvency Ratios (%) Debt Equity Ratio Interest Coverage Ratio 26.9 29.6 65.2 2.3 23.6 9.7 19.7 8.1 0.4 40 41 74 92 0.1 38.3
FY 09 33.5 37.1 94.0 3.4 14.2 5.1 11.8 5.2 0.7 36 36 82 103 0.0 65.6
FY 10 25.3 29.2 114.9 7.0 26.8 5.9 20.7 9.0 1.0 23 22 86 140 0.0 130.3
FY 11E 27.0 31.2 135.3 6.3 22.9 4.6 17.9 6.6 1.0 20 20 85 130 0.0 136.7
FY 12E 34.5 38.9 161.7 8.0 18.0 3.8 13.3 5.4 1.3 24 21 80 120 0.0 188.4
(` millions) Profit After tax Add: Dep & Amor. Deferred Taxes Net Extra-ordinary income W. C Inflow / (Outflow) Operating Purchase of Fixed Assets Purchase of Investments Acquisition of Goodwill Investing Issue of Share Capital Proceeds from fresh borrowings Buyback of Shares Dividend paid including tax Others Financing Net Extra-ordinary i N tE t di income Opening Cash & Bank bal. Closing Cash & Bank bal. Inc/(Dec) in Cash & Bank bal.
FY 08 3,476 356 105 106 (767) 3,276 (1,761) (556) (2,317) (679) (302) 86 (895) (106) 183 142 (41)
FY 09 4,166 478 50 367 (1,855) 3,205 (970) (1,162) (2,133) 0 (334) (455) 89 (700) (367) 142 148 6
FY 10 3,403 502 42 (83) 146 4,010 (544) (2,695) (3,239) 135 (198) (925) 151 (837) 83 148 165 17
FY 11E 3,573 550 (733) 3,390 (600) (2,000) (2,600) 1 (833) (43) (876) 165 79 (86)
FY 12E 4,555 588 (427) 4,716 (600) (3,000) (3,600) (1,062) (0) (1,062) 79 133 54
March, 2011
Company Financials: Dr. Reddys (DRL)


FY 08 50,005 8,473 8 473
YoY (%) YoY (%)
(23) (46)
FY 09 69,441
39 56
FY 10 70,277 15,800 15 800
FY 11E 76,736 16,340 16 340
9 3
FY 12E 87,480 19,503 19 503
14 19
13,246 13 246
19
3,388 5,085 185 5,270 (1,453)
(28) (39)
3,814 9,432 552 254 9,134 1,362
15 16
5,758 10,042 372 866 10,536 963 9,5 9,572
5,950 10,390 350 966 11,007 1,168
11 3
6,330 13,173 329 1,033 13,876 1,388
10 27
ecu g et o t Recurring Net Profit
6, 3 6,723
7,772 ,
23
9,838
12,488 ,488
(` millions) Total Assets Net Block Add: Capital Work in Progress Goodwill Investments Cash & Bank balance Inventory Sundry Debtors Loans and Advances Net Current Assets Total Liabilities Paid up Equity Share Capital ad qu ty S a e Cap ta
FY 08 71,663 12,765 4,001 4 001 33,602 4,993 7,398 11,133 6,823 4,138 16,303 71,663 8 841 168 46,226 47,067 19,542 5,055
FY 09 64,939 16,603 4,279 4 279 22,179 792 5,596 13,226 14,592 5,008 21,086 64,939 8 842 168 41,203 42,045 19,483 3,411
FY 10 57,443 15,898 6,561 6 561 13,973 1,500 6,584 13,371 11,960 6,010 19,511 57,443 8 8 848 170 40,159 41,007 14,695 1,741
FY 11E 63,318 17,001 7,561 7 561 13,973 1,500 6,407 16,819 13,665 6,611 23,283 63,318 8 8 848 170 46,921 47,769 13,809 1,741
FY 12E 72,511 17,725 8,561 8 561 13,973 1,500 13,238 17,975 14,380 7,272 30,753 72,511 8 8 848 170 56,912 57,759 13,011 1,741
(2,058) (10) (2) 4,678
16.9 13.4
(12,964) (24) (5,168)
19.1 11.2
(8,552) (48) 1,068
22.5 13.6
(158) 9,681
21.3 12.8
12,488
22.3 14.3

FY 08 Per Share Data (`) EPS CEPS BV DPS Valuation Ratios Basic PE (x) P/BV (x) EV/EBITDA (x) EV/Sales (x) Dividend Yield (%) Profitability Ratios (%) RoCE RoNW Turnover Ratios Avg Collection Period (days) Avg P A Payment P i d (days) t Period (d ) Solvency Ratios (%) Debt Equity Ratio Interest Coverage Ratio 39.6 59.6 277.6 4.3 13.9 2.0 11.9 2.0 0.8 7.1 14.3 50 80 0.4
FY 09 45.8 68.3 248.0 4.4 10.7 2.0 7.2 1.4 0.9 14.5 18.5 77 66 0.5 17.1
FY 10 56.5 90.4 241.8 11.3 22.6 5.3 14.1 3.2 0.9 17.5 23.3 62 71 0.4 27.0
FY 11E 58.0 93.1 281.7 11.4 27.4 5.6 16.9 3.6 0.7 16.4 20.6 65 75 0.3 29.7
FY 12E 73.6 111.0 340.6 14.7 21.6 4.7 14.2 3.2 0.9 18.2 21.6 60 70 0.2 40.0
(` millions) Profit After tax Add: Dep & Amor. Deferred Taxes Net Extra-ordinary income W. C Inflow / (Outflow) Operating Purchase of Fixed Assets Purchase of Investments Acquisition of Goodwill Investing Issue of Share Capital Proceeds from fresh borrowings Buyback of Shares Dividend paid including tax Others Financing Net Extra-ordinary i N tE t di income Opening Cash & Bank bal. Closing Cash & Bank bal. Inc/(Dec) in Cash & Bank bal.
FY 08 4,678 1,430 (745) (1,744) 3,619 (5,767) (3,662) 828 (8,602) 1 (5,212) (737) (397) (6,345) 745 17,981 7,398 (10,583)
FY 09 (5,168) 2,168 634 (6,585) (8,951) (6,285) 4,201 11,423 9,339 1 (59) (738) (761) (1,556) (634) 7,398 5,596 (1,802)
FY 10 1,068 2,705 (72) 2,563 6,264 (4,282) (708) 8,206 3,216 6 (4,788) (1,908) (1,874) (8,564) 72 5,596 6,584 988
FY 11E 9,681 2,897 225 (3,950) 8,853 (5,000) (5,000) (886) (1,936) (983) (3,805) (225) 6,584 6,407 (177)
FY 12E 12,488 3,277 (638) 15,127 (5,000) (5,000) (798) (2,498) 0 (3,295) 6,407 13,238 6,832
March, 2011
10
Company Financials: Suven Life Sciences (Suven)


FY 06 802 136 34 103 17 86 1 85 0
YoY (%) YoY (%)
FY 07 1,117 178
39 31
FY 08 1,173 158
FY 09 1,399 169
19 7
FY 10 1,291 139
(8)
(11)
(17)
53 87 49 37 (33) 70
40 138 30 108 (5) 113
44 114 51 64 (20) 84
50 119 68 51 (20) 71
Recurring Net Profit
380
(0)
(2)
(0)
19
115
-
(` millions) Total Assets Net Block Add: Capital Work in Progress Goodwill Investments Cash & Bank balance Inventory Sundry Debtors Loans and Advances Net Current Assets Total Liabilities Paid up Equity Share Capital
FY 06 1,196 828 27 100 11 227 149 132 313 1,196 50 25 909
FY 07 1,488 956 50 109 98 229 160 188 426 1,488 58 29 1,015
FY 08 1,668 1,098 37 82 30 244 355 198 476 1,668 116 116 1,006
FY 09 1,576 1,123 36 62 12 272 214 140 352 1,576 116 116 1,029
FY 10 1,681 1,096 34 116 22 305 326 107 394 1,681 116 116 1,065
(54)
17.0 10.6
85
113
16.0 10.1
13.5 7.1
84
125
12.1 5.1
10.8 5.4
70
959 237 (72)
1,073 415 (53)
1,122 546 (24)
1,144 431 3
1,181 501 42

FY 06 Per Share Data (`) EPS CEPS BV DPS Valuation Ratios Basic PE (x) P/BV (x) EV/EBITDA (x) EV/Sales (x) Dividend Yield (%) Profitability Ratios (%) RoCE RoNW Turnover Ratios Avg Collection Period (days) Avg Payment Period (days) d (d ) Solvency Ratios (x) Debt Equity Ratio Interest Coverage Ratio 0.7 1.0 8.3 0.2 27.4 2.4 19.6 3.3 1.1 9 9 68 109 09 0.2 6.1
FY 07 1.0 1.3 9.3 0.2 38.9 4.1 26.7 4.3 0.6 9 11 52 103 03 0.4 4.6
FY 08 0.7 1.1 9.7 0.3 44.4 3.3 23.4 3.2 0.9 7 7 110 165 0.5 2.3
FY 09 0.6 1.0 9.9 0.3 17.9 1.1 7.6 0.9 2.7 8 6 56 152 2 0.4 1.8
FY 10 0.6 1.1 10.2 0.3 53.0 3.1 26.6 2.9 0.9 5 6 92 222 0.4 1.8
(` millions) Profit After tax Add: Dep & Amor. Deferred Taxes Net Extra-ordinary income W. C Inflow / (Outflow) Operating Purchase of Fixed Assets Purchase of Investments Acquisition of Goodwill Investing Issue of Share Capital Proceeds from fresh borrowings Buyback of Shares Dividend paid including tax Others Financing Net Extra-ordinary income d Opening Cash & Bank bal. Closing Cash & Bank bal. Inc/(Dec) in Cash & Bank bal.

FY 06 85 34
FY 07 113 40
FY 08 84 44
FY 09 125 50
FY 10 70 53
(65) 53 (91) 112 (25) (60) 27 12 11 (10)
12 165 (205) 7 178 (29) (30) 126 11 98 86
(88) 40 (162) 8 131 (34) (51) 55 98 30 (67)
168 343 (153) 3 (34) (178) (208) 30 12 (18)
6 129 (100) 70 (34) (54) (19) 12 22 10
March, 2011
11
Management meeting > HYDERABAD | Pharmaceuticals
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March, 2011
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Key to investment Ratings Guide to the expected return over the next 12 months. 1=BUY (expected to give absolute returns of 20 or more percentage points); 2= ACCUMULATE/ADD (expected to give absolute returns between 10 to 20 percentage points); 3=REDUCE (expected to give absolute returns between 0 to 10 percentage points); 4=SELL (expected to give absolute negative returns)
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February, 2011
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Pharma Companies - Management Meet Note - SBICAP Securities

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Management meeting > HYDERABAD | Pharmaceuticals KEY HIGHLIGHTS

Pharmaceuticals; Sector Overweight

Management Meetings HYDERABAD

* N/C ( coverage) I/C (i iti ti coverage) (no ) (initiation )

Top 2 picks in Generics: Sun Pharma Lupin

Analyst | Vivek Kumar email | vivek.kumar@sbicapsec.com (+91 22 4227 3312)

Divis Labs Jubilant Life Dishman CRAMS agg.

Top picks in CRAMs: Divis Labs

* Price as on 11-March 2011 / SBICAP Securities Research

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Management meeting > HYDERABAD | Pharmaceuticals KEY HIGHLIGHTS

Company Financials 7 Disclaimer

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Management meeting > HYDERABAD | Pharmaceuticals KEY HIGHLIGHTS

Aurobindo Pharma (APL)

Source: Company, SBICAP Securities Research

Analyst | Vivek Kumar email | vivek.kumar@sbicapsec.com (+91 22 4227 3312)

Source: Company, SBICAP Securities Research

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Management meeting > HYDERABAD | Pharmaceuticals KEY HIGHLIGHTS

Management meeting > HYDERABAD | Pharmaceuticals KEY HIGHLIGHTS

Divis Laboratories (Divis)

Accumulate `620 `724 17%

Source: Company, SBICAP Securities Research

Analyst | Vivek Kumar email | vivek.kumar@sbicapsec.com (+91 22 4227 3312)

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Management meeting > HYDERABAD | Pharmaceuticals KEY HIGHLIGHTS

Dr. Reddys (DRL)

Reduce `1,590 `1,659 `1 659 4%

Source: Company, SBICAP Securities Research

Analyst | Vivek Kumar email | vivek.kumar@sbicapsec.com (+91 22 4227 3312)

Management meeting > HYDERABAD | Pharmaceuticals

Suven Life Sciences (Suven)

Source: Company, SBICAP Securities Research

Analyst | Vivek Kumar email | vivek.kumar@sbicapsec.com (+91 22 4227 3312)

Management meeting > HYDERABAD | Pharmaceuticals KEY HIGHLIGHTS

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Management meeting > HYDERABAD | Pharmaceuticals KEY HIGHLIGHTS

Company Financials: Aurobindo Pharma (APL)

Profit & Loss Statement (Ye March )

YoY (%) YoY (%)

FY 07 21,230 3,022 3 022

FY 08 24,359 3,411 3 411

FY 09 30,773 5,174 5 174

FY 10 35,754 8,232 8 232

Effective tax rate (%) YoY (%)

997 2,025 454 366 1,937 5

1,004 2,408 432 249 2,224 328

1,276 3,898 839 167 3,227 964

1,493 6,738 678 389 6,450 1,592

Recurring Net Profit

402 14 (310) 698

BalanceSheet (Ye March)

No. of Shares o/s (mn)

EBITDA Margin PAT Margin

485 (3) 2,385

(1,750) (1) 514

751 (3) 5,612

Performance & Market Ratio (Ye March)

Cash Flow Statement (Ye March)

Source: Company, SBICAP Securities Research

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