India Pharma

Institutional Equity Research
INDIA PHARMA | Sector Overweight
June 07, 2012
Below is our composite analysis - 4QF12 earnings and managements F13 outlook. We revisit our pharma coverage ratings. Our pharma universe reported strong earnings for the quarter aided by Lipitor (RBXY), Geodon (DRL, LPC) and Lipidox/Taro onetime (SUNP). For 4Q on base business, Sales /EBITDA/Recurring PAT grew 22%/33%/23% YoY (40%/67%/51% - including oneoffs). Amongst the front line, base business profitability improved and stood strong for DRL, RBXY, and LPC. Divis and Dishman too delivered p positive surprise p on the Core OPM. Domestic formulations growth was better than expected at 25% YoY (versus 13.2% in 3Q). DRL continued to surprise with 17%, others including SUNP, LPC, CDH and Glenmark were in 2024%. DRL, RBXY, LPC holds positive F13 outlook. SUNPs 1H to remain weak. Adjusting for several non-recurring sales, exports formulation grew robust ~19% YoY (US/RoW at 25%/21%). Within CRAMs segment, Divis+Dishman results were upbeat. Overall Generics core margin improved to ~22% (20% in 4QF11), thanks to high formulation mix ~54% (52% in 4Q). US fml mix was 31% (30% in 4Q). CRAMs margin surprise, largely driven by higher utilisation of DSN (Divis) and positive yield in CA (Dishman). Divis reported 40% (SSLe: 36%). Dishman clocked ~25% (SSLe: 20%). Factoring in weak INR (avg rate of Rs53/US$ for 1Q, down 19% YoY), we anticipate positive earning surprise to continue in upcoming quarter from DRL, SUNP, LPC, RBXY Divis and Ipca. Other 4Q highlights (details on pg-4): 1) Negative surprise during 4Q, 2) F13 Outlook; companies guiding towards strong growth, 3) comment over US$3bn F15 Outlook for LPC and CDH. We revisit our pharma coverage (details on pg-4): Resetting our valuations to F14 multiples. This drives recommendation downgrades in some stocks despite price target upgrades from the rollover. Ratings impacted during 4Q result season: Upgrades: Divis (TP-Rs1,008) and DRL (TPRs1,995). Downgrades: Biocon (TP-Rs270) and SUNP (TP-Rs641). What we prefer (replacing SUNP with DRL in order of preference): Amongst the large cap, cap we have replaced SUNP with DRL in order of preference followed by LPC and anticipate a relative outperformance from stock over mid-long term. In the mid-cap, our order of preferences is Divis, Ipca and Dishman.
Please refer to the last page for disclaimer
Barring few, 4Q reiterated its perkiness, +ve on DRL/LPCs F13 Outlook
Analyst email
| Vivek Kumar | vivek.kumar@sbicapsec.com (+91 22 4227 3312)
Associate | Kunal Mishra email | kunal.mishra@sbicapsec.com (+91 22 4227 3459)
INDIA PHARMA Barring few, 4Q reiterated its perkiness, +ve on DRL/LPCs F13 Outlook June 07, 2012
Contents
India pharma - Barring few, 4Q reiterated its perkiness, +ve on DRL/LPCs F13 Outlook
India pharma 4Q: strong and ahead of expectation............... Other 4Q O Q highlights; We revisit our pharma coverage. Domestic formulation: a healthy growth of ~25% YoY (19% ex SUNPs onetime), F13 outlook mostly positive . US formulation: strong growth led by Lipitor, Lipidox and exceptional sales in Taro .... Rest of World formulation: grew robust at 21%, SUNPs RoW growth strategy-key catalyst on watch . Earnings/margins surprises and disappoints.... C Cross currency movement: Rupee weaken against major currencies over the past few f month.. India pharma: Demand for expensive defensives to continue for some more time ... Relative price performance: relative price appreciation to continue.. Pharmaceutical universe: valuation and financial summary.............................................................. 03 04 08 08 09 10 11 13 14 15
Our coverage universe ........................................................................17-21 17-21

Ajanta Pharma (AJP): Sales upside drove 4Q surprise Upgrade (Rs607, BUY) Biocon: Earnings beat estimate on low taxes, but gloomy outlook triggers Downgrade (Rs270, REDUCE) Cadila (Cadila HC): A slothful growth engine, Uphill sales target; REDUCE (Rs809, REDUCE) Divis Laboratories (Divis): DSN SEZ pulls an early bird; 4Q bulldozes estimates Upgrade to BUY (Rs1008, BUY) Dishman Pharma (Dishman): 4Q ahead of estimates, estimates F13 Outlook hold strong (Rs77, (Rs77 BUY) Dr. Reddys (DRL): Surged Conviction, Core business galvanized; Upgrade to BUY (Rs1,995, BUY)
IPCA Labs (IPCA): 4Q broadly in line; F13 Outlook affirms BUY (Rs421, BUY)
Jubilant LifeSciences (JLS): Quarter impaired by exceptionals, F13 outlook endorses an Add (Rs239, ADD) Lupin Limited (Lupin): 4Q Tax surprise to fade, Drivers intact; Reiterate BUY (Rs629, BUY) Ranbaxy Laboratories (RBXY): Lipitor outraces estimates, estimates reiterate "BUY" BUY (Rs610, (Rs610 BUY) Sun Pharmaceutical (SUNP): Several onetime drove 4Q performance; Revised to ADD on limited upside (Rs641, ADD)
Company financials...22-33 Disclaimer
India pharma 4Q: strong and ahead of expectation

Com panies 4Q/F12 Biocon Cadila Dr Reddy's IPCA Lupin Ranbaxy Sun Pharma Ajanta Pharma All Generic Agg. Dishman Divi's Jubilant gg All CRAMs Agg. Sector Agg. All Generic Agg. ^ All CRAMs Agg. 6,102 13,444 26,585 5,531 19,239 37,868 23 299 23,299 1,719 133,787 3,502 7,180 11,711 22,393 , 156,180 109,338 22,393 Sales (Rs m n) 4Q/F11 YoY(%) 4,710 11,687 20,173 4,738 15,536 21,809 14 633 14,633 1,258 94,544 3,444 4,786 8,903 17,134 , 111,678 90,864 17,134 29.6 15.0 31.8 16.7 23.8 73.6 59 2 59.2 36.6 41.5 1.7 50.0 31.5 30.7 39.8 20.3 30.7 QoQ (%) 18.0 -0.6 -4.0 -8.1 5.8 -0.1 86 8.6 4.9 1.7 31.9 73.2 7.7 26.7 4.6 1.2 26.7 4Q/F12 1,546 2,376 6,418 1,036 3,728 10,152 9 565 9,565 357 35,178 883 2,869 2,062 5,814 , 40,991 24,124 5,814 EBITDA (Rs m n) 4Q/F11 YoY(%) 1,308 2,346 4,261 936 3,108 4,032 4 436 4,436 280 20,707 555 1,913 1,423 3,891 , 24,597 18,572 3,891 18.2 1.3 50.6 10.7 20.0 151.8 115 6 115.6 27.5 69.9 59.2 49.9 44.9 49.4 66.6 29.9 49.4 QoQ (%) 30.6 1.6 -26.1 -25.1 -8.0 18.1 -0.8 08 -10.2 -3.0 67.7 93.4 -0.4 42.5 1.6 -1.8 42.5 4Q/F12 1,048 1,892 4,286 714 1,612 8,219 8 202 8,202 203 26,176 373 2,169 638 3,179 , 29,355 18,503 3,179 21,683 PAT (Rs m n) 4Q/F11 YoY(%) 942 2,110 2,783 621 2,288 3,266 4 427 4,427 175 16,612 223 1,752 910 2,885 , 19,497 14,698 2,885 17,583 11.3 -10.3 54.0 15.0 -29.6 151.7 85 3 85.3 16.3 57.6 67.0 23.8 -29.9 10.2 50.6 25.9 10.2 23.3 QoQ (%) 38.3 -0.7 -10.3 -31.3 -40.8 25.5 87 8.7 -17.1 2.5 333.7 103.6 -31.1 53.1 6.3 11.7 53.1 16.3 25.3 17.7 24.1 18.7 19.4 26.8 41 1 41.1 20.8 26.3 25.2 40.0 17.6 26.0 26.2 22.1 26.0 22.7 OPM (%) M ar-12 M ar-11 Dec-11 27.8 20.1 21.1 19.7 20.0 18.5 30 3 30.3 22.2 21.9 16.1 40.0 16.0 22.7 22.0 20.4 22.7 20.8 22.9 17.3 31.4 23.0 22.3 22.7 44 9 44.9 24.3 27.6 19.8 35.8 19.0 23.1 27.0 22.7 23.1 22.8
22.0 4.8 33.3 4.5 Sector Agg. ^ 131,731 107,998 29,938 22,463 ^ comparable base adjusted w ith; RBXY (Lipitor+Caduet)+DRL (Zyprexa+Geodon)+LPC (Geodon)+ SUNP (Lipidox+Taro/DF one time sales) + CDH (B (Bremer+ N Nesher h + Bi Biochem)+Aricept h ) A i t (1QC11) Source: Company, SSLe
Key takeaways
Our pharma universe reported strong earnings for the quarter aided by Lipitor (RBXY), Geodon (DRL, Lupin) and Lipidox/Taro onetime (SUNP). For 4Q on base business, Sales /EBITDA/Recurring PAT grew 22%/33%/23% YoY (40%/67%/51% - including oneoffs). Amongst the front line, base business OPM improved and stood strong for DRL, RBXY, and LPC. Divis and Dishman too delivered +tive surprise on the Core OPM. Domestic formulations growth was better than expected at 25% YoY (versus 13.2% in 3Q). DRL continued to surprise with 17%, others including SUNP, LPC, CDH and Glenmark were in 20-24% (inds. grew ~19% for Jan-Mar, as per AIOCD). DRL, RBXY, LPC holds positive F13 outlook. SUNPs 1H to remain weak. Biocon saw strong PAT, led by lower Tax/PBT which seems unlikely to continue. Mgt. guided for weak outlook on global biopharma; expect 12-15% growth in F13. Overall Generics core margin improved to ~22% (20% in 4QF11), thanks to high formulation mix ~54% (52% in 4Q). US fml mix was 31% (30% in 4Q). CRAMs margin i surprise, i l largely l d driven i b by hi higher h utilisation tili ti of f DSN (Di (Divis) i ) and d positive iti yield i ld i in CA (Di (Dishman). h ) Di Divis i reported t d 40% (SSLe: (SSL 36%). 36%) Di Dishman h clocked l k d ~25% 25% (SSLe: 20%). Factoring in weak INR (avg rate of Rs53/US$ for 1Q, down 19% YoY), we anticipate positive earning surprise to continue in upcoming quarter from DRL, SUNP, LPC, RBXY, Divis and Ipca.
Other 4Q highlights; We revisit our pharma coverage

Negative surprise during 4Q: 1) LPC high tax (46% of pbt), 2) DRL: impairment charge of Rs1bn in German market, 3) JLS: impairment of g/w Rs1.2bn on US clinical research arm, , 4) ) BIOS: weak F13 outlook ( (12-15%), ), 5) ) CDH: High g capex p g guid. of Rs6.5bn in F13, , and 6) ) SUNP: Onetime sales in Domestic Formulation ( (Rs1.8bn) ) resulting in weak 1HF13 guidance. F13 Outlook; companies guiding towards strong growth: DRL (~30% Sales growth), Dishman (~12-15%), Divis (+25%). In our view, DRL guidance is on optimistic side (builds possibility of few undisclosed niche launches) however outlook from Dishman/Divis looks more realistic to conservative. SUNPs guidance of 18-20% in INR terms (~12% at Rs/US$ 51) looks weak with further risk of high tax deteriorating most of future earrings. US$3b F15 O US$3bn Outlook tl k f for L Lupin i and dC Cadila: dil We W view i C Cadila dil (CDH) target t t to t be b more aspirational i ti l hence h chances h of f managements t optimism ti i getting tti misplace i l i is hi high h unless resort to inorganic strategy (required F12-15 cagr 41%). LPCs F15 deviation error is low (required cagr 27%) given 5Yr-historic run-rate of 27% growth and potential from Japan market. We revisit our pharma coverage: Given the sharp run up in the stock prices for some of the stocks under our coverage we have revisited our coverage to revaluate our recommendation. We have also reset valuations for stocks based on roll forward to F14 and selectively revised the earnings and target multiples where outlook has changed Ratings impacted during 4Q result season: Upgrades: DRL (TP changed. (TP-Rs1,995) Rs1 995) and Divi Divis s (TP (TP-Rs1,008). Rs1 008) Downgrades: SUNP (TP (TP-Rs641) Rs641) and Biocon (TP (TP-Rs270). Rs270)
Overview of change in recommendation and price targets TP Rec. Stocks Comment Old New Old New R Recommendation d ti change h Dr Reddy's 1648 1995 REDUCE BUY Rollover to F14; base multiple retained at 19x Sun Pharma 534 641 BUY ADD Rollover to F14; base multiple retained at 25x Divi's Labs 779 1008 REDUCE BUY Rollover to F14 Rollover to F14; downgrade due to gloomy outlook; Biocon 319 270 ADD REDUCE multiple cut to 14x Price target change Ranbaxy Lupin Cadila HC Ajanta Jubilant Life Ipca Dishman
Source: Company, SSLe
509 507 667 510 223 357 84
610 629 809 607 239 421 77
BUY BUY REDUCE BUY ADD BUY BUY
BUY Rollover to C13 BUY Rollover to F14; base multiple retained at 19x Rollover to F14; valued at 16x on concerns of increasing REDUCE financial leverage + falling organic growth BUY Rollover to F14 ADD Rollover to F14; maintaining multiple of 6x BUY Rollover to F14 BUY Rollover to F14
India Pharma: 4QF12 Sales YoY
Source: Company, SSLe * comparable base excludes - RBXY (Lipitor+Caduet)+DRL (Zyprexa+Geodon)+LPC (G d ) SUN (Lipidox+Taro/DF (Geodon)+ (Li id T /DF one time ti sales)+ l ) CDH (Bremer+ Nesher + Biochem)+Aricept (1QC11)
India Pharma: 4QF12 Sales QoQ
Source: Company, SSLe * comparable base excludes - RBXY (Lipitor+Caduet)+DRL ( p ) ( (Zyprexa+Geodon)+LPC yp ) (Geodon)+ SUN (Lipidox+Taro/DF one time sales)+ CDH (Bremer+ Nesher + Biochem)
India Pharma: 4QF12 EBITDA YoY
India Pharma: 4QF12 EBITDA QoQ
India Pharma: 4QF12 Recurring PAT YoY
India Pharma: 4QF12 Recurring PAT QoQ
Domestic formulation: a healthy growth of ~25% YoY (19% ex SUNPs onetime), F13 outlook mostly positive
(Rs mn) Sun Pharma* Dr Reddy's Ranbaxy Lupin Cadila HC Ipca Ajanta Cipla Glenmark Domestic Fml 4Q/F12 4Q/F11 3Q/F12 YoY% QoQ% 8,767 3,203 4,929 3,772 6,296 1,477 496 7,536 2,682 39,158 5,887 2,746 4,342 3,071 5,006 1,288 285 6,522 2,160 31,307 6,956 3,333 4,845 5,198 5,901 1,876 660 8,687 2,547 40,002 48.9 16.7 13.5 22.8 25.8 14.7 74 0 74.0 15.5 24.2 25.1 26.0 -3.9 1.7 -27.4 6.7 -21.3 -24.8 24 8 -13.3 5.3 -2.1
MAT 2012 (Jan-Mar)
26.0 10.2 8.0 14.4 16.6 23.0 38 0 38.0 17.5 33.1 18.9
* includes one time; Rs1.8bn in 4QF12, Rs40mn in 4QF11 Source: Company, SSLe
Domestic formulations growth has been robust this quarter for most of the pharma companies partly due to a low base in the same quarter last year. DF growth was robust at 25% YoY (versus 13.2% in 3Q). Based on secondary growth trend & mgts outlook, 1Q expects to remain strong for LPC+DRL (on low base)+IPCA+RBXY. Front liners: SUNP, LPC and Cipla outperformed sector average, grew 20% (excludingthird party+onetime), 29.8% and 18.4%, respectively, driven by ramp-up in new launches. While DRLs DRL s F12/4Q revived ~11%/17% YoY driven by new launches and bio bio-similar, similar LPC continued with 23% growth. IPCAs 4Q recovered to 15%. Ex-Biochem, growth from CDH were15%, led by recovery in wellness business (+11% YoY). Average primary growth for companies was marginally higher to the underlying secondary growth; indicative of YE inventory pushing. F13 outlook positive; (LPC/SUNP indicated +20% growth, RBXY/CDH/DRL ~15%, IPCA i 18 is 18-20%). 20%) SUNP SUNPs1H 1H growth h to be b weak k on account of f change h in i distribution di ib i policy. li
US formulation: strong growth led by Lipitor, Lipidox and exceptional sales in Taro
(Rs mn) Sun Pharma Dr Reddy's Ranbaxy Lupin Cadila HC Ipca Glenmark US Fml revenues Revenues (ex)^ 4Q/F12 4Q/F11 3Q/F12 YoY% QoQ% 10,106 5,530 10,400 82.7 -2.8 8,732 5,918 11,114 47.5 -21.4 20,925 7,644 20,757 173.7 0.8 9,118 6,235 6,832 46.2 33.5 3,533 2,803 3,435 26.1 2.9 435 324 411 34.2 5.8 3 435 3,435 2 243 2,243 3 190 3,190 53 1 53.1 77 7.7 56,283 30,697 56,139 83.4 0.3 33,634 27,017 32,547 24.5 3.3

^ comparable base adjusted for all one time sales Source: Company, SSLe
Adjusting for non-recurring, the US formulation witnessed a strong growth of 83% (25% ex-Lipitor, ex Lipitor Lipidox and exceptional sales in Taro) Taro), thanks to channel inventory filling as YE rush. Unanticipated surprises reported from RBXY (Lipitor) SUNP (strong Taro+Lipidox) and DRL (core business covering for low Zyprexa sales) triggered most EPS upgrades for F13 Companies including SUNP, DRL and IPCA have seen strong growth momentum YoY. CDH grew ~17%/12% YoY for F12/4Q, with no substantial ANDA launches however mgtm anticipates ~10-15 ANDA approvals post FDA clearance of Moraiya Injectable facility. RBXYs US base business run rate improved ~$85mn per quarter (~$80mn in 4Q). Mgtm hopeful to grow to $100mn run-rate by C12 end. ANDA pipeline across companies remained healthy. Based on F12, LPC with 25 filing occupied first place followed by SUNP (22), CDH (21) and DRL (17). However the launch g for SUNP ( (22) ) and DRL ( (16). ) to file ratio was highest We expect strong US growth to be retained in the upcoming quarters, led by scaling up of niche launches and aspiration drive (DRL, LPC), spillover of exceptional sales in Taro (SUNP), positive news flow (Diovan, Actos, potential Isotretinoin launch) in RBXY. Please refer to the last page for disclaimer
8
Rest of World formulation: grew robust at 21%, SUNPs RoW growth strategy-key catalyst on watch
(Rs mn) ( ) Sun Pharma Dr Reddy's Ranbaxy Lupin Cadila HC Ipca Ajanta Cipla Glenmark ROW Fml revenues
4Q/F12 4Q/F11 3Q/F12 YoY% QoQ% 3,226 6,462 10,211 3,398 1,953 1,958 1,223 8,551 3,662 40,644 2,231 5,504 8,676 2,128 1,837 1,951 969 7,428 2,783 33,507 2,810 6,840 10,664 3,051 2,348 2,487 979 7,021 3,404 39,604 44.6 17.4 17.7 59.7 6.3 0.4 26.2 15.1 31.6 21.3 14.8 -5.5 -4.2 11.4 -16.8 -21.3 21.3 25.0 21.8 7.6 2.6

RoW formulation (excluding India and US) sustained healthy growth of 21% YoY, 3% QoQ. QoQ Barring Cadila and RBXY, the growth reported in Japan/LATAM generics were strong. LPC (+60% YoY) continued to positively surprise. IPCAs growth mainly impacted by track and trace implementation in UK (lowering productivity); Mgtm. hopes growth recovery from 2QF13. g sharply p y QoQ (-10%), ( ), mainly y impacted p EU formulation remained flat YoY but de-grew from continued tenderization of the German market (DRL). On account of this DRL took an impairment charge of Rs1bn in 4Q The Russia/CIS formulation growth revived (+25% YoY) from 3Q. (as per Pharmaexpert Mar 2012, the overall market grew ~17%). DRL and Glenmark clocked secondary prescription sales growth of 21% and 18%, respectively (partially driven by volume and OTC portfolio). We believe the RoW market will continue to be a strategic focus area for accelerated product launches, as it offers economic opportunities for growth with sustained profitability. SUNPs RoW growth strategy will be key catalyst on watch with Israel Markov (ex-Teva CEO) taking over as new Chairman of SUN.
Earnings*/margins^ surprises and disappoints *

JLS Divi's Dishman Ajanta Sun Pharma Ranbaxy Lupin IPCA DRL Cadila Biocon Earning+rating downgrade -70% -50% -30% -10% 10% 30% 50% 70%
Earning+rating upgrade
Rating downgrade

Earning+rating upgrade

disappointment
surprise

JLS Divi's Divi s
On an aggregate basis, earnings of our coverage universe were better than expected ( (variance of +22%). ) Total earnings g were Rs29.4bn against g SSLe of Rs24bn. On an aggregate basis, operating margins expanded sharply by ~258bps to 26% against SSLe of 24%, led by weak INR (11% YoY) + high formulation mix (~54%) + high gross margin in one-time Geodon (DRL), Lipitor (RBXY), Lipidox /Taro (SUNP). Generics core margins were impressive at 22% YoY (19% in 4QF11) is unlikely to sustain if rupee recovers. Extreme earning surprise cases were RBXY, RBXY SUNP, SUNP DIVIs and DISH, DISH boosted from improvement in OP margins. LPC low earning is impacted by high tax burden (46%) due to expiration of EoU benefits + advance tax on unrealized gain on inventory. Top line growth from frontline companies were 10-20% better; SUNP (improvement in Taro + Lipidox), RBXY (strong ms in Lipitor) and DRL (US generic, Russia and PSAI ). CRAMs margin surprise, largely driven by higher utilisation of DSN (Divis) and positive yield in CA (Dishman). Divis reported 40% (SSLe: 36%). Dishman clocked ~25% (SSLe: 20%). Dishman expects low margin in CA to scale up to 10% in F13 and has maintained its positive outlook. As a result of strong Rs/US$ on closing basis (~4%, QoQ) most companies reported MTM forex gain for 4Q at Rs4.6bn (~12% ( 12% of PBT) on forex loans. Forex gains during 4QF12 earnings
Companies Ranbaxy Jubilant Life Ajanta Ipca DRL Cadila HC Biocon Dishman Forex gain (P/L) Rs mn Profit before tax 4,249 400 33 51 96 (90) (70) (58) 4,611 9,593 988 280 900 5,124 2,328 1,168 581 37,452 % to PBT 44.3 40.5 11.8 5.7 1.9 (3.9) (6.0) (10.0) 12.3
Dishman Ajanta Sun Pharma Ranbaxy Lupin IPCA DRL Cadila Biocon -700 -500 -300 -100 100 300 500 700
Total
bps
10
20 Jan-05 J Jul-05 Feb-06 F Sep-06 S Apr-07 A Nov-07 N Jun-08 J Jan-09 J Aug-09 A Feb-10 F Sep-10 S Apr-11 A Nov-11 N Jun-12 J Apr-11 1 Nov-11 1 Jun-12 2 Sep-10 0 Feb-10 0 Aug-09 9 Jan-09 9 Jun-08 8 Nov-07 7 Apr-07 7 Sep-06 6 Feb-06 6 Jul-05 5 Jan-05 5
US$INR
US$RUB
24
28
32
36
40
30
35
40
45
50
55
60
June 07, 2012
INDIA PHARMA Barring few, 4Q reiterated its perkiness, +ve on DRL/LPCs F13 Outlook
Cross currency movement: Rupee weaken against major currencies over the past few months
Source: SSLe 40 45 50 55 60 65 70 75 0.2 Jan-05 J Aug-05 A Feb-06 F Sep-06 S Apr-07 A Nov-07 N Jun-08 J Jan-09 J Jul-09 Feb-10 F Sep-10 S Apr-11 A Nov-11 N Jun-12 J
EURINR
JPYINR
0.3
0.4
0.5
0.6
0.7
Jan-05 5 Jul-05 5 Feb-06 6 Sep-06 6 Apr-07 7 Nov-07 7 Jun-08 8 Jan-09 9 Aug-09 9 Feb-10 0 Sep-10 0 Apr-11 1 Nov-11 1 Jun-12 2
11
Cross currency movement

CHFINR
70 60 50 40 30 20 Nov v-07 Nov v-11 Jan n-05 Aug g-05 Mar r-06 Sep p-06 Apr r-07 Jun n-08 Jan n-09 Aug g-09 Feb b-10 Sep p-10 Apr r-11 Jun n-12
Source: SSLe
12
India pharma: Demand for expensive defensives to continue for some more time
Given the current weak macroeconomic backdrop, we believe expensive defensives will continue to be in flavor over the next few months. Moreover, the pharma sector should benefit from the INRs INR s depreciation (c (c. Rs55 Rs55.6/US$, 6/US$ down 10% Apr Apr till date) date). The recent expansion in the premium over Sensex (~38% against the long term average of 25%) is mostly led by decline in Sensex PE. Pharma PE multiple (1-Yr forward) broadly remained in 16-18x range (stable earning growth ~18-20%). This suggests that a selective approach to pharma stocks is warranted with a focus on earnings visibility. We view sector core Sales/earnings growth between F1214e to be steady at 18%/22% cagr.
Action and recommendations Besides this, we have reset our price targets on F14 (implied ~20% EPS growth over F13). Our stock order of preference is changed: Amongst the large cap, we have replaced Sun Pharma (SUNP) with DRL as our top pick followed by LPC, SUNP and anticipate a relative outperformance from stock over mid-long term. In the mid-cap, our order of preferences is Divis, IPCA and Dishman. DRL: play on US generic opportunities and sustained DF growth of ~16% through F14 LPC: limited competition products launch + encouraging growth in Japan-post-Irom integration + gaining focus in RoW markets
India pharma universe

Company p y Sun Pharma Dr Reddy's Ranbaxy Lupin Cadila HC Biocon Ipca Ajanta Generics agg. Jubilant Life Dishman Divi's Labs CRAM agg. CRAMs Rating g Add Buy Buy Buy Reduce Reduce Buy Buy Add Buy Buy M.Cap New Tgt Rs Bn (Rs) 599 274 208 246 148 44 42 7 28 4 124 641 1,995 610 629 809 270 421 607 239 77 1,008 Upside p 11% 23% 23% 14% 12% 24% 26% -4% 16% 37% 43% 8% 14%
1-Yr forward PE: Our coverage vs. Sensex

2 25x 20x 15x 10x 5x 0x Jun-07 Jun-08 Premium Jun-09 Jun-10 Jun-11 50% 0% 40% 30% 20% 10% 0% Jun-12
Pharma P/E (1 yr fwd)
Sensex P/E (1 yr fwd)
Source: Company, SSLe, Price as on June 6, 2012
13
Relative price performance: relative price appreciation to continue

We believe the India pharma sector will continue to outperform in the near future, despite stocks being reprised with risks to the global economy and uncertainty that may drive markets for some time time. Indian pharma growth prospects in domestic and export markets remain strong and thus warrants a relative outperformance. DF growth has remained strong in Mar12 and Apr12 with 22% YoY and 18% YoY growth (as per AIOCD-secondary sales data). Hence, we maintain healthy growth outlook for medium to longer term for most of our coverage universe. SUNs 1HF13 growth to be weak on account of change in distribution policy. Despite recent weakness, the sector out performance versus Nifty/Sensex in the last 3/6-month is ~12%; while in 1-year, it was ~17%. Over the past 24 months, pharma index has outperformed broader indices by 23% and has historically been trading at a premium to Sensex. Hence, we reiterate the sector is poise for a better returns over broader indices. Amongst the frontline stocks over the past 1Yr, only SUNP have relatively outperformed their peers by huge difference, mainly led by continued strong Taro performance and gain in market share for niches launches (including Lipidox). While RBXY bounced back (led by successful launch of generic Atorvastatin + positive news flow on FDA/DOJ settlement + visibility in upcoming US launch). Biocons sharp price correction is attributable to Pfizer deal call-off+weak global biopharma outlook+ potential delay in monetizating insulin/ MAbs opportunities beyond F15. No clear timeline indication over the draft pricing policy. Although, we believe this to have minimal impact for the domestic pharma industry. We anticipate ~55 10% lower EBITDA for our coverage , if the policy is implemented.

Relative price and volume performance (3M, 6M, 1Yr and 2Yr)
Nifty Sensex BSE HC Ajanta Biocon Cadila HC DRL IPCA Lupin Ranbaxy Sun Pharma Dishman Divi's Jubilant Life Free float (%) 29.9 39.1 25.2 74.4 54.0 53.1 36.3 36.3 38.6 47.8 51.0 CMP (Rs) 5 429 5,429 17,924 6,279 632 218 724 1,616 335 552 494 578 54 933 175 3M -9.3 93 -9.2 3.2 52.8 -22.7 2.5 -1.1 -0.2 11.6 15.8 3.4 -6.6 22.1 -8.4 Absolute returns (%) 6M 1 Yr -1.9 19 -13.4 13 4 -3.1 -14.2 8.6 2.9 84.9 130.7 -33.4 -41.7 3.3 -19.7 6.7 2.5 34.7 2.6 15.6 15.4 11.2 -8.6 8.9 21.1 16.6 -49.2 19.7 17.4 -3.0 8.3 2 Yr -2.6 26 -3.7 19.5 242.3 -26.2 17.8 17.4 27.0 45.2 14.8 69.3 -75.1 24.5 -48.4 3M 158 1 158.1 12.5 2.0 0.1 0.7 0.1 0.3 0.2 0.7 0.9 0.9 0.4 0.2 0.1 Volumes (mn) 6M 1 Yr 177 5 177.5 159 7 159.7 15.4 15.0 2.1 1.8 0.1 0.1 0.7 0.5 0.1 0.1 0.3 0.4 0.2 0.2 0.8 0.9 1.1 0.9 0.9 1.0 0.3 0.2 0.2 0.2 0.1 0.2 2 Yr 154 9 154.9 15.4 2.5 0.1 0.6 0.1 0.4 0.2 1.0 1.0 1.0 0.2 0.2 0.2 Rating Buy Reduce Reduce Buy Buy Buy Buy Add Buy Buy Add Tgt Price (Rs) 607 270 809 1,995 421 629 610 641 77 1,008 239
Source: Company, SSLe, Stock price as on June 6, 2012
14
Pharma universe: valuation summary

Company Sun Pharma Dr Reddys Ranbaxy Lupin Cadila HC Divi's Labs Biocon Ajanta Jubilant Life Ipca Dishman Pharma universe
S Source: Company, C SS SSLe
Blmg tick Rating SUNP.IN DRRD.IN RBXY.IN LPC.IN CDH.IN DIVI.IN BIOS.IN AJN.IN JOL.IN IPCA.IN DISH.IN Add Buy Buy Buy Reduce Buy Reduce Buy Add Buy Buy
Mkt Cap (Rs bn) CMP(Rs) 599 578 274 1616 208 494 246 148 124 44 7 28 42 4 552 724 933 218 632 175 335 54
Price TP(Rs) 641 1995 610 629 809 1008 270 607 239 421 77
Upside (%) F 12e 11% 22.8 23% 20.5 23% 14.5 14% 12% 8% 24% -4% 37% 26% 43% 25.5 19.5 20.1 14.7 7.1 8.1 12.7 6.5 20.6
P/E (x) F 13e 22.7 17.2 13.2 18.9 16.8 18.6 13.0 10.3 6.1 11.9 4.9 18.5
F 14e 23.0 15.4 18.4 16.9 14.3 14.8 11.3 8.3 4.4 10.3 3.5 18.0
EV/EBIDTA (x) F 12e F 13e F 14e 17.1 16.1 16.2 12.7 11.0 9.9 10.9 9.6 12.8 16.5 15.8 14.0 9.1 5.7 6.4 9.5 4.7 11.1 13.6 12.1 13.1 7.5 6.4 5.0 8.3 4.4 9.7 12.2 10.4 10.5 6.5 5.2 4.1 7.2 3.7 9.0
Mkt Cap/Sales (x) F 12e F 13e F 14e 7.4 6.3 5.8 3.1 2.4 2.1 1.7 1.8 1.9 3.3 3.0 5.4 2.3 0.9 0.7 1.8 0.3 2.7 2.9 2.3 5.1 1.8 1.0 0.5 1.5 0.3 2.4 2.5 2.0 4.1 1.6 0.8 0.4 1.3 0.3 2.1
Dividend Yield F 12e F 13e F 14e 0.9 1.0 1.0 0.8 0.9 1.0 0.0 0.0 0.0 0.8 1.2 2.0 2.3 1.9 1.7 1.1 1.8 1.3 1.2 1.6 2.0 2.5 2.2 2.6 0.7 1.9 1.5 1.4 1.9 2.5 2.9 2.6 3.7 0.8 2.7 1.9
Pharma universe: financial summary

Company Sun Pharma Ranbaxy Dr Reddys Divi's Labs Lupin Biocon Ajanta Cadila HC Jubilant Life Dishman Ipca Pharma universe
Revenues (Rs Mn) F 12e F 13e F 14e 80,057 94,716 102,420 101,614 115,504 107,705 96,737 112,190 128,530 18,893 70,829 20,865 5,983 51,769 42,784 11,221 22,992 24,190 85,133 23,880 7,245 63,273 52,012 12,807 27,077 29,745 98,181 27,606 8,766 73,394 63,513 15,210 31,693 F 12e 29,855 11,742 14,559 5,053 9,273 3,236 752 7,990 3,945 568 3,329
PAT (Rs Mn) F 13e 28,715 15,792 15,906 6,666 13,016 3,361 720 8,807 4,574 894 3,539 F 14e 28,621 11,329 17,729 8,367 14,607 3,852 888 10,352 6,344 1,245 4,087 F 12e 25.0 27.9 86.0 38.1 20.8 16.2 64.2 39.0 24.8 7.0 26.4
EPS (Rs) F 13e 25.5 37.5 94.0 50.2 29.2 16.8 61.6 43.0 28.7 11.1 28.1 F 14e 25.2 26.9 104.7 63.0 32.7 19.3 75.9 50.6 39.8 15.4 32.4
2-yrs CAGR (F 12-14e) Sales 13.1 3.0 15.3 25.5 17.7 15.0 21.1 19.1 21.8 16.4 17.4 17.6 EPS -2.1 -1.8 10.4 28.7 25.5 9.1 8.7 13.8 26.8 48.0 10.8 22.1 F 12e 22.4 37.9 25.3 23.7 22.7 14.3 27.7 30.0 16.4 6.2 26.4 23.0
RoE (%) F 13e 19.2 30.9 23.4 26.2 25.7 13.5 22.0 26.9 16.7 9.0 22.3 21.4 F 14e 16.6 18.2 22.2 27.3 23.7 14.0 22.4 25.9 19.6 11.3 20.8 20.2 F 12e 22.4 16.0 20.3 28.0 22.0 13.3 19.9 30.0 10.2 8.5 20.3 19.2
RoCE (%) F 13e 21.3 19.6 19.8 31.5 24.6 13.2 16.6 26.9 12.1 9.8 19.6 19.5 F 14e 18.2 12.3 20.0 33.1 23.4 14.1 17.4 25.9 14.9 11.5 19.4 19.1
15
Ajanta Pharma (AJP): Sales upside drove 4Q surprise
(Rs607, BUY)
F12/4Q highlights: Ajanta Pharma (AJP) beats 4Q estimate with sales at Rs1.7bn (+37% YoY), driven by strong domestic formulation (DF). Better-than expected EBITDA margins of 20.8% (SSLe 19.7%) has more than negated the impact from higher tax/PBT on profits (recurring PAT at Rs203mn; SSLe was Rs126mn). F12 Sales/PAT growth was strong ~31%/60% with OPM at 21.1%. Further AJN announced a stock split of 1:2 (subject to shareholder approval) and has declared 75% dividend (Rs7.5 per share). Raising TP to Rs607, maintain a BUY: We rollover out TP to F14 at Rs607 (Rs510 earlier) and re-iterate BUY on attractive valuation and managements encouraging F13 growth forecast of ~22% in topline. Over the long term (3-5 Yr), we believe the underlying fundamentals are favourable. We are marginally tweaking out EPS estimate for F13/14e to Rs62/76 (from Rs64/80), due to revised tax/PBT guidance of 17%. The F12/4Q YoY growth continue to surprise at 34%/74%, largely driven volume growth across Derma/ CVS/Optha segments + pick up in 3 newer segment . Conservatively, we expect AJP to sustain DF growth of 18-20% (F12-14e). Growth from export formulations segment was healthy for F12/4Q (+26%/29% YoY), led mainly by Asia and Africa regions. Good news - upside in the US market to start from 1QF13: With distribution tie tie-up up in place, AJP expects to commence the US sales from 1QF13 (May end). We maintain our forecast with US being the key driver over 3-5 years. Key management outlook: a) The management expects DF momentum to be maintained in F13, b) AJP has 2 approved ANDA (Respiradone and Levetiracetam) and is ramping up its filing for US market (filed 2 ANDA in 4Q/ c.7 ANDA in F12), c) the management expects to commence the US sales from 1QF13 (May end).
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Biocon: Earnings beat estimate on low taxes, but gloomy outlook triggers downgrade
(Rs270, REDUCE)
F12/4Q highlights: Biocons 4Q results are broadly in line at net sales/EBITDA/PBT level of Rs6.1/1.5bn/1.2bn (SSLe Rs5.8/1.5/1.1bn). However, lower-than-expected Tax/PBT of 11% (SSLe 28%) led recurring PAT beat estimates at Rs1bn (SSLe Rs76mn and consensus Rs836mn). Core EBITDA margin were compressed at ~25%, impacted from higher R&D spend to Sales (~12%) and low licensing income LI delta (Pfizer). Further Biocon declared 100% dividend (Rs5 per share). Lowering F13 EPS; Cut TP to Rs270: We have lowered our EPS for F13e by 11% (Pfizer-Biocon deal implication) and further introduce F14 numbers with EPS of Rs19.3 (~10% growth). As highlighted in 3Q review for possible weak outlook on global bio-pharma/moderating growth in Statin business, we downgrade the stock to Reduce with TP of Rs270 (14x F14). Our Reduce call is led by: a) muted core earning F12-14e ~11% due to margin headwinds, b) slow progression in the Statin business (~10% growth for F12-14e) and potential delay in monetizating insulin/ MAbs opportunities beyond F15. At the CMP of Rs239, the stock is trading at a P/E of 14.2x F13e and 12.4x F14e. We downgrade the stock to Reduce with TP of Rs270 (14x F14). y management g outlook: Key a) Overall guidance for F13: Sales growth in 12-15%, Capex may step up at ~Rs3bn, Tax guidance for F13 is increased to MAT rate (~12% in F12), b) Pfizer deal call-off implication, LI to remain EBITDA/PAT neutral post 1QF13.
Cadila (Cadila HC): A slothful growth engine, Uphill sales target; REDUCE
(Rs809, REDUCE)
F12/4Q highlights: 4QF12 reported Sales were below estimates at Rs13.4bn Rs13 4bn (+15% YoY, YoY SSLe Rs14.6bn) Rs14 6bn) while recurring PAT stood in-line. in line In our view, view the US business accounting for 26% continues to limp (17% YoY ex-Nesher) with no substantial ANDA approvals. Further net sales growth of 15% (5% ex-inorganic acq.) is weak. EBITDA margins were below consensus at 17.7% (SSLe 17.2%/cons 19.1%) owing to slower recovery in the wellness business. Maintain REDUCE on near-term margin compression; revise TP to Rs809: We have rolled forward our valuation to F14, with a target P/E multiple of 16x. This drives an increase in our TP to Rs809 from Rs667 earlier. With worries around; a) below mid-teen mid teen profitability in the recently acquired companies and longer gestation in reaping integration benefits , and b) increasing tax burden/rising interest cost leading to moderate earnings growth for F12-14 of ~14% CAGR. Maintain REDUCE. Ahead of ambitious F15 Sales target of US$3bn being contingent upon resolution of pending FDA issue over its injectables facility, concerns from increasing financial leverage with marginal integration benefit, anticipated risk of falling organic growth and underperformance over the next 1-2 years is likely. Downside risks: Include slower ramp up in US, unanticipated declines in the JV+Wellness business, delay in cost synergies from BioChem, Nesher and Bremer K management Key t outlook: tl k a) F13 Domestic Formulation ex-Biochem growth; +15%, to be driven largely by enhanced MR productivity, b) F13/14 US Formulation Nesher to witness +15% (constant currency), c) Target to file ~30 ANDAs in F13, d) AMT (Alternate Minimum Tax) rate applicable +20%, e) Capex guidance Rs6.5bn (mainly towards Formulation blocks and biologics) and f) D/E targeted ~0.5x by F14.
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Divis Laboratories (Divis): DSN SEZ pulls an early bird; 4Q bulldozes estimates Upgrade to BUY
(Rs1008, BUY)
F12/4Q highlights: Divis 4QF12 upbeat largely driven by net sales; grew 50% YoY to Rs7.2bn, exceptionally higher than estimates (SSLe: Rs4.9bn / Consensus: Rs4.1bn). The EBITDA margins were 40% (flat YoY but expanded 417bps QoQ), led by DSN SEZ higher utilization and high margin product mix. 4Q positive aberration occurred earlier than expected primarily beating managements guidance from previous quarter. Upgrade to BUY; early DSN SEZ ramp-up+fresh supplies in high margin product mix were upgrade triggers: Our upgrade to BUY from Reduce is driven by: a) F12 upbeat with enhanced EPS of Rs39 (SSLe Rs34), to continue, b) fresh supplies in high margin product mix, c) better than expected production pick up DSN SEZ. As a result, we revise EPS estimate for F13 to Rs50.2 (upgrade 16%); introduce F14 EPS at Rs63 (26% YoY). Y Y) We W upgrade d stock t k to t BUY; BUY revised i d TP to t Rs1008 R 1008 (16x (16 rollover ll t F14). to F14) Management outline for at least 25% growth in F13/14 despite high base in F12 with similar OPM of F12 (~37%). In our view, with uptake in the utilisation at DSN (block I) and addition of 2 more blocks the growth outlook of 25% should be easy. Key management outlook: a) Sales to growth at least 25% for F13/14, b) EBITDA margins likely to be maintained at F12 levels of ~37%, c) On DSN, Mgt target F13 sales contribution >13% (7% in F12), F12) d) Tax rate ~20% 20% (from ~23% 23% given in 3Q call), call) e) Nutraceutical sales estimated to reach Rs1.5bn Rs1 5bn (F12: Rs810mn), Rs810mn) f) DSN SEZ facility stands to gain US FDA approval in F13; post which EBITDA margins will expand further, g) Expect DSN SEZ facility to get FDA approval in1H F13.
Dishman Pharma (Dishman): 4Q ahead of estimates, F13 Outlook hold strong
(Rs77, BUY)
F12/4Q highlights: Dishman beats 4Q estimate; Sales at Rs3.5bn Rs3 5bn (SSLe: Rs3.0bn, Rs3 0bn Cons: Rs3.2bn), Rs3 2bn) Better-than Better than expected EBITDA margins of 25.2% 25 2% (SSLe: 19.8%, 19 8% Cons: 19.6%) 19 6%) has more than negated the impact from higher tax/PBT on profits. Recurring PAT at Rs373mn (SSLe/cons: Rs216mn) was up 37% YoY. Following up from 3Q, 4Q continue to witness step-up in its core operating performance across business segments. Managements signs of optimism for F13 ensures growth visibility. Improving operating leverage + better growth visibility = Maintain Buy: We maintain BUY considering trailing underperformance, improving operating leverage, growth visibility (from new contracts + pick up at Unit 9 (Hypo), Unit 10 (Disinfectants) Unit 13 (V-D3)). (Disinfectants), (V-D3)) We tweak down F13 EPS by ~7% to Rs11.1 Rs11 1 to factor conservative sales (13-15%) and high tax/pbt (23-24%) guidance. guidance This is a multiple call: In our view, the worst quarter of performance is now behind the company which now appear to be reflected in P/E and in long-term consensus EPS. Better execution should drive F14 P/E from 2.8x to 5x over next year (2-Yr EPS CAGR +48%). Potential catalysts that could boost Dishman stock: 1) pick up in revenues from Unit 9, 10, 13 in F13, 2) potential supplies to Astellas (Jan 2013), 3) recovery of ~Rs1bn on de-notification of SEZ investment in F13, 4) formal F13 guidance in late 1QF13, with improved OPM outlook. Key management outlook: a) Sales for F13 at Rs12.5bn with PAT to be Rs900mn-1bn, b) MM segment margin guidance ~18-20% for F13 (Benzethonium Chloride sales for F13 pegged at US$12mn), c) OPM for F13 to be better than F12 of 20.6%; CA to clock good margin in F13 ~10%, d) Tax guidance at 23-24% level, e) No borrowing plans over the next 2 years.
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Dr. Reddys (DRL): Surged Conviction, Core business galvanized; Upgrade to BUY
(Rs1,995, BUY)
F12/4Q highlights: 4Q sales at Rs26.5bn (+32% YoY) were ahead of estimates, with US generic, Russia and PSAI being the key growth drivers. Barring major FTF (Geodon, assuming US$20mn in sales) the US base business reported strong growth (26% YoY/21% QoQ) covering up for Zyprexa depressed sales. India/Russia grew robust at 17%/23%YoY. EBITDA margin fell below est. at 24% (SSLe: 27%) due insignificant Olanzapine. However, core OPM expanded smartly ~30bps QoQ. During the qtr. DRL took an impairment charge of Rs1bn further impacting the reported PAT at Rs3.4bn (SSLe: Rs4.3bn).. Opinion on outlook - Surprised; upgrade to Buy: DRL maintains the F13 targets of US$2.5-2.7bn, guiding towards bold 30% sales growth over high base of F12. The mgmt. refrained from disclosing the specifics, ifi we believe b li th there exists i t a scope for f few f niche i h launches l h in i US. US Being B i excessively i l conservative ti we adjust dj t our Sales S l forecast f t for f F13 to t US$2.5bn US$2 5b from f US$2.3bn and upgrade our view on stock to Buy; raise TP to Rs1,995 (Rs1,648). We anticipate a relative outperformance from stock driven by; 1) strong ramp up in fondaparinux, 2) mid-term visibility in para III/IV products for the US market (Ziprasidone+atorvastatin+ Finasteride), 3) Lansoprazole OTC launch (US$200mn sales), 4) sustained DF growth through F14 (~16%) . Key management outlook: a) ) Management M maintained i i d its i revenue guidance id of f US$2.5-2.7bn US$2 2 b for f F13 with i h ~30% 30% growth h and d believes b li F13 to be b an interesting i i year, b) DF growth h to be b at market growth levels in F13, c) US Generic to reach US$900mn (from US$670mn in F12), d) F13 Tax rate; 20%.
IPCA Labs (IPCA): 4Q broadly in line; F13 Outlook affirms BUY
(Rs421, BUY)
F12/4Q highlights: I Ipcas 4Q results lt are broadly b dl in i line; li net t sales/EBITDA/PBT l /EBITDA/PBT at t Rs5.5bn R 5 5b /1.0bn/900mn /1 0b /900 (SSL Rs5.7bn/1.0bn/886mn). (SSLe: R 5 7b /1 0b /886 ) However, H l lower-than-expected th t d Tax/PBT T /PBT of f 21% (SSLe: 31%) led recurring PAT beat estimates at Rs714bn (SSLe: Rs615mn). 4Q EBITDA margins of 18.7% were inline. Other highlights includes: encouraging growth in DF (+15% YoY) after couple of weak quarters, robust growth from exports API (+60%, led by Tonira consolidation), decline in EU generics and MTM forex gain of Rs510mn. Overall formulation mix improved to ~76% of sales (F11: 74%). Retain BUY; F13 outlook broadly indicates positivity - TP raised to Rs421: We rollover our TP to F14 and our revised target price is Rs421 (13x F14 EPS) and retain our BUY recommendation. recommendation Further owing to better F13 outlook; a) improved DF guidance of 18-20% growth, b) better visibility in tender business of Rs3.5bn, and c) favourable export realisation impacting margins, our F13 EPS is marginally tweaked to Rs28.1 (+3%). DF growth recovered to 15%; management pegs ~18-20% for F13 Key management outlook: a) Revenue growth of 17-20%; 17 20%; DF growth 18-20%, 18 20% APIs exports +15%, +15% b) OPM expansion in 30-50bps 30 50bps range, range c) Tender business to be ~Rs3.6bn, ~Rs3 6bn d) Capex to be ~Rs2.5bn, e) Sharp increase in inventory days to 105 days in F12 (F11: 90 days), led by high procurement cost of artemisinin at US$675 (from US$400 in F11) and lower UK sales impacted implementation of track and trace (resulting in loss of productivity), and f) US FDA approval for Indore may come anytime (likely to trigger ~4 ANDAs approval)
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Jubilant LifeSciences (JLS): Quarter impaired by exceptionals, F13 outlook endorses an Add
(Rs239, ADD)
F12/4Q highlights: JLS reported better-than-expected sales at Rs11.7bn (+31.5% YoY), led by higher capacity utilization in the Sartans, volume growth/better pricing in Generics and new API launches. Other highlights; EBITDA margins stood at 17.6% (16% in 4QF11), the recurring PAT was lower than SSLe at Rs638mn impacted by high amortization + high tax/PBT (36%). For F12, overall Sales/PAT grew 25%/63% with ~20% OPM. Key surprise includes dividend of 300% (+50% YoY). Maintain ADD, TP raised to Rs239: We have rolled forward our valuation to F14 EPS (Rs39.8, implying F12-14e CAGR of 27%), maintaining our target multiple of 6x. Retain ADD. , managements g F13 Sales outlook looks conservative to factor in a) ) ramp-up p p in new Niacinamide capacity p y at SEZ Gujarat, j , 2) ) the commissioning g of In our view, additional capacities in Symtet in 1QF13, 3) traction in new contracts . We estimate F12-14e Sales CAGR growth of 22%. However, the long-term out performance would be a concern: Led by sustainability of core EBITDA margin (ex-favorable Rs/US$ impact) of ~20% for the next few quarters and high financial leverage (1.6x). Key management outlook: ) F13 Sales g growth of 20-22%, , b) ) EBITDA margins g to improve p in the next few y years, , led by y utilisation p pick up p in p products business and high g margin g p product mix a) in Service business on sustainable basis, expects ~23-24% (Product) and ~15-18% (Services), c) Capex planned at Rs3.5bn (Rs2.5bn towards Symtet+Generics Tab capacity), d) Tax guidance for F13 given at ~25-27% (15% in F12).
Lupin Limited (LPC): 4Q Tax surprise to fade, Drivers intact; Reiterate BUY
(Rs629, BUY)
F12/4Q highlights: Lupins 4QF12 are in line with net sales at Rs19.2bn (+23.8% YoY), driven by strong growth in DF (23%), US (46%) and Japan (26% ex Irom). Exceptionally high tax burden to pbt (46%) due to expiration of EoU benefits on Goa/Mandideep and advance tax on unrealized gain on inventory impacted recurring PAT of Rs1.6bn (SSLe/Cons Rs2.7bn). In our view, high tax will get back to normal levels of ~20% from 1QF13. Maintain a BUY rating; raise TP Rs629: Factoring in for the near-term triggers with continuing exclusivity on Geodon in 1Q+ new launches in limited competition products in the US (Combivir/OC/Glumetza), encouraging growth prospects in Japan (post-Irom integration) and increasing contribution from RoW markets, We believe Lupin offers better growth prospects in the next 2 years. Retain BUY on the stock with a SOTP based TP of Rs629. . Key management outlook: a) Sales target of US$3bn by F15 (assuming Rs45-46 to US$), b) EBITDA margin to improve by 50-70 bps annually, c) The share of US branded Sales to be mainatained ~10% of overall Sales in F15, d) The US generics business to catch up with the launch of several limited competition products: Combivir (May12), Glumetza, +10 OCs launch (F13) and generic Tricor (F14), e) Positive on receiving some milestone from Medicis during F13, f) Tax rate guided between 20-25% for F13, g) DF to grow in excess of 20% in F13e, h) Total tax (Rs1348mn) includes a one time tax hit (Rs560mn) which has a deferred tax asset flavour. The benefits of which will be harvested over the upcoming quarters.
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Ranbaxy Laboratories (RBXY): Lipitor outraces estimates, reiterate "BUY"
(Rs610, BUY)
Revised TP from latest event Ciper wins ISOTRETINOIN approval: RBXY to initiate US launch by Dec12 Reference report May 28,2012 1QC12 highlights: RBXY 1QC12 reported exceptional numbers beating all estimates. Net sales at Rs37.8bn (+74% YoY), dominated by better-than-expected US generics (Lipitor exclusivity +Caduet AG). Stripping off all FTFs, 1Q witnessed strong improvement in the base business growth ~20% YoY with ~9% core OPM (in our view). Further, high probability of monetizing at least one FTFs+ pick up the US base business will be earning sweetener in upcoming quarters. Reiterate a BUY and revised TP to Rs570: (based on C13e) ) and marginally g y raised our target g multiple p on base business to 20x ( (from 19x earlier) ) to We have rolled forward our TP to Rs570 from Rs507 ( factor strengthening US business+ conservative C12 guidance. Retain Buy. EPS upgrade of ~11% for C12e to Rs36.7 (earlier Rs33) is on account of elevated sales clocked by Lipitor in 1QC12. In our view positive news flow (Diovan, US$2.5bn in brand sales and Actos, US$3.4bn in brand sales monetization), ramp-up up at Mohali facility and potential Isotretinoin launch leaves room for surprises on the upside. Base business valuation to unlock with clarity emerging towards resumption US supplies. y management g outlook: Key a) US base business likely to grow at US$100mn/quarter by F13 (from current US$75-80mn/quarter), b) Sequential improvement in the base business margins led growing base in the US business and strengthening manufacturing processes, c) Management expects to maintain leadership in Atorvastatin US supplies, d) Consultants likely to visit Dewas and Poanta Sahib during 2QC12; FDA approval subsequent step.
Sun Pharmaceutical (SUNP): Several onetime drove 4Q performance; Revised to ADD on limited upside
(Rs641, ADD)
F12/4Q highlights: hi hli ht Sun Pharmas (Sun) 4Q numbers continued to remain strong and ahead of street estimates led by strong Taro performance + several unanticipated one-off sales in DF (Rs1.8bn)+Lipidox (est.~US$35mn). Net sales were Rs23.3bn, (+59.2% YoY). Operating margins expanded ~1,073bps to 41.1%, due to high margins in Taro (led by price rise), Lipidox, and favourable rupee/US$. Reported PAT after minority interest was Rs8.2bn (+85% YoY). Excluding Taros high margin and temporary US supplies of Lipidox, base business grew at ~27% with 37% in OPM. Key catalyst on watch: In our view, view with moderating growth in US ( (~14% 14% till F14) and miniscule presence in ROW markets (7% of F12 Sales); in-organic acquisition appears inevitable for Sun to defend its longer term strategy for growth (F12 Cash & cash equivalents is approx. US$1bn, D/E nil). We revise Sun to ADD (BUY earlier); TP raised to Rs641: Following recent run up in the stock price (29% Apr11 till date), moderate to low F12-14e core earnings (6%),and limited upside potential with stock being reasonably valued at upper band of 23x F14e, we downgrade stock to ADD rating; TP to Rs641/sh F13 guidance of 18 18-20%; 20%; but high tax may drain earnings: Key management outlook: a) DF to growth above market rate; 1HF13 to be weak, b) Sun continue to supply Lipidox in 1QF13 as sole player, c) Prandin - On 17 Apr12, US Supreme Court ruled pending litigation in favor of Caraco, d) Expects NPM pressure on downward side, and e) Tax rate to be below 20%.
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Company financials
22
Financial summary: Ajanta Pharma (AJP)

Income statement
Y/E March (Rs m n) Net Revenue YoY (%) EBITDA YoY (%) Depreciation & Amortisation EBIT Interest Other incomes Pre-tax Incom e Less: Taxation Effective tax rate (%) Recurring Net Profit YoY (%) Exceptional items Less: Minority Interest Less: Share of Gain / Loss in Ass R Reported t d PAT EBITDA Margin PAT Margin F 09 , 3,195 12 597 30 131 466 220 14 259 45 17 214 20 214 18.7 6.7 F 10 3,817 , 19 730 22 198 533 191 10 352 57 16 296 38 (13) 283 19.1 7.7 F 11 4,572 , 20 901 23 238 663 157 16 523 55 10 469 58 (4) 465 19.7 10.2 F 12e 5,983 , 31 1,260 40 307 953 140 72 885 133 15 752 60 (87) 665 21.1 12.6 F 13e 7,245 , 21 1,447 15 408 1,040 254 82 868 148 17 720 (4) 720 20.0 9.9 F 14e 8,766 , 21 1,778 23 551 1,226 232 75 1 070 1,070 182 17 888 23 888 20.3 10.1
Balance sheet
Y/E March (Rs m n) Total Assets Net Block Add: Capital Work in Progress Goodw ill Investm ents Cash & Bank balance Inventory Sundry Debtors Loans and Advances Net Current Assets Total Liabilities Paid up Equity Share Capital No. of Shares o/s (mn) Reserves & Surplus General & Other Reserve Minority Interest N tW Net Worth th Debts Deferred Tax Liability F 09 3,930 , 1,302 552 171 73 990 945 440 1,906 3,930 117 12 1,404 1 521 1,521 2,402 8 F 10 3,847 , 1,609 470 171 52 1,052 855 385 1,598 3,847 117 12 1,639 1 756 1,756 2,033 58 F 11 3,839 , 2,062 172 171 125 961 758 480 1,435 3,839 117 12 2,031 2 148 2,148 1,582 109 F 12e 4,780 , 2,355 172 171 508 1,623 1,254 661 2,083 4,780 117 12 2,593 2 710 2,710 1,900 171 F 13e 6,261 , 3,447 172 171 355 1,966 1,588 661 2,471 6,261 117 12 3,154 3 271 3,271 2,819 171 F 14e 7,036 , 4,396 172 171 135 2,379 1,801 352 2,298 7,036 117 12 3,851 3 968 3,968 2,897 171
Performance & Market Ratio

F 09 (Rs) ) 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) A P Avg Payment t Period P i d (d (days) ) Solvency Ratios (%) Debt Equity Ratio Interest Coverage Ratio Source: Company, SSLe 18.3 29.5 130.0 2.9 2.8 0.4 46 4.6 0.9 5.7 11.9 14.1 108 106 1.6 2.1 F 10 25.3 42.2 150.1 4.1 7.2 1.2 54 5.4 1.0 2.2 13.8 16.8 82 135 1.2 2.8 F 11 40.0 60.4 183.6 5.8 5.0 1.1 46 4.6 0.9 2.9 17.3 21.8 60 138 0.7 4.2 F 12e 64.2 90.5 231.6 8.8 7.1 2.0 57 5.7 1.2 1.9 19.9 27.7 77 149 0.7 6.8 F 13e 61.6 96.4 279.6 13.6 10.3 2.3 64 6.4 1.3 2.2 16.6 22.0 80 130 0.9 4.1 F 14e 75.9 123.0 339.1 16.3 8.3 1.9 52 5.2 1.0 2.6 17.4 22.4 75 130 0.7 5.3
Cash flow statement

Y/E March (Rs m n) 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 Goodw ill Investing Issue of Share Capital Proceeds from fresh borrow ings Buyback of Shares Dividend paid including tax Others Financing N tE Net Extra-ordinary t di i income Opening Cash & Bank bal. Closing Cash & Bank bal. Inc/(Dec) in Cash & Bank bal. F 09 214 129 37 (265) 116 (805) (3) (808) 751 (34) (0) 717 49 73 24 F 10 283 195 51 18 287 834 (420) (420) (369) (48) (0) (417) (18) 73 52 (21) F 11 465 232 51 6 236 990 (388) (388) (451) (68) (5) (523) (6) 52 125 73 F 12e 665 307 87 (265) 793 (600) (600) 318 (103) 62 276 (87) 125 508 383 F 13e 720 408 (542) 586 (1,500) (1,500) 920 (159) 0 761 508 355 (153) F 14e 888 551 (47) 1,392 (1,500) (1,500) 78 (191) 0 (113) 355 135 (220)
23
Financial summary: Biocon

Income statement
Y/E March (Rs m n) Net Revenue YoY (%) EBITDA YoY (%) Depreciation & Amortisation EBIT Interest Other incomes Pre-tax Incom e Less: Taxation Effective tax rate (%) Recurring Net Profit YoY (%) Exceptional items Less: Minority Interest Less: Share of Gain / Loss in Ass R Reported t d PAT EBITDA Margin PAT Margin F 09 , 16,087 53 3,346 13 1,103 2,243 177 646 2 712 2,712 594 22 2,119 (26) (1,109) 71 7 931 20.8 13.2 F 10 23,678 , 47 4,774 43 1,401 3,372 169 370 3 574 3,574 504 14 3,069 45 (41) 96 2 932 2,932 20.2 13.0 F 11 27,707 , 17 5,652 18 1,568 4,085 257 429 4 257 4,257 657 15 3,600 17 150 75 3 675 3,675 20.4 13.0 F 12e 20,865 , (25) 5,174 (8) 1,744 3,430 123 470 3 777 3,777 541 14 3,236 (10) 150 3 386 3,386 24.8 15.5 F 13e 23,880 , 14 5,740 11 2,048 3,693 154 663 4 201 4,201 840 20 3,361 4 3 361 3,361 24.0 14.1 F 14e 27,606 , 16 6,636 16 2,308 4,328 154 641 4 815 4,815 963 20 3,852 15 3 852 3,852 24.0 14.0
Balance sheet
Y/E March (Rs m n) Total Assets Net Block Add: Capital Work in Progress Goodw ill Investm ents Cash & Bank balance Inventory Sundry Debtors Loans and Advances Net Current Assets Total Liabilities Paid up Equity Share Capital No. of Shares o/s (mn) General & Other Reserve Minority Interest N tW Net Worth th Debts Deferred Tax Liability F 09 21,060 , 10,485 1,720 1,631 3,676 118 3,192 3,667 947 3,548 21,060 1,000 200 14,107 248 15 355 15,355 5,239 466 F 10 23,560 , 11,653 755 1,726 4,306 1,399 3,716 4,461 1 344 1,344 5,120 23,560 1,000 200 16,578 338 17 916 17,916 5,136 508 F 11 24,544 , 11,769 1,796 2,342 4,605 4,414 4,137 5,124 1 355 1,355 4,033 24,544 1,000 200 19,328 377 20 705 20,705 3,342 497 F 12e 25,764 , 14,025 2,836 2,342 4,921 5,232 3,783 4,815 925 1,640 25,764 1,000 200 21,657 38 22 695 22,695 2,572 497 F 13e 28,032 , 14,977 3,877 2,342 4,921 4,149 4,330 5,511 925 1,916 28,032 1,000 200 23,926 38 24 964 24,964 2,572 497 F 14e 30,632 , 15,669 4,917 2,342 4,921 3,635 5,005 6,371 925 2,783 30,632 1,000 200 26,525 38 27 563 27,563 2,572 497

F 09 (Rs) ) 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) A P Avg Payment t Period P i d (d (days) ) Solvency Ratios (%) Debt Equity Ratio Interest Coverage Ratio Source: Company, SSLe 10.6 16.1 76.8 3.5 13.6 1.9 91 9.1 1.9 2.4 10.7 13.8 83 81 0.3 12.7 F 10 15.3 22.4 89.6 3.9 18.5 3.2 11 8 11.8 2.4 1.4 14.3 17.1 69 58 0.3 20.0 F 11 18.0 25.8 103.5 5.0 19.1 3.3 12 0 12.0 2.5 1.4 16.6 17.4 68 66 0.2 15.9 F 12e 16.2 24.9 113.5 5.5 14.7 2.1 91 9.1 2.3 2.3 13.3 14.3 84 118 0.1 27.9 F 13e 16.8 27.0 124.8 5.5 13.0 1.7 75 7.5 1.8 2.5 13.2 13.5 84 100 0.1 23.9 F 14e 19.3 30.8 137.8 6.3 11.3 1.6 65 6.5 1.6 2.9 14.1 14.0 84 100 0.1 28.0
Cash flow statement

Y/E March (Rs m n) 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 Goodw ill Investing Issue of Share Capital Proceeds from fresh borrow ings Buyback of Shares Dividend paid including tax Others Financing N tE Net Extra-ordinary t di i income Opening Cash & Bank bal. Closing Cash & Bank bal. Inc/(Dec) in Cash & Bank bal. F 09 931 1,102 1 1,584 (1,185) 2,433 (2,888) 1,071 (1 355) (1,355) (3,171) 500 2,689 (702) (142) 2,344 (1 584) (1,584) 96 118 22 F 10 2,932 , 1,249 42 59 (291) 3,991 (1,452) (630) (96) (2,177) (103) (774) 403 (474) (59) 118 1,399 1,281 F 11 3,675 , 1,466 (12) (215) 4,102 9,017 (2,622) (299) (616) (3,537) (1,794) (991) 104 (2,680) 215 1,399 4,414 3,015 F 12e 3,386 , 1,744 (150) 3,211 8,191 (5,041) (316) (5,357) (770) (1,101) (295) (2,166) 150 4,414 5,232 818 F 13e 3,361 , 2,048 (1,359) 4,050 (4,041) (4,041) (1,093) (0) (1,093) 5,232 4,149 (1,083) F 14e 3,852 , 2,308 (1,381) 4,780 (4,041) (4,041) (1,252) (0) (1,252) 4,149 3,635 (513)
24
Financial summary: Cadila Healthcare (Cadila HC)

Income statement
Y/E March (Rs m n) Net Revenue YoY (%) EBITDA YoY (%) Depreciation & Amortisation EBIT Interest Other incomes Pre tax Incom e Pre-tax Less: Taxation Effective tax rate (%) Recurring Net Profit YoY (%) Exceptional items Less: Minority Interest Less: Share of Gain / Loss in Ass Reported PAT EBITDA Margin PAT Margin F 09 29,066 26 6,100 38 1,118 4,982 978 413 4 417 4,417 769 17 3,648 41 (451) 165 3,032 21.0 12.5 F 10 36,233 25 7,755 27 1,339 6,416 809 794 6 401 6,401 855 13 5,546 52 (266) 229 5,051 21.4 15.3 F 11 45,367 25 9,837 27 1,269 8,568 780 1,066 8 854 8,854 1,259 14 7,595 37 (234) 251 7,110 21.7 16.7 F 12e 51,769 14 10,377 5 1,579 8,798 1,073 1,395 9 120 9,120 1,130 12 7,990 5 (1,178) 286 6,526 20.0 15.4 F 13e 63,273 22 12,879 24 1,876 11,003 1,046 1,481 11 437 11,437 2,631 23 8,807 10 286 8,521 20.4 13.9 F 14e 73,394 16 15,086 17 2,125 12,962 1,020 1,502 13 444 13,444 3,092 23 10,352 18 286 10,066 20.6 14.1
Balance sheet
Y/E March (Rs m n) Total Assets Net Block Add: Capital Work in Progress Goodw ill Investm ents Cash & Bank balance Inventory Sundry Debtors Loans and Advances Net Current Assets Total Liabilities Paid up Equity Share Capital No. of Shares o/s (mn) Reserves & Surplus General & Other Reserve Minority Interest Net Worth Debts Deferred Tax Liability F 09 26,131 15,298 1,889 249 2,517 6,012 4,549 2 533 2,533 8,695 26,131 682 136 11,232 228 12,142 12,673 1,316 F 10 28,621 16,844 2,482 207 2,507 7,504 4,668 3 070 3,070 9,088 28,621 682 136 15,501 392 16,575 10,905 1,141 F 11 34,484 18,326 4,310 207 2,952 8,119 7,652 4 106 4,106 11,641 34,484 1,024 205 20,691 669 22,384 10,973 1,127 F 12e 47,919 23,747 9,571 242 4,666 10,905 8,863 5 798 5,798 14,359 47,919 1,024 205 24,712 904 26,640 20,094 1,185 F 13e 53,545 26,871 10,071 242 5,086 13,328 10,833 5 798 5,798 16,361 53,545 1,024 205 30,838 904 32,766 19,594 1,185 F 14e 60,281 29,746 10,571 242 6,908 15,460 12,565 5 798 5,798 19,722 60,281 1,024 205 38,074 904 40,002 19,094 1,185

F 09 Per Share Data (Rs) 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) Solvency Ratios (%) Debt Equity Ratio Interest Coverage Ratio Source: Company, SSLe 17.8 23.3 59.3 3.9 10.2 3.1 77 7.7 1.6 2.1 19.1 30.0 57 170 1.0 5.1 F 10 27.1 33.6 81.0 6.0 20.4 6.8 15 6 15.6 3.3 1.1 22.4 33.5 47 160 0.7 7.9 F 11 37.1 43.3 109.3 7.5 21.3 7.2 17 3 17.3 3.8 0.9 24.8 33.9 62 172 0.5 11.0 F 12e 39.0 46.7 130.1 9.0 19.5 5.8 15 8 15.8 3.2 1.2 18.4 30.0 62 171 0.8 8.2 F 13e 43.0 52.2 160.0 11.7 16.8 4.5 12 1 12.1 2.5 1.6 20.5 26.9 62 171 0.6 10.5 F 14e 50.6 60.9 195.4 13.8 14.3 3.7 10 4 10.4 2.1 1.9 21.5 25.9 62 171 0.5 12.7
Cash flow statement

Y/E March (Rs m n) 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 Goodw ill Investing Issue of Share Capital Proceeds from fresh borrow ings Buyback of Shares Dividend paid including tax Others Financing Net Extra-ordinary income Opening Cash & Bank bal. Closing Cash & Bank bal. Inc/(Dec) in Cash & Bank bal. F 09 3,032 3 032 1,054 84 644 (932) 3,881 (4,240) 5 (4,235) 54 4,296 (796) (966) 2,588 (644) 926 2,517 1,591 F 10 5,051 5 051 1,162 (183) 380 (403) 6,007 (3,301) 42 (3,259) (1,768) (1,237) 627 (2,378) (380) 2,517 2,507 (10) F 11 7,110 7 110 1,260 (14) 334 (2,107) 6,583 (4,570) (4,570) 341 68 (1,529) (114) (1,234) (334) 2,507 2,952 445 F 12e 6 526 6,526 1,579 1,178 (1,004) 8,278 (12,261) (35) (12,296) 9,121 (1,834) (377) 6,910 (1,178) 2,952 4,666 1,714 F 13e 8 521 8,521 1,876 (1,582) 8,815 (5,500) (5,500) (500) (2,395) (0) (2,895) 4,666 5,086 420 F 14e 10,066 10 066 2,125 (1,539) 10,651 (5,500) (5,500) (500) (2,829) 0 (3,329) 5,086 6,908 1,822
25
Financial summary: Divis Laboratories (Divis)

Income statement
Y/E March (Rs m n) Net Revenue YoY (%) EBITDA YoY (%) Depreciation & Amortisation EBIT Interest Other incomes Pre tax Incom e Pre-tax Less: Taxation Effective tax rate (%) Recurring Net Profit YoY (%) Exceptional items Less: Minority Interest Less: Share of Gain / Loss in Ass Reported PAT EBITDA Margin PAT Margin F 09 11,849 14 5,229 23 479 4,750 72 175 4 853 4,853 430 9 4,423 25 (257) 4,166 44.1 37.3 F 10 9,499 (20) 4,136 (21) 515 3,621 28 178 3 771 3,771 425 11 3,346 (24) 58 3,403 43.5 35.2 F 11 13,137 38 4,981 20 534 4,447 22 299 4 724 4,724 431 9 4,293 28 4,293 37.9 32.7 F 12e 18,893 44 6,904 39 621 6,283 37 281 6 526 6,526 1,474 23 5,053 18 280 5,333 36.5 26.7 F 13e 24,190 28 9,101 32 705 8,396 37 299 8 657 8,657 1,991 23 6,666 32 6,666 37.6 27.6 F 14e 29,745 23 11,310 24 769 10,541 37 362 10 866 10,866 2,499 23 8,367 26 8,367 38.0 28.1
Balance sheet
Y/E March (Rs m n) Total Assets Net Block Add: Capital Work in Progress Goodw ill Investm ents Cash & Bank balance Inventory Sundry Debtors Loans and Advances Net Current Assets Total Liabilities Paid up Equity Share Capital No. of Shares o/s (mn) Reserves & Surplus General & Other Reserve Minority Interest Net Worth Debts Deferred Tax Liability F 09 13,374 5,899 195 1,718 148 4,213 2,660 647 5,562 13,374 130 65 12,286 12,415 526 432 F 10 15,982 5,898 238 4,413 165 4,985 2,232 655 5,433 15,982 264 132 14,915 15,179 328 474 F 11 18,707 5,899 1,293 5,256 177 5,717 3,674 728 6,258 18,707 265 133 17,711 17,976 230 500 F 12e 22,452 6,911 2,293 4,770 309 6,789 4,956 1 469 1,469 8,477 22,452 266 133 21,050 21,315 528 609 F 13e 26,614 7,205 3,093 5,970 101 8,692 6,296 1 469 1,469 10,344 26,614 266 133 25,212 25,477 528 609 F 14e 31,837 7,436 3,893 8,070 128 10,689 7,742 1 469 1,469 12,437 31,837 266 133 30,435 30,701 528 609

F 09 Per Share Data (Rs) 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) Solvency Ratios (%) Debt Equity Ratio Interest Coverage Ratio Source: Company, SSLe 33.3 36.9 93.5 3.4 14.3 5.1 11 8 11.8 5.2 0.7 35.5 35.6 82 103 0.0 65.6 F 10 25.2 29.1 114.3 7.0 26.9 5.9 20 7 20.7 9.0 1.0 22.7 22.0 86 140 0.0 130.3 F 11 32.3 36.4 135.4 11.6 20.9 5.0 17 1 17.1 6.5 1.7 23.8 23.9 102 122 0.0 201.8 F 12e 38.1 42.7 160.6 15.1 20.1 4.8 14 0 14.0 5.1 2.0 28.0 23.7 96 112 0.0 168.0 F 13e 50.2 55.5 191.9 18.9 18.6 4.9 13 1 13.1 4.9 2.0 31.5 26.2 95 112 0.0 224.5 F 14e 63.0 68.8 231.3 23.7 14.8 4.0 10 5 10.5 4.0 2.5 33.1 27.3 95 112 0.0 281.8
Cash flow statement

Y/E March (Rs m n) 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 Goodw ill Investing Issue of Share Capital Proceeds from fresh borrow ings Buyback of Shares Dividend paid including tax Others Financing Net Extra-ordinary income Opening Cash & Bank bal. Closing Cash & Bank bal. Inc/(Dec) in Cash & Bank bal. F 09 4,166 4 166 478 50 367 (1,855) 3,205 (970) (1,162) (2,133) 0 (334) (455) 89 (700) (367) 142 148 6 F 10 3,403 3 403 502 42 (83) 146 4,010 (544) (2,695) (3,239) 135 (198) (925) 151 (837) 83 148 165 17 F 11 4,293 4 293 527 26 (813) 4,033 (1,583) (844) (2,427) 1 (98) (1,541) 44 (1,594) 165 177 12 F 12e 5 333 5,333 621 (280) (2,087) 3,587 (2,632) 486 (2,146) 0 297 (2,003) 118 (1,588) 280 177 309 133 F 13e 6 666 6,666 705 (2,075) 5,296 (1,800) (1,200) (3,000) (2,504) (0) (2,504) 309 101 (208) F 14e 8 367 8,367 769 (2,066) 7,070 (1,800) (2,100) (3,900) (3,143) (0) (3,143) 101 128 27
26
Financial summary: Dishman Pharmaceutical (Dishman)

Income statement
Y/E March (Rs m n) Net Revenue YoY (%) EBITDA YoY (%) Depreciation & Amortisation EBIT Interest Other incomes Pre tax Incom e Pre-tax Less: Taxation Effective tax rate (%) Recurring Net Profit YoY (%) Exceptional items Less: Minority Interest Less: Share of Gain / Loss in Ass Reported PAT EBITDA Margin PAT Margin F 09 10,624 32 2,760 81 629 2,131 459 48 1 720 1,720 151 9 1,569 65 (102) 6 1,462 26.0 14.8 F 10 9,154 (14) 2,038 (26) 594 1,444 388 13 1 070 1,070 73 7 997 (36) 179 3 1,173 22.3 10.9 F 11 9,908 8 1,622 (20) 688 935 416 39 558 35 6 523 (48) 290 14 800 16.4 5.3 F 12e 11,221 13 2,314 43 765 1,549 729 60 880 312 35 568 9 0 1 568 20.6 5.1 F 13e 12,807 14 2,640 14 807 1,833 702 61 1 192 1,192 298 25 894 57 894 20.6 7.0 F 14e 15,210 19 3,136 19 834 2,301 702 60 1 659 1,659 415 25 1,245 39 1,245 20.6 8.2
Balance sheet
Y/E March (Rs m n) Total Assets Net Block Add: Capital Work in Progress Goodw ill Investm ents Cash & Bank balance Inventory Sundry Debtors Loans and Advances Net Current Assets Total Liabilities Paid up Equity Share Capital No. of Shares o/s (mn) Reserves & Surplus General & Other Reserve Minority Interest Net Worth Debts Deferred Tax Liability F 09 14,585 7,698 2,227 82 14 451 3,040 1,494 1 865 1,865 4,564 14,585 161 81 6,979 7,140 7,237 208 F 10 15,946 8,353 3,574 77 14 455 2,423 1,131 1 871 1,871 3,928 15,946 161 81 7,729 7,890 7,739 316 F 11 17,803 10,044 4,116 77 14 425 2,702 1,737 1 680 1,680 3,553 17,803 161 81 8,630 8,792 8,689 323 F 12e 18,328 10,279 4,616 77 14 451 3,074 1,844 1 680 1,680 3,343 18,328 161 81 8,944 9,106 8,900 323 F 13e 18,803 9,972 4,916 77 14 433 3,860 2,105 1 680 1,680 3,825 18,803 161 81 9,755 9,917 8,564 323 F 14e 19,932 9,637 5,216 77 14 578 4,584 2,500 1 680 1,680 4,988 19,932 161 81 10,884 11,046 8,564 323

F 09 Per Share Data (Rs) 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) Solvency Ratios (%) Debt Equity Ratio Interest Coverage Ratio Source: Company, SSLe 19.4 27.2 88.5 1.4 5.2 1.1 54 5.4 1.4 1.4 14.6 22.0 51 45 1.0 4.6 F 10 12.4 19.7 97.8 1.4 17.2 2.2 12 0 12.0 2.7 0.7 9.1 12.6 45 83 1.0 3.7 F 11 6.5 15.0 108.9 1.4 15.7 0.9 96 9.6 1.6 1.4 5.3 6.0 64 145 1.0 2.2 F 12e 7.0 16.5 112.8 0.8 6.5 0.4 47 4.7 1.0 1.8 8.5 6.2 60 130 1.0 2.1 F 13e 11.1 21.1 122.9 1.0 4.9 0.4 44 4.4 0.9 1.9 9.8 9.0 60 115 0.9 2.6 F 14e 15.4 25.8 136.9 1.4 3.5 0.4 37 3.7 0.8 2.7 11.5 11.3 60 100 0.8 3.3
Cash flow statement

Y/E March (Rs m n) 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 Goodw ill Investing Issue of Share Capital Proceeds from fresh borrow ings Buyback of Shares Dividend paid including tax Others Financing Net Extra-ordinary income Opening Cash & Bank bal. Closing Cash & Bank bal. Inc/(Dec) in Cash & Bank bal. F 09 1,462 1 462 835 66 145 (644) 1,864 (2,593) (0) 79 (2,514) 2 937 (113) 50 875 (145) 371 451 80 F 10 1,173 1 173 528 115 (256) 639 2,199 (2,530) (0) 6 (2,524) 503 (113) (317) 73 256 451 455 3 F 11 800 798 (2) (363) 346 1,578 (3,030) 0 0 (3,030) 949 (113) 223 1,059 363 455 425 (29) F 12e 568 765 (0) 236 1,568 (1,500) (1,500) 211 (66) (188) (42) 0 425 451 26 F 13e 894 807 (500) 1,201 (800) (800) (336) (83) 0 (420) 451 433 (18) F 14e 1 245 1,245 834 (1,018) 1,061 (800) (800) (116) (0) (116) 433 578 145
27
Financial summary: Dr. Reddys Laboratories (DRL)

Income statement
Y/E March (Rs m n) Net Revenue YoY (%) EBITDA YoY (%) Depreciation & Amortisation EBIT Interest Other incomes Pre tax Incom e Pre-tax Less: Taxation Effective tax rate (%) Recurring Net Profit YoY (%) Exceptional items Less: Minority Interest Less: Share of Gain / Loss in Ass Reported PAT EBITDA Margin PAT Margin F 09 69,441 39 13,246 56 3,814 9,432 552 254 9 134 9,134 1,362 15 7,772 16 (12,964) (24) (5,168) 19.1 11.2 F 10 70,277 1 14,202 7 4,160 10,042 372 866 10 536 10,536 963 9 9,573 23 (8,552) (48) 1,068 20.2 13.6 F 11 74,693 6 15,716 11 4,147 11,569 188 750 12 132 12,132 1,420 12 10,712 12 325 (3) 11,040 21.0 14.3 F 12e 96,737 30 23,742 51 5,214 18,528 690 925 18 763 18,763 4,204 22 14,559 36 (351) (54) 14,262 24.5 15.0 F 13e 112,190 16 25,367 7 5,653 19,714 652 820 19 882 19,882 3,976 20 15,906 9 (1,040) 14,866 22.6 14.2 F 14e 128,530 15 28,162 11 6,092 22,070 617 709 22 161 22,161 4,432 20 17,729 11 (1,040) 16,689 21.9 13.8
Balance sheet
Y/E March (Rs m n) Total Assets Net Block Add: Capital Work in Progress Goodw ill Investm ents Cash & Bank balance Inventory Sundry Debtors Loans and Advances Net Current Assets Total Liabilities Paid up Equity Share Capital No. of Shares o/s (mn) Reserves & Surplus General & Other Reserve Minority Interest Net Worth Debts Deferred Tax Liability F 09 64,939 16,603 4,279 22,179 792 5,596 13,226 14,592 5 008 5,008 21,086 64,939 842 168 41,203 42,045 19,483 3,411 F 10 59,009 17,592 4,867 13,973 3,910 6,584 13,371 11,960 5 445 5,445 18,667 59,009 848 170 42,067 42,915 14,656 1,438 F 11 71,000 23,775 5,867 15,246 3,910 5,729 16,059 17,615 5 990 5,990 22,202 71,000 846 169 45,144 45,990 23,572 1,438 F 12e 91,092 25,147 8,099 13,528 3,910 7,979 19,352 25,339 9 500 9,500 40,407 91,092 848 170 56,595 57,443 32,211 1,438 F 13e 99,745 26,080 10,332 13,528 3,910 5,761 23,053 29,387 10 450 10,450 45,896 99,745 848 170 67,035 67,883 30,424 1,438 F 14e 110,104 26,574 12,564 13,528 3,910 6,791 26,410 33,666 11 495 11,495 53,527 110,104 848 170 79,001 79,849 28,817 1,438

F 09 Per Share Data (Rs) 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) Solvency Ratios (%) Debt Equity Ratio Interest Coverage Ratio Source: Company, SSLe 45.9 68.4 248.4 4.4 10.6 2.0 72 7.2 1.4 0.9 14.5 18.5 77 66 0.5 17.1 F 10 56.6 81.1 253.5 7.3 22.6 5.0 15 5 15.5 3.1 0.6 17.0 22.3 62 100 0.3 27.0 F 11 63.3 87.8 271.7 11.3 25.9 6.0 17 9 17.9 3.8 0.7 16.3 23.3 86 90 0.5 61.6 F 12e 86.0 116.8 339.4 13.8 20.5 5.2 12 7 12.7 3.1 0.8 20.3 25.3 96 89 0.6 26.9 F 13e 94.0 127.4 401.1 14.3 17.2 4.0 11 0 11.0 2.5 0.9 19.8 23.4 96 80 0.4 30.2 F 14e 104.7 140.7 471.8 16.1 15.4 3.4 99 9.9 2.2 1.0 20.0 22.2 96 80 0.4 35.8
Cash flow statement

Y/E March (Rs m n) 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 Goodw ill Investing Issue of Share Capital Proceeds from fresh borrow ings Buyback of Shares Dividend paid including tax Others Financing Net Extra-ordinary income Opening Cash & Bank bal. Closing Cash & Bank bal. Inc/(Dec) in Cash & Bank bal. F 09 (5,168) (5 168) 2,168 634 (6,585) (8,951) (6,285) 4,201 11 423 11,423 9,339 1 (59) (738) (761) (1,556) (634) 7,398 5,596 (1,802) F 10 1,068 1 068 2,199 (72) 3,407 6,602 (3,776) (3,118) 8 206 8,206 1,312 6 (4,827) (1,233) (944) (6,998) 72 5,596 6,584 988 F 11 11,040 11 040 2,961 57 (4,390) 9,668 (10,144) (1 273) (1,273) (11,417) (2) 8,916 (1,907) (6,056) 951 (57) 6,584 5,729 (855) F 12e 14,262 14 262 3,628 (689) (15,955) 1,246 (7,232) 1 718 1,718 (5,514) 2 8,639 (2,327) (483) 5,830 689 5,729 7,979 2,250 F 13e 14,866 14 866 4,067 (7,706) 11,226 (7,232) (7,232) (1,786) (2,426) (2,000) (6,212) 7,979 5,761 (2,218) F 14e 16,689 16 689 4,506 (6,601) 14,594 (7,232) (7,232) (1,608) (2,723) (2,000) (6,331) 5,761 6,791 1,031
28
Financial summary: IPCA Laboratories (IPCA)

Income statement
Y/E March (Rs m n) Net Revenue YoY (%) EBITDA YoY (%) Depreciation & Amortisation EBIT Interest Other incomes Pre tax Incom e Pre-tax Less: Taxation Effective tax rate (%) Recurring Net Profit YoY (%) Exceptional items Less: Minority Interest Less: Share of Gain / Loss in Ass Reported PAT EBITDA Margin PAT Margin F 09 12,653 21 2,616 65 397 2,219 318 95 1 996 1,996 509 25 1,488 49 (533) (54) 1,008 20.7 11.8 F 10 15,456 22 3,227 23 467 2,760 264 96 2 592 2,592 598 23 1,994 34 44 (16) 2,054 20.9 12.9 F 11 18,659 21 3,633 13 554 3,079 311 236 3 004 3,004 654 22 2,350 18 303 100 2,554 19.5 12.6 F 12e 22,992 23 4,833 33 653 4,180 394 431 4 217 4,217 888 21 3,329 42 (528) 2,801 21.0 14.5 F 13e 27,077 18 5,556 15 841 4,715 405 304 4 614 4,614 1,075 23 3,539 6 3,539 20.5 13.1 F 14e 31,693 17 6,409 15 976 5,433 416 311 5 328 5,328 1,241 23 4,087 15 4,087 20.2 12.9
Balance sheet
Y/E March (Rs m n) Total Assets Net Block Add: Capital Work in Progress Goodw ill Investm ents Cash & Bank balance Inventory Sundry Debtors Loans and Advances Net Current Assets Total Liabilities Paid up Equity Share Capital No. of Shares o/s (mn) Reserves & Surplus General & Other Reserve Minority Interest Net Worth Debts Deferred Tax Liability F 09 11,560 5,768 144 412 113 3,062 3,391 832 5,236 11,560 250 25 6,063 (4) 6,309 4,599 651 F 10 13,981 6,379 383 325 108 3,802 3,880 1 201 1,201 6,894 13,981 250 125 8,398 (6) 8,643 4,545 793 F 11 16,653 6,978 1,132 489 84 4,625 4,663 1 160 1,160 8,054 16,653 251 126 10,287 10,539 5,307 807 F 12e 20,584 9,236 1,132 430 93 6,640 4,894 1 106 1,106 9,786 20,584 252 126 12,370 12,623 7,030 931 F 13e 24,049 10,895 1,632 430 285 7,418 5,935 1 106 1,106 11,092 24,049 252 126 15,635 15,888 7,230 931 F 14e 28,018 11,919 2,132 430 806 8,683 6,946 1 106 1,106 13,538 28,018 252 126 19,405 19,658 7,430 931

F 09 Per Share Data (Rs) 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) Solvency Ratios (%) Debt Equity Ratio Interest Coverage Ratio Source: Company, SSLe 11.8 15.0 50.2 2.6 5.6 1.3 47 4.7 1.0 3.9 19.2 23.6 91 45 0.7 7.0 F 10 15.8 19.6 68.8 3.3 17.0 3.9 11 7 11.7 2.4 1.2 19.7 23.1 98 40 0.5 10.5 F 11 18.6 23.1 83.8 3.7 16.2 3.6 11 5 11.5 2.2 1.2 18.5 22.3 92 33 0.5 9.9 F 12e 26.4 31.7 100.4 3.7 12.7 3.3 95 9.5 2.0 1.1 20.3 26.4 91 36 0.6 10.6 F 13e 28.1 34.8 126.4 2.2 11.9 2.7 83 8.3 1.7 0.7 19.6 22.3 78 41 0.5 11.6 F 14e 32.4 40.3 156.4 2.5 10.3 2.1 72 7.2 1.5 0.8 19.4 20.8 80 41 0.4 13.1
Cash flow statement

Y/E March (Rs m n) 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 Goodw ill Investing Issue of Share Capital Proceeds from fresh borrow ings Buyback of Shares Dividend paid including tax Others Financing Net Extra-ordinary income Opening Cash & Bank bal. Closing Cash & Bank bal. Inc/(Dec) in Cash & Bank bal. F 09 1,008 1 008 376 78 762 (737) 1,487 (869) (316) (1,185) (1) 1,069 (147) (443) 479 (762) 94 113 19 F 10 2,054 2 054 411 142 (63) (1,664) 880 (1,261) 86 (1,174) 1 (54) (184) 464 226 63 113 108 (5) F 11 2,554 2 554 444 14 (433) (1,183) 1,396 (1,793) (164) (1,957) 1 762 (217) (442) 104 433 108 84 (23) F 12e 2 801 2,801 653 528 (1,723) 2,259 (2,911) 59 (2,852) 1 1,723 (217) (377) 1,129 (528) 84 93 8 F 13e 3 539 3,539 841 (1,113) 3,267 (3,000) (3,000) 200 (274) (0) (74) 93 285 193 F 14e 4 087 4,087 976 (1,925) 3,137 (2,500) (2,500) 200 (317) 0 (117) 285 806 521
29
Financial summary: Jubilant LifeSciences (JLS)

Income statement
Y/E March (Rs m n) Net Revenue YoY (%) EBITDA YoY (%) Depreciation & Amortisation EBIT Interest Other incomes Pre tax Incom e Pre-tax Less: Taxation Effective tax rate (%) Recurring Net Profit YoY (%) Exceptional items Less: Minority Interest Less: Share of Gain / Loss in Ass Reported PAT EBITDA Margin PAT Margin F 09 35,261 42 6,841 48 1,632 5,209 1,070 344 4 482 4,482 722 16 3,760 12 (1,061) (133) 2,832 19.4 10.7 F 10 37,840 7 6,613 (3) 1,247 5,367 1,505 345 4 207 4,207 668 16 3,539 (6) 681 5 4,215 17.5 9.4 F 11 34,363 (9) 5,279 (20) 1,801 3,478 1,051 189 2 616 2,616 197 8 2,419 (32) (147) (25) 2,297 15.4 7.0 F 12e 42,784 25 8,734 65 2,207 6,528 2,095 196 4 629 4,629 684 15 3,945 63 (3,488) 311 146 20.4 9.2 F 13e 52,012 22 10,312 18 2,383 7,930 1,985 153 6 098 6,098 1,525 25 4,574 16 358 4,216 19.8 8.8 F 14e 63,513 22 12,720 23 2,494 10,225 1,875 109 8 459 8,459 2,115 25 6,344 39 412 5,932 20.0 10.0
Balance sheet
Y/E March (Rs m n) Total Assets Net Block Add: Capital Work in Progress Goodw ill Investm ents Cash & Bank balance Inventory Sundry Debtors Loans and Advances Net Current Assets Total Liabilities Paid up Equity Share Capital No. of Shares o/s (mn) General & Other Reserve Minority Interest Net Worth Debts Deferred Tax Liability F 09 52,928 37,450 5,031 2,714 3,817 5,956 5,044 4 855 4,855 7,733 52,928 148 148 12,529 320 12,996 38,781 1,151 F 10 55,925 38,189 5,056 2,564 5,037 6,910 5,186 5 183 5,183 10,115 55,925 159 159 21,735 379 22,273 31,727 1,924 F 11 63,100 39,911 6,778 328 10,457 6,913 5,205 5 654 5,654 16,084 63,100 159 159 21,566 418 22,143 39,245 1,712 F 12e 64,274 42,854 8,602 192 2,672 10,202 6,527 7 306 7,306 12,626 64,274 159 159 23,138 690 23,987 38,150 2,137 F 13e 65,755 43,971 8,702 192 445 12,403 7,935 7 918 7,918 12,890 65,755 159 159 26,619 690 27,468 36,150 2,137 F 14e 68,654 43,477 8,802 192 1,631 15,145 9,689 8 592 8,592 16,183 68,654 159 159 31,518 690 32,366 34,150 2,137

F 09 Per Share Data (Rs) 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) Solvency Ratios (%) Debt Equity Ratio Interest Coverage Ratio Source: Company, SSLe 23.6 33.9 81.6 1.6 4.0 1.2 69 6.9 1.3 1.7 9.8 28.9 52 104 3.0 4.9 F 10 22.2 30.0 139.8 2.3 15.2 2.4 11 8 11.8 2.1 0.7 9.6 15.9 50 89 1.4 3.6 F 11 15.2 26.5 139.0 2.3 11.5 1.3 98 9.8 1.5 1.3 5.5 10.9 55 95 1.8 3.3 F 12e 24.8 38.6 150.6 3.5 8.1 1.3 64 6.4 1.3 1.7 10.2 16.4 56 141 1.6 3.1 F 13e 28.7 43.7 172.4 4.6 6.1 1.0 50 5.0 1.0 2.6 12.1 16.7 56 130 1.3 4.0 F 14e 39.8 55.5 203.2 6.5 4.4 0.9 41 4.1 0.8 3.7 14.9 19.6 56 130 1.1 5.5
Cash flow statement

Y/E March (Rs m n) 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 Goodw ill Investing Issue of Share Capital Proceeds from fresh borrow ings Buyback of Shares Dividend paid including tax Others Financing Net Extra-ordinary income Opening Cash & Bank bal. Closing Cash & Bank bal. Inc/(Dec) in Cash & Bank bal. F 09 2,832 2 832 3,198 (127) 1,516 1,581 9,000 (21,708) (2,257) (23,965) 1 17,697 (261) (2,377) 15,060 (1,516) 5,238 3,817 (1,421) F 10 4,215 4 215 1,231 761 (972) (1,162) 4,073 (1,995) 149 (1,846) 11 (7,054) (370) 5,434 (1,979) 972 3,817 5,037 1,220 F 11 2,297 2 297 1,458 (120) 210 (549) 3,298 (4,901) 2,237 (2,665) 0 7,517 (370) (2,150) 4,997 (210) 5,037 10,457 5,420 F 12e 146 2,207 3,488 (4,327) 1,513 (6,974) 136 (6,839) (1,095) (555) 2,679 1,029 (3,488) 10,457 2,672 (7,785) F 13e 4 216 4,216 2,383 (2,490) 4,108 (3,600) (3,600) (2,000) (735) (0) (2,735) 2,672 445 (2,227) F 14e 5 932 5,932 2,494 (2,107) 6,320 (2,100) (2,100) (2,000) (1,034) (0) (3,034) 445 1,631 1,186
30
Financial summary: Lupin Limited (LPC)

Income statement
Y/E March (Rs m n) Net Revenue YoY (%) EBITDA YoY (%) Depreciation & Amortisation EBIT Interest Other incomes Pre tax Incom e Pre-tax Less: Taxation Effective tax rate (%) Recurring Net Profit YoY (%) Exceptional items Less: Minority Interest Less: Share of Gain / Loss in Ass Reported PAT EBITDA Margin PAT Margin F 09 38,296 33 7,279 15 880 6,399 499 337 6 238 6,238 1,036 17 5,201 21 (124) 29 33 5,015 19.0 13.6 F 10 47,985 25 9,269 27 1,239 8,030 385 655 8 300 8,300 1,343 16 6,957 34 40 112 69 6,816 19.3 14.5 F 11 58,315 22 11,906 28 1,712 10,194 325 94 9 963 9,963 1,169 12 8,794 26 148 20 8,626 20.4 15.1 F 12e 70,829 21 14,846 25 2,275 12,571 355 143 12 359 12,359 3,086 25 9,273 5 (400) 198 8,675 21.0 13.1 F 13e 85,133 20 18,816 27 2,373 16,443 370 198 16 271 16,271 3,254 20 13,016 40 198 12,818 22.1 15.3 F 14e 98,181 15 20,914 11 2,653 18,261 370 368 18 259 18,259 3,652 20 14,607 12 198 14,409 21.3 14.9
Balance sheet
Y/E March (Rs m n) Total Assets Net Block Add: Capital Work in Progress Goodw ill Investm ents Cash & Bank balance Inventory Sundry Debtors Loans and Advances Net Current Assets Total Liabilities Paid up Equity Share Capital No. of Shares o/s (mn) Reserves & Surplus General & Other Reserve Minority Interest Net Worth Debts Deferred Tax Liability F 09 27,788 12,012 2,240 3,174 216 778 9,572 10,349 2 780 2,780 10,147 27,788 828 83 13,420 143 14,391 12,233 1,164 F 10 38,766 15,864 3,579 3,197 264 2,015 9,715 11,266 4 759 4,759 15,861 38,766 889 89 24,788 255 25,932 11,399 1,435 F 11 46,361 17,313 5,312 3,255 32 4,201 12,000 12,558 6 208 6,208 20,449 46,361 892 446 31,918 515 33,326 11,624 1,411 F 12e 57,103 20,548 6,345 5,040 280 4,201 17,327 17,318 8 241 8,241 24,890 57,103 893 447 39,236 723 40,852 14,809 1,442 F 13e 66,931 22,176 7,377 5,040 280 8,456 20,826 20,816 8 241 8,241 32,058 66,931 893 447 49,064 723 50,680 14,809 1,442 F 14e 77,979 23,523 8,377 5,040 280 14,683 24,018 24,006 8 241 8,241 40,759 77,979 893 447 60,112 723 61,728 14,809 1,442

F 09 Per Share Data (Rs) 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) Solvency Ratios (%) Debt Equity Ratio Interest Coverage Ratio Source: Company, SSLe 11.7 13.6 32.3 2.8 11.8 4.3 10 0 10.0 1.9 2.0 23.0 36.1 95 112 0.9 12.8 F 10 15.6 18.4 58.1 3.3 20.8 5.6 16 6 16.6 3.2 1.0 20.7 26.8 99 132 0.4 20.9 F 11 19.7 23.5 74.7 3.7 21.1 5.6 16 4 16.4 3.3 0.9 22.0 26.4 86 109 0.3 31.4 F 12e 20.8 25.9 91.6 4.1 25.5 5.8 16 5 16.5 3.5 0.8 22.0 22.7 79 118 0.4 35.4 F 13e 29.2 34.5 113.6 6.7 18.9 4.9 13 6 13.6 3.0 1.2 24.6 25.7 89 133 0.3 44.4 F 14e 32.7 38.7 138.3 7.5 16.9 4.0 12 2 12.2 2.6 1.4 23.4 23.7 89 133 0.2 49.3
Cash flow statement

Y/E March (Rs m n) 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 Goodw ill Investing Issue of Share Capital Proceeds from fresh borrow ings Buyback of Shares Dividend paid including tax Others Financing Net Extra-ordinary income Opening Cash & Bank bal. Closing Cash & Bank bal. Inc/(Dec) in Cash & Bank bal. F 09 5,015 5 015 1,491 106 178 860 7,649 (4,617) (157) (1 301) (1,301) (6,076) 7 204 (1,235) (2,336) (3,359) (178) 2,742 778 (1,964) F 10 6,816 6 816 884 250 (57) (4,477) 3,417 (6,075) (49) (23) (6,147) 61 (834) (1,483) 6,167 3,911 57 778 2,015 1,238 F 11 8,626 8 626 2,003 (27) (2,402) 8,200 (5,185) 233 (58) (5,011) 3 226 (1,658) 426 (1,003) 2,015 4,201 2,186 F 12e 8 675 8,675 2,275 400 (4,440) 6,910 (6,542) (249) (1 785) (1,785) (8,576) 1 3,185 (1,823) 704 2,066 (400) 4,201 4,201 (0) F 13e 12,818 12 818 2,373 (2,914) 12,277 (5,032) (5,032) (2,990) (0) (2,990) 4,201 8,456 4,254 F 14e 14,409 14 409 2,653 (2,473) 14,589 (5,000) (5,000) (3,361) 0 (3,361) 8,456 14,683 6,228
31
Financial summary: Ranbaxy Laboratories (RBXY)

Income statement
Y/E Dec (Rs m n) Net Revenue YoY (%) EBITDA YoY (%) Depreciation & Amortisation EBIT Interest Other incomes Pre tax Incom e Pre-tax Less: Taxation Effective tax rate (%) Recurring Net Profit YoY (%) Exceptional items Less: Minority Interest Less: Share of Gain / Loss in Ass Reported PAT EBITDA Margin PAT Margin C 08 74,140 10 5,838 (12) 2,825 3,014 2,055 2,599 3 558 3,558 (83) (2) 3,641 (15) (12,991) 84 78 (9,512) 7.9 4.9 C 09 75,970 2 7,124 22 2,676 4,448 710 2,935 6 673 6,673 5,964 89 710 (81) 2,397 109 32 2,965 9.4 0.9 C 10 89,609 18 18,653 162 5,533 13,121 614 5,199 17 706 17,706 4,195 24 13,511 1,804 1,642 126 59 14,968 20.8 15.1 C 11 101,614 13 16,189 (13) 3,940 12,249 768 2,230 13 712 13,712 1,969 14 11,742 (13) (40,576) 97 66 (28,997) 15.9 11.6 C 12e 115,504 14 22,284 38 4,199 18,085 1,426 2,600 19 258 19,258 3,466 18 15,792 34 4,400 17 122 20,053 19.3 13.7 C 13e 107,705 (7) 16,670 (25) 4,367 12,303 1,296 2,808 13 816 13,816 2,487 18 11,329 (28) 17 122 11,190 15.5 10.5
Balance sheet
Y/E Dec (Rs m n) Total Assets Net Block Add: Capital Work in Progress Goodw ill Investm ents Cash & Bank balance Inventory Sundry Debtors Loans and Advances Net Current Assets Total Liabilities Paid up Equity Share Capital No. of Shares o/s (mn) Reserves & Surplus General & Other Reserve Minority Interest Net Worth Debts Deferred Tax Liability C 08 74,256 44,900 4,707 5,432 23,956 19,643 13,310 8 191 8,191 19,218 74,256 2,102 420 40,861 675 43,637 42,849 (12,229) C 09 75,517 44,905 6,231 5,407 12,416 18,407 18,399 10 863 10,863 18,974 75,517 2,102 420 41,332 533 43,967 36,295 (4,746) C 10 99,816 45,479 3,818 4,985 32,644 21,926 16,052 16 309 16,309 45,534 99,816 2,105 421 53,943 647 56,695 43,348 (227) C 11 76,426 48,587 2,641 982 30,681 26,107 30,065 17 729 17,729 24,216 76,426 2,110 422 28,071 810 30,991 44,907 528 C 12e 92,326 47,388 3,641 982 39,186 30,063 26,898 18 942 18,942 40,315 92,326 2,110 422 48,124 810 51,044 40,754 528 C 13e 99,778 46,020 4,641 2,000 43,462 28,033 25,082 20 276 20,276 47,116 99,778 2,110 422 59,314 810 62,234 37,016 528

C 08 Per Share Data (Rs) 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) Solvency Ratios (%) Debt Equity Ratio Interest Coverage Ratio Source: Company, SSLe 8.6 15.4 103.7 29.1 2.4 20 5 20.5 1.6 4.1 8.3 66 110 1.0 1.5 C 09 1.7 8.0 104.4 307.0 5.0 33 2 33.2 3.1 5.9 1.6 88 144 0.8 6.3 C 10 32.1 45.2 134.7 2.3 18.6 4.4 13 8 13.8 2.9 0.4 13.1 23.8 65 189 0.8 21.4 C 11 27.9 37.3 73.6 14.5 5.5 10 9 10.9 1.7 16.0 37.9 108 258 1.4 15.9 C 12e 37.5 47.5 121.2 13.2 4.1 96 9.6 1.9 19.6 30.9 85 180 0.8 12.7 C 13e 26.9 37.3 147.8 18.4 3.3 12 8 12.8 2.0 12.3 18.2 85 140 0.6 9.5
Cash flow statement

Y/E Dec (Rs m n) 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 Goodw ill Investing Issue of Share Capital Proceeds from fresh borrow ings Buyback of Shares Dividend paid including tax Others Financing Net Extra-ordinary income Opening Cash & Bank bal. Closing Cash & Bank bal. Inc/(Dec) in Cash & Bank bal. C 08 (9,512) (9 512) 3,397 (6,510) 18,558 23,792 29,725 (7,385) (3,028) (10,413) 236 1,433 17,155 18,824 (18,558) 4,379 23,956 19,577 C 09 2,965 2 965 839 5,888 (3,424) (11,296) (5,028) (2,367) 24 (2,343) 0 (6,553) (1,040) (7,593) 3,424 23,956 12,416 (11,540) C 10 14,968 14 968 3,691 (5,512) (6,333) 6,814 (1,852) 423 (1,429) 3 7,053 (982) 3,257 9,331 5,512 12,416 32,644 20,228 C 11 (28,997) (28 997) 3,109 40,954 19,355 34,421 (5,040) 4,003 (1,037) 5 1,559 4,043 5,607 (40,954) 32,644 30,681 (1,963) C 12e 20,053 20 053 4,199 (4,400) (7,594) 12,258 (4,000) (4,000) (4,153) 0 (4,153) 4,400 30,681 39,186 8,504 C 13e 11,190 11 190 4,367 (2,525) 13,033 (4,000) (1,018) (5,018) (3,738) 0 (3,738) 39,186 43,462 4,277
32
Financial summary: Sun Pharmaceutical (SUNP)

Income statement
Y/E March (Rs m n) Net Revenue YoY (%) EBITDA YoY (%) Depreciation & Amortisation EBIT Interest Other incomes Pre tax Incom e Pre-tax Less: Taxation Effective tax rate (%) Recurring Net Profit YoY (%) Exceptional items Less: Minority Interest Less: Share of Gain / Loss in Ass Reported PAT EBITDA Margin PAT Margin F 09 42,724 27 18,640 20 1,233 17,407 2,085 19 493 19,493 712 4 18,781 21 603 18,178 43.6 44.0 F 10 40,004 (6) 12,609 (32) 1,533 11,076 2,739 13 815 13,815 578 4 13,236 (30) 234 (41) 13,511 31.5 33.1 F 11 57,214 43 19,700 56 2,041 17,659 2,323 19 982 19,982 1,172 6 18,810 42 263 913 18,161 34.4 32.9 F 12e 80,057 40 32,517 65 2,911 29,606 4,075 33 681 33,681 3,826 11 29,855 59 (127) 3,855 25,873 40.6 37.3 F 13e 94,716 18 35,002 8 3,247 31,756 3,405 35 161 35,161 6,446 18 28,715 (4) 2,325 26,390 37.0 30.3 F 14e 102,420 8 34,777 (1) 3,546 31,231 3,815 35 046 35,046 6,425 18 28,621 (0) 2,575 26,046 34.0 27.9
Balance sheet
Y/E March (Rs m n) Total Assets Net Block Add: Capital Work in Progress Goodw ill Investm ents Cash & Bank balance Inventory Sundry Debtors Loans and Advances Net Current Assets Total Liabilities Paid up Equity Share Capital No. of Shares o/s (mn) Reserves & Surplus General & Other Reserve Minority Interest Net Worth Debts Deferred Tax Liability F 09 73,531 14,625 1,571 3,253 18,595 16,690 9,757 8,811 7 425 7,425 35,487 73,531 1,036 207 69,415 1,970 72,421 1,789 (679) F 10 81,043 15,328 1,448 4,060 30,664 6,073 10,739 11,748 8 562 8,562 29,543 81,043 1,036 1,036 77,254 1,932 80,222 1,712 (890) F 11 103,908 25,234 2,706 7,720 22,310 21,936 14,794 11,716 11 726 11,726 45,938 103,908 1,036 1,036 93,797 8,472 103,304 4,256 (3,652) F 12e 132,335 28,536 4,206 10,218 26,457 33,672 20,870 19,261 15 764 15,764 62,917 132,335 1,036 1,036 120,628 11,614 133,278 4,256 (5,199) F 13e 148,843 30,290 4,706 10,218 26,457 43,920 24,691 22,788 16 807 16,807 77,171 148,843 1,036 1,036 134,811 13,939 149,786 4,256 (5,199) F 14e 171,410 31,744 5,206 10,218 26,457 63,679 26,700 22,448 17 954 17,954 97,784 171,410 1,036 1,036 154,803 16,514 172,353 4,256 (5,199)

F 09 Per Share Data (Rs) 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) Solvency Ratios (%) Debt Equity Ratio Interest Coverage Ratio Source: Company, SSLe 17.6 19.3 69.9 3.1 12.7 3.2 10 6 10.6 4.6 1.4 23.7 25.9 75 84 0.0 F 10 13.0 14.3 77.5 3.2 27.4 4.6 26 6 26.6 8.4 0.9 13.7 16.5 107 63 0.0 F 11 17.5 20.1 99.8 4.1 25.2 4.4 21 5 21.5 7.4 0.9 17.0 18.2 75 97 0.0 F 12e 25.0 31.6 128.7 4.9 22.8 4.4 17 1 17.1 6.9 0.9 22.4 22.4 88 145 0.0 F 13e 25.5 30.9 144.6 5.9 22.7 4.0 16 1 16.1 5.9 1.0 21.3 19.2 88 120 0.0 F 14e 25.2 31.1 166.4 5.8 23.0 3.5 16 2 16.2 5.5 1.0 18.2 16.6 80 100 0.0 -
Cash flow statement

Y/E March (Rs m n) 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 Goodw ill Investing Issue of Share Capital Proceeds from fresh borrow ings Buyback of Shares Dividend paid including tax Others Financing Net Extra-ordinary income Opening Cash & Bank bal. Closing Cash & Bank bal. Inc/(Dec) in Cash & Bank bal. F 09 18,178 18 178 1,244 (481) 1,815 20,756 (6,401) (11,035) (1 524) (1,524) (18,959) 353 (3,332) 5,484 2,505 12,389 16,690 4,302 F 10 13,511 13 511 1,162 (428) (334) (4,674) 9,237 (1,742) (12,069) (807) (14,617) (77) (3,321) (2,173) (5,571) 334 16,690 6,073 (10,618) F 11 18,161 18 161 12,274 433 (376) (532) 29,959 (23,438) 8,354 (3 659) (3,659) (18,743) 2,544 (4,213) 5,940 4,271 376 6,073 21,936 15,864 F 12e 25,873 25 873 2,911 127 (5,243) 23,668 (7,713) (4,148) (2 498) (2,498) (14,359) (5,115) 7,669 2,554 (127) 21,936 33,672 11,736 F 13e 26,390 26 390 3,247 (4,006) 25,631 (5,500) (5,500) (6,134) (3,748) (9,883) 33,672 43,920 10,248 F 14e 26,046 26 046 3,546 (854) 28,738 (5,500) (5,500) (6,054) 2,575 (3,479) 43,920 63,679 19,759
33
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Institutional Equity Research

INDIA PHARMA | Sector Overweight

June 07, 2012

Barring few, 4Q reiterated its perkiness, +ve on DRL/LPCs F13 Outlook

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

Associate | Kunal Mishra email | kunal.mishra@sbicapsec.com (+91 22 4227 3459)

Our coverage universe ........................................................................17-21 17-21

Company financials...22-33 Disclaimer

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India pharma 4Q: strong and ahead of expectation

Other 4Q highlights; We revisit our pharma coverage

509 507 667 510 223 357 84

610 629 809 607 239 421 77

BUY BUY REDUCE BUY ADD BUY BUY

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India Pharma: 4QF12 Sales YoY

India Pharma: 4QF12 Sales QoQ

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India Pharma: 4QF12 EBITDA YoY

India Pharma: 4QF12 EBITDA QoQ

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India Pharma: 4QF12 Recurring PAT YoY

India Pharma: 4QF12 Recurring PAT QoQ

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Earnings*/margins^ surprises and disappoints *

JLS Divi's Divi s

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June 07, 2012

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Cross currency movement

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India pharma universe

1-Yr forward PE: Our coverage vs. Sensex

Pharma P/E (1 yr fwd)

Sensex P/E (1 yr fwd)

Source: Company, SSLe, Price as on June 6, 2012

Source: Company, SSLe

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Relative price performance: relative price appreciation to continue

Source: Company, SSLe, Stock price as on June 6, 2012

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Pharma universe: valuation summary

Pharma universe: financial summary

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Ajanta Pharma (AJP): Sales upside drove 4Q surprise

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Dishman Pharma (Dishman): 4Q ahead of estimates, F13 Outlook hold strong

IPCA Labs (IPCA): 4Q broadly in line; F13 Outlook affirms BUY

Ranbaxy Laboratories (RBXY): Lipitor outraces estimates, reiterate "BUY"

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Financial summary: Ajanta Pharma (AJP)

Performance & Market Ratio

Cash flow statement

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Financial summary: Biocon

Performance & Market Ratio

Cash flow statement

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Financial summary: Cadila Healthcare (Cadila HC)

Performance & Market Ratio

Cash flow statement

Earnings/margins^ surprises and disappoints