Actual Projecte

Particulars 2003 2004 2005 2006 2007

Growth rate (YoY) 0.22% 6.75% 4.89% 6.46%
COGS (% of sales) 64.9% 65.4% 61.7% 64.3% 62.80%
Selling cost as percentage of
sales 14.0% 14.4% 12.21% 12.21%
R&D expenses as percentage of
sales 13.2% 11.5% 10.73% 10.73%
Total administrative expenses
growth rate 31.0% 12.5% 7.0%
Income tax rate 29% -43% 42% 55% 42%

Gross profit margin 35.1% 34.6% 38.3% 35.7% 37.2%

SG&A/Sales 30.0% 32.8% 32.7% 30.3% 29.9%
Operating profit margin 5.1% 1.8% 5.6% 5.4% 7.3%

Sales 6768 6783 7241 7595 8086

COGS 4391 4435 4466 4887 5078
Gross profit 2377 2348 2775 2708 3007.86
Selling cost 950 1043 927 986.88
R&D expenses 896 831 815 867.65
Administrarive expenses 378 495 557 562.57
Total SG&A expenses 2031 2224 2369 2299 2417.10
Operating profit 346 124 406 409 590.75
Extraordinary losses 70 60 152 90 20.00
EBIT 276 64 254 319 570.75
Interest expense 77 85 90 120 120.00
EBT 199 -21 164 199
Income tax 58 9 69 110
EBIT (1-t) 218 55 185 209 331.04

Calculation of FCFF
Plus: Depreciation 386.00
Minus: Change in NWC -109.74
Minus: CapEx 424.00
CAPEX (%OF SALES) 5.24%
Fress Cash Flow to Firm (FCFF) 218 55 185 209 402.78

Discount Period 1.00

Discount Factor 0.95
Discounted Cash Flow 384.23
Present value 7281.67
Terminal Value in year 2020 59197.78
Terminal Value in April 2006 30601.38
Total Value 37883.04
Cash in Hand 770.00
Investment securities 168.00
Enterprise Value 38821.04
Less: Long-term debt (interest
bearing) 5944.00
Equity Value (in JPY millions) 32877.04
Equity Value (in $ million) 298.88
Projected
2008 2009 2010 2011 2012 2013 2014
15.03% 12.79% 8% 13.70% 5.30% 10.10% 7.70%
62.50% 62% 61.50% 61.00% 60.50% 60.00% 59.50%

12.21% 12.21% 12.21% 12.21% 12.21% 12.21% 12.21%

10.73% 10.73% 10.73% 10.73% 10.73% 10.73% 10.73%

6.1% 5.5% 5.1% 4.5% 4.4% 4.0% 3.7%

42% 42% 42% 42% 42% 42% 42%

37.5% 38.0% 38.5% 39.0% 39.5% 40.0% 40.5%

29.0% 28.4% 28.1% 27.5% 27.3% 26.9% 26.7%
8.5% 9.6% 10.4% 11.5% 12.2% 13.1% 13.8%

9301 10490 11330 12882 13565 14935 16085

5813 6504 6968 7858 8207 8961 9570
3487.84 3986.39 4361.95 5023.94 5358.04 5973.87 6514.28
1135.21 1280.41 1382.84 1572.29 1655.62 1822.84 1963.20
998.06 1125.71 1215.76 1382.32 1455.59 1602.60 1726.00
568.20 573.88 579.62 585.41 591.27 597.18 603.15
2701.47 2979.99 3178.22 3540.03 3702.47 4022.62 4292.35
786.38 1006.40 1183.73 1483.92 1655.56 1951.25 2221.93
20.00 20.00 20.00 20.00 20.00 20.00 20.00
766.38 986.40 1163.73 1463.92 1635.56 1931.25 2201.93

444.50 572.11 674.96 849.07 948.63 1120.13 1277.12

391.00 362.00 583.76 659.81 662.40 754.59 807.33

655.91 642.05 452.96 837.75 368.49 368.49 368.49
543.00 459.00 583.76 659.81 662.40 754.59 807.33
5.84% 4.38% 5% 5% 5% 5% 5%
-363.42 -166.94 222.00 11.32 580.13 751.63 908.63

2.00 3.00 4.00 5.00 6.00 7.00 8.00

0.91 0.87 0.83 0.79 0.75 0.72 0.69
-330.72 -144.93 183.86 8.95 437.23 540.41 623.21
 2015 2016 2017 2018 2019 2020 2021
7.70% 7.70% 7.70% 7.70% 7.70% 7.70% 1%
59.00% 58.50% 58.00% 57.50% 57.00% 56.50% 57%

12.21% 12.21% 12.21% 12.21% 12.21% 12.21% 12.21%

10.73% 10.73% 10.73% 10.73% 10.73% 10.73% 10.73%

3.5% 3.3% 3.1% 2.9% 2.7% 2.6% 0.0%

42% 42% 42% 42% 42% 42% 42%

41.0% 41.5% 42.0% 42.5% 43.0% 43.5% 0.0%

26.5% 26.2% 26.0% 25.8% 25.7% 25.5% 0.0%
14.5% 15.3% 16.0% 16.7% 17.3% 18.0% 0.0%

17323 18657 20094 21641 23307 25102 25353

10221 10914 11654 12443 13285 14183
7102.50 7742.68 8439.33 9197.36 10022.10 10919.31
2114.36 2277.17 2452.51 2641.35 2844.74 3063.78
1858.90 2002.04 2156.20 2322.22 2501.04 2693.62
609.18 615.27 621.43 627.64 633.92 640.26
4582.45 4894.48 5230.13 5591.22 5979.69 6397.65
2520.05 2848.19 3209.20 3606.14 4042.41 4521.65
20.00 20.00 20.00 20.00 20.00 20.00
2500.05 2828.19 3189.20 3586.14 4022.41 4501.65

1450.03 1640.35 1849.73 2079.96 2333.00 2610.96

863.57 936.39 1006.24 1082.89 1167.74 1256.93

368.49 368.49 368.49 368.49 368.49 368.49
863.57 936.39 1006.24 1082.89 1167.74 1256.93
5% 5% 5% 5% 5% 5%
1081.54 1271.86 1481.24 1711.47 1964.50 2242.47

9.00 10.00 11.00 12.00 13.00 14.00

0.65 0.62 0.60 0.57 0.54 0.52
707.65 793.87 882.00 972.17 1064.53 1159.21
 Actual Projecte
Particulars 2003 2004 2005 2006 2007
Growth rate (YoY) 0.22% 6.75% 4.89% 6.46%
COGS (% of sales) 64.9% 65.4% 61.7% 64.3% 62.80%
Selling cost as percentage of
sales 14.0% 14.4% 12.21% 12.21%
R&D expenses as percentage of
sales 13.2% 11.5% 10.73% 10.73%
Total administrative expenses
growth rate 31.0% 12.5% 7.0%
Income tax rate 29% -43% 42% 55% 42%

Gross profit margin 35.1% 34.6% 38.3% 35.7% 37.2%

SG&A/Sales 30.0% 32.8% 32.7% 30.3% 29.9%
Operating profit margin 5.1% 1.8% 5.6% 5.4% 7.3%

Sales 6768 6783 7241 7595 8086

COGS 4391 4435 4466 4887 5078
Gross profit 2377 2348 2775 2708 3007.86
Selling cost 950 1043 927 986.88
R&D expenses 896 831 815 867.65
Administrarive expenses 378 495 557 562.57
Total SG&A expenses 2031 2224 2369 2299 2417.10
Operating profit 346 124 406 409 590.75
Extraordinary losses 70 60 152 90 20.00
EBIT 276 64 254 319 570.75
Interest expense 77 85 90 120
EBT 199 -21 164 199
Income tax 58 9 69 110
EBIT (1-t) 218 55 185 209 331.04

Calculation of FCFF
Plus: Depreciation 386.00
Minus: Change in NWC -109.74
Minus: CapEx 424.00
CAPEX (%OF SALES) 5.24%
Fress Cash Flow to Firm (FCFF) 218 55 185 209 402.78

Discount Period 1.00

Discount Factor 0.95
Discounted Cash Flow 384.23
Present value 14784.36
Terminal Value in year 2020 104671.86
Terminal Value in April 2006 54108.49
Total Value 68892.85
Cash in Hand 770.00
Investment securities 168.00
Enterprise Value 69830.85
Less: Long-term debt (interest
bearing) 5944.00
Equity Value (in JPY millions) 63886.85
Equity Value (in $ million) 580.79
Projected
2008 2009 2010 2011 2012 2013 2014
15.03% 12.79% 5.4% 10.60% 4.20% 9.00% 6.60%
62.50% 62% 61.50% 61.00% 60.50% 60.00% 59.50%

12.21% 12.21% 12.21% 12.21% 12.21% 12.21% 12.21%

10.73% 10.73% 10.73% 10.73% 10.73% 10.73% 10.73%

6.1% 5.5% 5.2% 4.8% 4.6% 4.3% 4.1%

42% 42% 42% 42% 42% 42% 42%

37.5% 38.0% 38.5% 39.0% 39.5% 40.0% 40.5%

29.0% 28.4% 28.2% 27.7% 27.6% 27.2% 27.0%
8.5% 9.6% 10.3% 11.3% 11.9% 12.8% 13.5%

9301 10490 11057 12229 12743 13889 14806

5813 6504 6800 7460 7709 8334 8810
3487.84 3986.39 4256.94 4769.32 5033.34 5555.79 5996.50
1135.21 1280.41 1349.55 1492.60 1555.29 1695.27 1807.15
998.06 1125.71 1186.50 1312.26 1367.38 1490.44 1588.81
568.20 573.88 579.62 585.41 591.27 597.18 603.15
2701.47 2979.99 3115.66 3390.28 3513.94 3782.89 3999.12
786.38 1006.40 1141.28 1379.04 1519.41 1772.90 1997.39
20.00 20.00 20.00 20.00 20.00 20.00 20.00
766.38 986.40 1121.28 1359.04 1499.41 1752.90 1977.39

444.50 572.11 650.34 788.24 869.66 1016.68 1146.88

391.00 362.00 569.71 626.37 622.26 701.78 743.17

655.91 642.05 452.96 837.75 368.49 368.49 368.49
543.00 459.00 569.71 626.37 622.26 701.78 743.17
5.84% 4.38% 5% 5% 5% 5% 5%
-363.42 -166.94 197.38 -49.51 501.16 648.19 778.39

2.00 3.00 4.00 5.00 6.00 7.00 8.00

0.91 0.87 0.83 0.79 0.75 0.72 0.69
-330.72 -144.93 163.47 -39.11 377.72 466.04 533.88
 2015 2016 2017 2018 2019 2020 2021
6.60% 6.60% 6.60% 6.60% 6.60% 6.60% 6.60%
59.00% 58.50% 58.00% 57.50% 57.00% 56.50% 56.00%

12.21% 12.21% 12.21% 12.21% 12.21% 12.21% 12.21%

10.73% 10.73% 10.73% 10.73% 10.73% 10.73% 10.73%

3.9% 3.7% 3.5% 3.3% 3.1% 2.9% 2.8%

42% 42% 42% 42% 42% 42% 42%

41.0% 41.5% 42.0% 42.5% 43.0% 43.5% 44.0%

26.8% 26.6% 26.4% 26.2% 26.0% 25.9% 25.7%
14.2% 14.9% 15.6% 16.3% 17.0% 17.6% 18.3%

15783 16825 17936 19119 20381 21726 23160

9312 9843 10403 10994 11617 12275 12970
6471.19 6982.41 7532.93 8125.70 8763.90 9450.95 10190.52
1926.43 2053.57 2189.11 2333.59 2487.60 2651.78 2826.80
1693.68 1805.46 1924.62 2051.64 2187.05 2331.40 2485.27
609.18 615.27 621.43 627.64 633.92 640.26 646.66
4229.28 4474.30 4735.15 5012.87 5308.57 5623.44 5958.73
2241.91 2508.11 2797.78 3112.83 3455.33 3827.51 4231.79
20.00 20.00 20.00 20.00 20.00 20.00 20.00
2221.91 2488.11 2777.78 3092.83 3435.33 3807.51 4211.79

1288.71 1443.11 1611.11 1793.84 1992.49 2208.36 2442.84

786.81 844.45 898.17 956.72 1021.14 1087.90 1159.67

368.49 368.49 368.49 368.49 368.49 368.49 368.49
786.81 844.45 898.17 956.72 1021.14 1087.90 1159.67
5% 5% 5% 5% 5% 5% 5%
920.21 1074.61 1242.62 1425.35 1624.00 1839.87 2074.34

9.00 10.00 11.00 12.00 13.00 14.00 15.00

0.65 0.62 0.60 0.57 0.54 0.52 0.49
602.10 670.75 739.91 809.64 880.02 951.09 1022.93
 2022 2023 2024 2025 2026 2027
6.60% 6.60% 6.60% 6.60% 6.60% 6.60% 1.00%
55.50% 55.00% 54.50% 54.00% 53.50% 53.00%

12.21% 12.21% 12.21% 12.21% 12.21% 12.21%

10.73% 10.73% 10.73% 10.73% 10.73% 10.73%

2.6% 2.5% 2.4% 2.3% 2.1% 2.0%

42% 42% 42% 42% 42% 42%

44.5% 45.0% 45.5% 46.0% 46.5% 47.0%

25.6% 25.4% 25.3% 25.2% 25.1% 25.0%
18.9% 19.6% 20.2% 20.8% 21.4% 22.0%

24689 26318 28055 29907 31881 33985

13702 14475 15290 16150 17056 18012
10986.54 11843.24 12765.17 13757.20 14824.58 15972.93
3013.37 3212.25 3424.26 3650.26 3891.18 4148.00
2649.30 2824.15 3010.54 3209.24 3421.05 3646.84
653.13 659.66 666.25 672.92 679.65 686.44
6315.79 6696.06 7101.06 7532.42 7991.88 8481.28
4670.74 5147.18 5664.11 6224.78 6832.71 7491.65
20.00 20.00 20.00 20.00 20.00 20.00
4650.74 5127.18 5644.11 6204.78 6812.71 7471.65

2697.43 2973.76 3273.58 3598.77 3951.37 4333.56

1236.47 1317.91 1404.91 1497.69 1596.49 1701.87

368.49 368.49 368.49 368.49 368.49 368.49
1236.47 1317.91 1404.91 1497.69 1596.49 1701.87
5% 5% 5% 5% 5% 5%
2328.94 2605.27 2905.09 3230.28 3582.88 3965.06

16.00 17.00 18.00 19.00 20.00 21.00

0.47 0.45 0.43 0.41 0.39 0.37
1095.61 1169.18 1243.71 1319.26 1395.90 1473.68
Computation of Beta
Unlevered Beta (average of four comparable firms) 0.535 D/E 1.5
E/V 0.400 V/E 2.5
Levered Beta 0.742 TARGET d? 0.6666667

Cost of Equity
Rf 1.70%
Risk Premium 5.80%
Cost of equity for large firms 6.00%
Size premium in Japan 3.95%
Cost of equity 9.951%
Cost of debt for similar companies 2.43%
Tax rate 42.00%
Cost of debt after tax 1.41%
WACC 4.83%
Particulars No. of days Actual Projected
2003 2004 2005 2006 2007 2008
Note receivables 67 1374.00 1498.19 1484.21 1707.29
Accounts receivables 106 1694.00 2372.14 2348.16 2701.09
Inventory 85 1955.97 1882.96 2165.96
Notes payable 46 998.79 1019.01 1172.17
Accounts payable 15 353.74 332.29 382.23
Net Working Capital 197 4473.77 4364.03 5019.94
Change in NWC -109.74 655.91
Projected Projected - Scenario 1
2009 2010 2011 2012 2013 2014 2015 2016 2017
1925.65 2079.70 2364.62 2489.95 2741.43 2952.52 3179.87 3424.72 3688.42
3046.55 3290.28 3741.05 3939.32 4337.19 4671.16 5030.84 5418.21 5835.41
2442.99 2638.43 2999.90 3158.89 3477.94 3745.74 4034.16 4344.79 4679.34
1322.09 1427.86 1623.47 1709.52 1882.18 2027.11 2183.19 2351.30 2532.35
431.12 465.61 529.39 557.45 613.75 661.01 711.91 766.73 825.77
5661.99 6114.95 6952.70 7321.19 8060.63 8681.30 9349.76 10069.70 10845.06
642.05 452.96 837.75 368.49 739.44 620.67 668.46 719.93 775.37
 2018 2019 2020
3972.43 4278.31 4607.74
6284.74 6768.67 7289.85
5039.65 5427.70 5845.64
2727.34 2937.35 3163.52
889.35 957.83 1031.58
11680.13 12579.50 13548.12
835.07 899.37 968.62
 Comparable multiples
Sawai Nichi Towa Fuji
Multiple Pharma lkoPharma Pharma Pharma Median
EV/Sales 2.69 1.9 1.96 1.2 1.93
EV/EBIT 17.02 15.4 15.4 9 15.4
PE Ratio 29.07 24 26.77 17.2 25.385

Since the company has a different cost structure than others

so comparing on sales is not good. We should consier values
that take cost into consideration

Transaction comparables:
 Valuation based on

Maximum Minimum Average Median Maximum Minimum Average

2.69 1.2 1.94 141.9 197.7 88.2 142.4
17.02 9 14.21 79.9 88.3 46.7 73.7
29.07 17.2 24.26 20.5 23.5 13.9 19.6
No Particulars
1 Savings in API Procurement (US $Millions)
Savings from API Variation Molecules

Pravastatin
Amlodipine
Risperidone
Phase I
Lansoprazole
Omeprazole
Simvastatin
2
Total

Beraprost Na
Zonisamide
Epinaspine
Phase 2
Tansulosine
Zopiclone
Total

No of units to be shifted to India (in millions)

3 Savings due to manufacturing site variation Cost Savings
0.0096

Savings from capacity increase No of units where savings are possible (in US
Current Mgf Cost / Unit
4
0.0114

5 Total change in profit before tax (PBT) (1+2+3+4)(US $ millions)

6 Tax benefits due to shifting of operations (US $ millions)
Total synergy benefits (5+6) (US $ millions)
Time period (Year 0 = April 2006)
Discount Rate 7.06%
PV of synergy (US $ million)

Continuing synergy benefits 0.00

Perpetual growth in rate (assumed) 0%
Value of perpetual savings = 0.00
PV of perpetual synergy benefits 0.00
Total value of synergy (US $ millions) 0.00
 Savings over the years
Projected Savings Potential Savings 2009 - 10 2010 - 11 2011 - 12

Qty (Kg) Savings / Kg Savings ($ m) % Savings compared to potential

50% 100%
152 11000 1.67 0 0.84 1.67
250 2000 0.50 0 0.25 0.50
60 9000 0.54 0 0.27 0.54
130 750 0.10 0 0.12 0.23
180 2500 0.45 0 0.23 0.45
60 10000 0.60 0 0.30 0.60
0 2.01 3.99
50%
0.112 3000000 0.34 0 0 0.17
780 200 0.16 0 0 0.08
60 3500 0.21 0 0 0.11
1 300000 0.30 0 0 0.15
80 2000 0.16 0 0 0.08
0 0 0.59

be shifted to India (in millions) 0 100 250

Freight Charges Cost Savings / tab
0.0021 0.0075 Total savings => 0.75 1.875

here savings are possible (in US $ millions) 100 300 500

Cost Savings/ Unit (13%)
0.001482 Total savings => 0.150 0.500 0.750
r the years
2012 - 13

ompared to potential
102%
1.70
0.51
0.55
0.23
0.46
0.61
4.06
100%
0.34
0.16
0.21
0.30
0.16
1.17

500

3.75

750

1.125

Total
0.00