India Pharma

Institutional Equity

Research

June 07, 2012

Below is our composite analysis - 4QF12 earnings and management’s F13 outlook. We revisit our pharma coverage ratings.

INDIA PHARMA | Sector Overweight

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. Divi’s and Dishman too delivered positive surprise on the Core OPM.p pDomestic 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%. DRL, RBXY, LPC holds positive F13 outlook. SUNP’s 1H to remain weak.Adjusting for several non-recurring sales, exports formulation grew robust ~19% YoY (US/RoWat 25%/21%). Within CRAMs segment, Divi’s+Dishman results were upbeat.

Barring few, 4Q reiterated its perkiness, +ve on DRL/LPC’s F13 Outlook 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 (Divi’s) and positive yield in CA (Dishman). Divi’s 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

Outlook

earning surprise to continue in upcoming quarter from DRL, SUNP, LPC, RBXY Divi’s 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 andCDH.

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 therollover. Ratings impacted during 4Q result season: Upgrades: Divi’s (TP-Rs1,008) and DRL (TP-Rs1,995). Downgrades: Biocon (TP-Rs270) and SUNP (TP-Rs641).

What we prefer (replacing SUNP with DRL in order of preference): Amongst the large cap we

Analyst | Vivek Kumar email | [email protected]

(+91 22 4227 3312)

Please refer to the last page for disclaimer

What we prefer (replacing SUNP with DRL in order of preference): Amongst the large cap, wehave replaced SUNP with DRL in order of preference followed by LPC and anticipate a relativeoutperformance from stock over mid-long term. In the mid-cap, our order of preferences is Divi’s,Ipca and Dishman.

Associate | Kunal Mishraemail | [email protected]

(+91 22 4227 3459)

INDIA PHARMA – Barring few, 4Q reiterated its perkiness, +ve on DRL/LPC’s F13 Outlook

June 07, 2012

ContentsIndia pharma - Barring few, 4Q reiterated its perkiness, +ve on DRL/LPC’s F13 Outlook

India pharma 4Q: strong and ahead of expectation……………………………………………….……………..……............ 03O QOther 4Q highlights; We revisit our pharma coverage………………………………………………………………….……… 04Domestic formulation: a healthy growth of ~25% YoY (19% ex SUNP’s onetime), F13 outlook mostly positive ………. 08US formulation: strong growth led by Lipitor, Lipidox and exceptional sales in Taro ……………………………..……….. 08Rest of World formulation: grew robust at 21%, SUNP’s RoW growth strategy-key catalyst on watch …………………. 09Earnings/margins surprises and disappoints…………………………………………………..……………………………….. 10C fCross currency movement: Rupee weaken against major currencies over the past few month………………………….. 11India pharma: Demand for expensive defensives to continue for some more time ………………………………………... 13Relative price performance: relative price appreciation to continue………………………………………………………….. 14Pharmaceutical universe: valuation and financial summary……………………….............................................................. 15

Our coverage universe 17-21Our coverage universe ……………………………………………........................................................................17-21Ajanta 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)Divi’s Laboratories (Divi’s): DSN SEZ pulls an early bird; 4Q bulldozes estimates Upgrade to BUY (Rs1008, BUY)Dishman Pharma (Dishman): 4Q ahead of estimates F13 Outlook hold strong (Rs77 BUY)Dishman Pharma (Dishman): 4Q ahead of estimates, F13 Outlook hold strong (Rs77, BUY)Dr. Reddy’s (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 reiterate "BUY" (Rs610 BUY)Ranbaxy Laboratories (RBXY): Lipitor outraces estimates, reiterate BUY (Rs610, BUY)Sun Pharmaceutical (SUNP): Several onetime drove 4Q performance; Revised to ADD on limited upside (Rs641, ADD)

Company financials………………………………………………………………………………..…………………….22-33

Disclaimer

Please refer to the last page for disclaimer 2


June 07, 2012

India pharma 4Q: strong and ahead of expectation

4Q/F12 4Q/F11 YoY(%) QoQ (%) 4Q/F12 4Q/F11 YoY(%) QoQ (%) 4Q/F12 4Q/F11 YoY(%) QoQ (%) M ar-12 M ar-11 Dec-11Companies Sales (Rs mn) EBITDA (Rs mn) PAT (Rs mn) OPM (%)

Biocon 6,102 4,710 29.6 18.0 1,546 1,308 18.2 30.6 1,048 942 11.3 38.3 25.3 27.8 22.9Cadila 13,444 11,687 15.0 -0.6 2,376 2,346 1.3 1.6 1,892 2,110 -10.3 -0.7 17.7 20.1 17.3Dr Reddy's 26,585 20,173 31.8 -4.0 6,418 4,261 50.6 -26.1 4,286 2,783 54.0 -10.3 24.1 21.1 31.4IPCA 5,531 4,738 16.7 -8.1 1,036 936 10.7 -25.1 714 621 15.0 -31.3 18.7 19.7 23.0Lupin 19,239 15,536 23.8 5.8 3,728 3,108 20.0 -8.0 1,612 2,288 -29.6 -40.8 19.4 20.0 22.3Ranbaxy 37,868 21,809 73.6 -0.1 10,152 4,032 151.8 18.1 8,219 3,266 151.7 25.5 26.8 18.5 22.7Sun Pharma 23 299 14 633 59 2 8 6 9 565 4 436 115 6 0 8 8 202 4 427 85 3 8 7 41 1 30 3 44 9Sun Pharma 23,299 14,633 59.2 8.6 9,565 4,436 115.6 -0.8 8,202 4,427 85.3 8.7 41.1 30.3 44.9Ajanta Pharma 1,719 1,258 36.6 4.9 357 280 27.5 -10.2 203 175 16.3 -17.1 20.8 22.2 24.3All Generic Agg. 133,787 94,544 41.5 1.7 35,178 20,707 69.9 -3.0 26,176 16,612 57.6 2.5 26.3 21.9 27.6Dishman 3,502 3,444 1.7 31.9 883 555 59.2 67.7 373 223 67.0 333.7 25.2 16.1 19.8Divi's 7,180 4,786 50.0 73.2 2,869 1,913 49.9 93.4 2,169 1,752 23.8 103.6 40.0 40.0 35.8Jubilant 11,711 8,903 31.5 7.7 2,062 1,423 44.9 -0.4 638 910 -29.9 -31.1 17.6 16.0 19.0All CRAMs Agg. 22,393 17,134 30.7 26.7 5,814 3,891 49.4 42.5 3,179 2,885 10.2 53.1 26.0 22.7 23.1gg , , , , , ,Sector Agg. 156,180 111,678 39.8 4.6 40,991 24,597 66.6 1.6 29,355 19,497 50.6 6.3 26.2 22.0 27.0

All Generic Agg. ^ 109,338 90,864 20.3 1.2 24,124 18,572 29.9 -1.8 18,503 14,698 25.9 11.7 22.1 20.4 22.7All CRAMs Agg. 22,393 17,134 30.7 26.7 5,814 3,891 49.4 42.5 3,179 2,885 10.2 53.1 26.0 22.7 23.1Sector Agg. ^ 131,731 107,998 22.0 4.8 29,938 22,463 33.3 4.5 21,683 17,583 23.3 16.3 22.7 20.8 22.8^ comparable base adjusted w ith; RBXY (Lipitor+Caduet)+DRL (Zyprexa+Geodon)+LPC (Geodon)+ SUNP (Lipidox+Taro/DF one time sales)

CDH (B N h Bi h ) A i t (1QC11)

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).

Key takeaways

+ CDH (Bremer+ Nesher + Biochem)+Aricept (1QC11)Source: Company, SSLe

Amongst the front line, base business OPM improved and stood strong for DRL, RBXY, and LPC. Divi’s 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. SUNP’s 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

i i l l d i b hi h tili ti f DSN (Di i’ ) d iti i ld i CA (Di h ) Di i’ t d 40% (SSL 36%) Di h l k d 25%


margin surprise, largely driven by higher utilisation of DSN (Divi’s) and positive yield in CA (Dishman). Divi’s 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, Divi’s and Ipca.


June 07, 2012

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 capex guid. of Rs6.5bn in F13, and 6) SUNP: Onetime sales in Domestic Formulation (Rs1.8bn) , ) ( ), ) g p g , ) ( )resulting in weak 1HF13 guidance.

F13 Outlook; companies guiding towards strong growth: DRL (~30% Sales growth), Dishman (~12-15%), Divi’s (+25%). In our view, DRL guidance is on optimistic side (builds possibility of few undisclosed niche launches) however outlook from Dishman/Divi’s looks more realistic to conservative. SUNP’s 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 tl k f L i d C dil W i C dil (CDH) t t t b i ti l h h f t’ ti i tti i l i hi hUS$3bn F15 Outlook for Lupin and Cadila: We view Cadila (CDH) target to be more aspirational hence chances of management’s optimism getting misplace is high unless resort to inorganic strategy (required F12-15 cagr 41%). LPC’s 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 revaluateour 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 Rs1 995) and Divi’s (TP Rs1 008) Downgrades: SUNP (TP Rs641) and Biocon (TP Rs270)changed. Ratings impacted during 4Q result season: Upgrades: DRL (TP-Rs1,995) and Divi s (TP-Rs1,008). Downgrades: SUNP (TP-Rs641) and Biocon (TP-Rs270).

Overview of change in recommendation and price targets

Old New Old NewR d ti h

TP Rec. CommentStocks

Recommendation changeDr Reddy's 1648 1995 REDUCE BUY Rollover to F14; base multiple retained at 19xSun Pharma 534 641 BUY ADD Rollover to F14; base multiple retained at 25xDivi's Labs 779 1008 REDUCE BUY Rollover to F14

Biocon 319 270 ADD REDUCERollover to F14; downgrade due to gloomy outlook; multiple cut to 14x

Price target changeRanbaxy 509 610 BUY BUY Rollover to C13Lupin 507 629 BUY BUY Rollover to F14; base multiple retained at 19x

Cadila HC 667 809 REDUCE REDUCERollover to F14; valued at 16x on concerns of increasing financial leverage + falling organic growth

Ajanta 510 607 BUY BUY Rollover to F14


Jubilant Life 223 239 ADD ADD Rollover to F14; maintaining multiple of 6xIpca 357 421 BUY BUY Rollover to F14Dishman 84 77 BUY BUY Rollover to F14Source: Company, SSLe


June 07, 2012

India Pharma: 4QF12 Sales YoY

Source: Company, SSLe* comparable base excludes - RBXY

(Lipitor+Caduet)+DRL (Zyprexa+Geodon)+LPC (G d ) SUN (Li id T /DF ti l )

India Pharma: 4QF12 Sales QoQ

(Geodon)+ SUN (Lipidox+Taro/DF one time sales)+ CDH (Bremer+ Nesher + Biochem)+Aricept (1QC11)


(Lipitor+Caduet)+DRL (Zyprexa+Geodon)+LPC


( p ) ( yp )(Geodon)+ SUN (Lipidox+Taro/DF one time sales)+ CDH (Bremer+ Nesher + Biochem)


June 07, 2012

India Pharma: 4QF12 EBITDA YoY



India Pharma: 4QF12 EBITDA QoQ







June 07, 2012

India Pharma: 4QF12 Recurring PAT YoY



India Pharma: 4QF12 Recurring PAT QoQ







June 07, 2012

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.

Domestic formulation: a healthy growth of ~25% YoY (19% ex SUNP’s onetime), F13 outlook mostly positive

(Rs mn) 4Q/F12 4Q/F11 3Q/F12 YoY% QoQ% MAT 2012 (Jan-Mar)

DF growth was robust at 25% YoY (versus 13.2% in 3Q). Based on secondary growth trend & mgt’s 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% (excluding-third party+onetime), 29.8% and 18.4%, respectively, driven by ramp-up in new launches. While DRL’s F12/4Q revived ~11%/17% YoY driven by new launches and bio similar

Sun Pharma* 8,767 5,887 6,956 48.9 26.0 26.0Dr Reddy's 3,203 2,746 3,333 16.7 -3.9 10.2Ranbaxy 4,929 4,342 4,845 13.5 1.7 8.0Lupin 3,772 3,071 5,198 22.8 -27.4 14.4Cadila HC 6,296 5,006 5,901 25.8 6.7 16.6Ipca 1,477 1,288 1,876 14.7 -21.3 23.0Ajanta 496 285 660 74 0 24 8 38 0 While DRL s F12/4Q revived ~11%/17% YoY driven by new launches and bio-similar,

LPC continued with 23% growth. IPCA’s 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 20%) SUNP’ 1H h b k f h i di ib i li

Ajanta 496 285 660 74.0 -24.8 38.0Cipla 7,536 6,522 8,687 15.5 -13.3 17.5Glenmark 2,682 2,160 2,547 24.2 5.3 33.1Domestic Fml 39,158 31,307 40,002 25.1 -2.1 18.9* includes one time; Rs1.8bn in 4QF12, Rs40mn in 4QF11Source: Company, SSLe

is 18-20%). SUNP’s1H growth to be weak on account of change in distribution policy.

US formulation: strong growth led by Lipitor, Lipidox and exceptional sales in Taro

Adjusting for non-recurring, the US formulation witnessed a strong growth of 83% (25% ex Lipitor Lipidox and exceptional sales in Taro) thanks to channel inventory filling as YE

(Rs mn) 4Q/F12 4Q/F11 3Q/F12 YoY% QoQ%ex-Lipitor, Lipidox and exceptional sales in 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 F13Companies 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

Sun Pharma 10,106 5,530 10,400 82.7 -2.8Dr Reddy's 8,732 5,918 11,114 47.5 -21.4Ranbaxy 20,925 7,644 20,757 173.7 0.8Lupin 9,118 6,235 6,832 46.2 33.5Cadila HC 3,533 2,803 3,435 26.1 2.9Ipca 435 324 411 34.2 5.8Glenmark 3 435 2 243 3 190 53 1 7 7 anticipates ~10-15 ANDA approvals post FDA clearance of Moraiya Injectable facility.

RBXY’s 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 to file ratio was highest for SUNP (22) and DRL (16).

Glenmark 3,435 2,243 3,190 53.1 7.7US Fml revenues 56,283 30,697 56,139 83.4 0.3Revenues (ex)^ 33,634 27,017 32,547 24.5 3.3^ comparable base adjusted for all one time sales Source: Company, SSLe


g ( ) ( )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.

8


June 07, 2012

Rest of World formulation: grew robust at 21%, SUNP’s RoW growth strategy-key catalyst on watch

RoW formulation (excluding India and US) sustained healthy growth of 21% YoY, 3% QoQ(Rs mn) 4Q/F12 4Q/F11 3Q/F12 YoY% QoQ% QoQ. Barring Cadila and RBXY, the growth reported in Japan/LATAM generics were strong. LPC (+60% YoY) continued to positively surprise. IPCA’s growth mainly impacted by track and trace implementation in UK (lowering productivity); Mgtm. hopes growth recovery from 2QF13.EU formulation remained flat YoY but de-grew sharply QoQ (-10%), mainly impacted

( )

Sun Pharma 3,226 2,231 2,810 44.6 14.8Dr Reddy's 6,462 5,504 6,840 17.4 -5.5Ranbaxy 10,211 8,676 10,664 17.7 -4.2Lupin 3,398 2,128 3,051 59.7 11.4Cadila HC 1,953 1,837 2,348 6.3 -16.8Ipca 1,958 1,951 2,487 0.4 -21.3 g p y ( ), y p

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).

Ipca 1,958 1,951 2,487 0.4 21.3Ajanta 1,223 969 979 26.2 25.0Cipla 8,551 7,428 7,021 15.1 21.8Glenmark 3,662 2,783 3,404 31.6 7.6ROW Fml revenues 40,644 33,507 39,604 21.3 2.6Source: Company, SSLe

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. SUNP’s RoW growth strategy will be key catalyst on watch with Israel Markov (ex-Teva CEO) taking over as new Chairman of SUN.



June 07, 2012

JLS

Earnings*/margins^ surprises and disappoints On an aggregate basis, earnings of our coverage universe were better than expected (variance of +22%). Total earnings were Rs29.4bn against SSLe of Rs24bn.*

Ranbaxy

Sun Pharma

Ajanta

Dishman

Divi's( ) g gOn 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 SUNP DIVI’s and DISH boosted from

Earning+rating upgrade

Rating downgrade

Biocon

Cadila

DRL

IPCA

Lupin Extreme earning surprise cases were – RBXY, SUNP, DIVI’s and 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 (Divi’s) and positive Earning+rating downgrade

Earning+rating upgrade

-70% -50% -30% -10% 10% 30% 50% 70%yield in CA (Dishman). Divi’s 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% of PBT) on forex loans.

disappointment surprise

^Divi's

JLSMTM forex gain for 4Q at Rs4.6bn ( 12% of PBT) on forex loans.

Forex gains during 4QF12 earnings

Ranbaxy

Sun Pharma

Ajanta

Dishman

Divi s

Companies Forex gain (P/L) Rs mn Profit before tax % to PBT

Ranbaxy 4,249 9,593 44.3 Jubilant Life 400 988 40.5

Biocon

Cadila

DRL

IPCA

Lupin Ajanta 33 280 11.8 Ipca 51 900 5.7 DRL 96 5,124 1.9 Cadila HC (90) 2,328 (3.9)Biocon (70) 1,168 (6.0)Dishman (58) 581 (10.0)


Source: Company, SSLe

bps

10

-700 -500 -300 -100 100 300 500 700Total 4,611 37,452 12.3 Source: Company, SSLe


June 07, 2012

Cross currency movement: Rupee weaken against major currencies over the past few months

US$INR EURINR

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US$RUB JPYINR

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9

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Source: SSLe

J F S A N J J A F S A N J J A F S A N J J F S A N J


June 07, 2012

CHFINR

Cross currency movement…

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Source: SSLe

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June 07, 2012

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 INR’s depreciation (c Rs55 6/US$ down 10% Apr’ till date)

India pharma: Demand for expensive defensives to continue for some more time

sector should benefit from the INR s depreciation (c. Rs55.6/US$, down 10% Apr till 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 F12-14e to be steady at 18%/22% cagr.

Action and recommendationsBesides 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 Divi’s, IPCA and Dishman.DRL: play on US generic opportunities and sustained DF growth of ~16% through F14

0%2

LPC: limited competition products launch + encouraging growth in Japan-post-I’rom integration + gaining focus in RoW markets

India pharma universe 1-Yr forward PE: Our coverage vs. SensexM.Cap New Tgt Rs Bn (Rs)Company Rating Upside

20%

30%

40%

50%

10x

15x

20x

25xRs Bn (Rs)Sun Pharma Add 599 641 11%Dr Reddy's Buy 274 1,995 23%Ranbaxy Buy 208 610 23%Lupin Buy 246 629 14%Cadila HC Reduce 148 809 12%Biocon Reduce 44 270 24%

p y g p

0%

10%

0x

5x

Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12

Premium Pharma P/E (1 yr fwd) Sensex P/E (1 yr fwd)

Ipca Buy 42 421 26%Ajanta Buy 7 607 -4%Generics agg. 16%Jubilant Life Add 28 239 37%Dishman Buy 4 77 43%Divi's Labs Buy 124 1,008 8%CRAM 14%



CRAMs agg. 14%Source: Company, SSLe, Price as on June 6, 2012


June 07, 2012

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 Indian pharma growth prospects in domestic and export markets remain strong and thus warrants a relative

Relative price performance: relative price appreciation to continue

uncertainty that may drive markets for some time. Indian pharma growth prospects in domestic and export markets remain strong and thus warrants a relative outperformance.DF growth has remained strong in Mar’12 and Apr’12 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. SUN’s 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). Biocon’s 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 ~5-No clear timeline indication over the draft pricing policy. Although, we believe this to have minimal impact for the domestic pharma industry. We anticipate 510% lower EBITDA for our coverage , if the policy is implemented.

Relative price and volume performance (3M, 6M, 1Yr and 2Yr)

3M 6M 1 Yr 2 Yr 3M 6M 1 Yr 2 YrNifty 5 429 9 3 1 9 13 4 2 6 158 1 177 5 159 7 154 9

Absolute returns (%) Volumes (mn) Rating Tgt Price (Rs)

Free float (%)

CMP (Rs)

Nifty - 5,429 -9.3 -1.9 -13.4 -2.6 158.1 177.5 159.7 154.9 - -Sensex - 17,924 -9.2 -3.1 -14.2 -3.7 12.5 15.4 15.0 15.4 - -BSE HC - 6,279 3.2 8.6 2.9 19.5 2.0 2.1 1.8 2.5 - -Ajanta 29.9 632 52.8 84.9 130.7 242.3 0.1 0.1 0.1 0.1 Buy 607Biocon 39.1 218 -22.7 -33.4 -41.7 -26.2 0.7 0.7 0.5 0.6 Reduce 270Cadila HC 25.2 724 2.5 3.3 -19.7 17.8 0.1 0.1 0.1 0.1 Reduce 809DRL 74.4 1,616 -1.1 6.7 2.5 17.4 0.3 0.3 0.4 0.4 Buy 1,995IPCA 54.0 335 -0.2 34.7 2.6 27.0 0.2 0.2 0.2 0.2 Buy 421Lupin 53.1 552 11.6 15.6 15.4 45.2 0.7 0.8 0.9 1.0 Buy 629Ranbaxy 36.3 494 15.8 11.2 -8.6 14.8 0.9 1.1 0.9 1.0 Buy 610Sun Pharma 36.3 578 3.4 8.9 21.1 69.3 0.9 0.9 1.0 1.0 Add 641Dishman 38.6 54 -6.6 16.6 -49.2 -75.1 0.4 0.3 0.2 0.2 Buy 77Divi's 47.8 933 22.1 19.7 17.4 24.5 0.2 0.2 0.2 0.2 Buy 1,008Jubilant Life 51.0 175 -8.4 -3.0 8.3 -48.4 0.1 0.1 0.2 0.2 Add 239


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


June 07, 2012

Pharma universe: valuation summary

CMP(Rs) TP(Rs) Upside (%) F 12e F 13e F 14e F 12e F 13e F 14e F 12e F 13e F 14e F 12e F 13e F 14eCompany Blmg tick Mkt Cap

(Rs bn)Rating P/E (x)Price Dividend YieldMkt Cap/Sales (x)EV/EBIDTA (x)

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

Pharma universe: financial summary

F 12e F 13e F 14e F 12e F 13e F 14e F 12e F 13e F 14e Sales EPS F 12e F 13e F 14e F 12e F 13e F 14e

RoE (%) RoCE (%)Company 2-yrs CAGR (F 12-14e)Revenues (Rs Mn) EPS (Rs)PAT (Rs Mn)


Sun Pharma 80,057 94,716 102,420 29,855 28,715 28,621 25.0 25.5 25.2 13.1 -2.1 22.4 19.2 16.6 22.4 21.3 18.2Ranbaxy 101,614 115,504 107,705 11,742 15,792 11,329 27.9 37.5 26.9 3.0 -1.8 37.9 30.9 18.2 16.0 19.6 12.3Dr Reddys 96,737 112,190 128,530 14,559 15,906 17,729 86.0 94.0 104.7 15.3 10.4 25.3 23.4 22.2 20.3 19.8 20.0Divi's Labs 18,893 24,190 29,745 5,053 6,666 8,367 38.1 50.2 63.0 25.5 28.7 23.7 26.2 27.3 28.0 31.5 33.1Lupin 70,829 85,133 98,181 9,273 13,016 14,607 20.8 29.2 32.7 17.7 25.5 22.7 25.7 23.7 22.0 24.6 23.4Biocon 20,865 23,880 27,606 3,236 3,361 3,852 16.2 16.8 19.3 15.0 9.1 14.3 13.5 14.0 13.3 13.2 14.1Ajanta 5,983 7,245 8,766 752 720 888 64.2 61.6 75.9 21.1 8.7 27.7 22.0 22.4 19.9 16.6 17.4Cadila HC 51,769 63,273 73,394 7,990 8,807 10,352 39.0 43.0 50.6 19.1 13.8 30.0 26.9 25.9 30.0 26.9 25.9Jubilant Life 42,784 52,012 63,513 3,945 4,574 6,344 24.8 28.7 39.8 21.8 26.8 16.4 16.7 19.6 10.2 12.1 14.9Dishman 11,221 12,807 15,210 568 894 1,245 7.0 11.1 15.4 16.4 48.0 6.2 9.0 11.3 8.5 9.8 11.5Ipca 22,992 27,077 31,693 3,329 3,539 4,087 26.4 28.1 32.4 17.4 10.8 26.4 22.3 20.8 20.3 19.6 19.4Pharma universe 17.6 22.1 23.0 21.4 20.2 19.2 19.5 19.1




June 07, 2012

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 marginsof 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/PATgrowth 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 management’s encouraging F13 growth forecast of ~22% intopline. Over the long term (3-5 Yr), we believe the underlying fundamentals are favourable. We are marginally tweaking out EPS estimate for F13/14e toRs62/76 (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-up in place, AJP expects to commence the US sales from 1QF13 (May end). WeGood news upside in the US market to start from 1QF13: With distribution tie up in place, AJP expects to commence the US sales from 1QF13 (May end). Wemaintain 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 filingfor 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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June 07, 2012

Biocon: Earnings beat estimate on low taxes, but gloomy outlook triggers downgrade (Rs270, REDUCE) F12/4Q highlights:

Biocon’s 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 of11% (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). Ashighlighted in 3Q review for possible weak outlook on global bio-pharma/moderating growth in Statin business, we downgrade the stock to Reduce with TP ofRs270 (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).

Key management outlook:y ga) 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) Pfizerdeal 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 (+15% YoY SSLe Rs14 6bn) while recurring PAT stood in line In our view the US business4QF12 reported Sales were below estimates at Rs13.4bn (+15% YoY, SSLe Rs14.6bn) while recurring PAT stood in-line. In our view, the US businessaccounting for 26% continues to limp (17% YoY ex-Nesher) with no substantial ANDA approvals. Further net sales growth of 15% (5% ex-inorganic acq.) isweak. 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 worriesaround; a) below mid teen profitability in the recently acquired companies and longer gestation in reaping integration benefits and b) increasing taxaround; a) below mid-teen profitability in the recently acquired companies and longer gestation in reaping integration benefits , and b) increasing taxburden/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 increasingfinancial 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 t tl k


Key management outlook: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 towardsFormulation blocks and biologics) and f) D/E targeted ~0.5x by F14.


June 07, 2012

Divi’s Laboratories (Divi’s): DSN SEZ pulls an early bird; 4Q bulldozes estimates Upgrade to BUY (Rs1008, BUY)F12/4Q highlights:

Divi’s 4QF12 upbeat largely driven by net sales; grew 50% YoY to Rs7.2bn, exceptionally higher than estimates (SSLe: Rs4.9bn / Consensus: Rs4.1bn). TheEBITDA margins were 40% (flat YoY but expanded 417bps QoQ), led by DSN SEZ higher utilization and high margin product mix. 4Q positive aberrationoccurred earlier than expected primarily beating management’s 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 productmix, 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% Y Y) W d t k t BUY i d TP t R 1008 (16 ll t F14)(26% YoY). We upgrade stock to BUY; revised TP to Rs1008 (16x rollover 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 atDSN (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) d) Tax rate 20% (from 23% given in 3Q call) e) Nutraceutical sales estimated to reach Rs1 5bn (F12: Rs810mn) f) DSN SEZ facility>13% (7% in F12), d) Tax rate ~20% (from ~23% given in 3Q call), e) Nutraceutical sales estimated to reach Rs1.5bn (F12: Rs810mn), f) DSN SEZ facilitystands 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 (SSLe: Rs3 0bn Cons: Rs3 2bn) Better than expected EBITDA margins of 25 2% (SSLe: 19 8% Cons: 19 6%)Dishman beats 4Q estimate; Sales at Rs3.5bn (SSLe: Rs3.0bn, Cons: Rs3.2bn), Better-than expected EBITDA margins of 25.2% (SSLe: 19.8%, Cons: 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. Management’s 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)) We tweak down F13 EPS by ~7% to Rs11 1 to factor conservative sales (13-15%) and high tax/pbt (23-24%) guidance(Disinfectants), Unit 13 (V-D3)). We tweak down F13 EPS by ~7% to Rs11.1 to factor conservative sales (13-15%) and high tax/pbt (23-24%) 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-termconsensus 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:


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 atUS$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 overthe next 2 years.


June 07, 2012

Dr. Reddy’s (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 grewrobust 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

ifi b li th i t f f i h l h i US B i i l ti dj t S l f t f F13 t US$2 5b fspecifics, we believe there exists a scope for few niche launches in US. Being excessively conservative we adjust our Sales forecast for F13 to US$2.5bn fromUS$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:) M i i d i id f US$2 2 b f F13 i h 30% h d b li F13 b i i b) DF h ba) Management maintained its revenue guidance of US$2.5-2.7bn for F13 with ~30% growth and believes F13 to be an interesting year, b) DF growth to be 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 ’ 4Q lt b dl i li t l /EBITDA/PBT t R 5 5b /1 0b /900 (SSL R 5 7b /1 0b /886 ) H l th t d T /PBT fIpca’s 4Q results are broadly in line; net sales/EBITDA/PBT at Rs5.5bn /1.0bn/900mn (SSLe: Rs5.7bn/1.0bn/886mn). However, lower-than-expected Tax/PBT of21% (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 genericsand 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 Further owing to better F13 outlook; a)We rollover our TP to F14 and our revised target price is Rs421 (13x F14 EPS) and retain our BUY 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 EPSis 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%; DF growth 18 20% APIs exports +15% b) OPM expansion in 30 50bps range c) Tender business to be ~Rs3 6bn d) Capex to


a) Revenue growth of 17-20%; DF growth 18-20%, APIs exports +15%, b) OPM expansion in 30-50bps range, c) Tender business to be ~Rs3.6bn, d) Capex tobe ~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 inF11) 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)


June 07, 2012

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 Genericsand new API launches. Other highlights; EBITDA margins stood at 17.6% (16% in 4QF11), the recurring PAT was lower than SSLe at Rs638mn impacted byhigh 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.In our view, management’s F13 Sales outlook looks conservative to factor in a) ramp-up in new Niacinamide capacity at SEZ Gujarat, 2) the commissioning of, g ) p p p y j , ) gadditional 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 nextfew quarters and high financial leverage (1.6x).

Key management outlook:a) F13 Sales growth of 20-22%, b) EBITDA margins to improve in the next few years, led by utilisation pick up in products business and high margin product mix) g , ) g p y , y p p p g g pin Service business – on sustainable basis, expects ~23-24% (Product) and ~15-18% (Services), c) Capex planned at Rs3.5bn (Rs2.5bn towardsSymtet+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:

Lupin’s 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 I’rom). Exceptionallyhigh 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 ofRs1.6bn (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-I’rom 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 bemainatained ~10% of overall Sales in F15, d) The US generics business to catch up with the launch of several limited competition products: Combivir (May’12),


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. Thebenefits of which will be harvested over the upcoming quarters.


June 07, 2012

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 Dec’12” Reference report May 28,20121QC12 highlights:

RBXY 1QC12 reported exceptional numbers beating all estimates. Net sales at Rs37.8bn (+74% YoY), dominated by better-than-expected US generics (Lipitorexclusivity +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:We have rolled forward our TP to Rs570 from Rs507 (based on C13e) and marginally raised our target multiple on base business to 20x (from 19x earlier) to( ) g y g p ( )factor strengthening US business+ conservative C12 guidance. Retain Buy. EPS upgrade of ~11% for C12e to Rs36.7 (earlier Rs33) is on account of elevatedsales 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 potentialIsotretinoin launch leaves room for surprises on the upside. Base business valuation to unlock with clarity emerging towards resumption US supplies.

Key management outlook:

Sun Pharmaceutical (SUNP): Several onetime drove 4Q performance; Revised to ADD on limited upside (Rs641, ADD)F12/4Q hi hli ht

y ga) 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 marginsled 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.

F12/4Q highlights:Sun Pharma’s (Sun) 4Q numbers continued to remain strong and ahead of street estimates led by strong Taro performance + several unanticipated one-off salesin DF (Rs1.8bn)+Lipidox (est.~US$35mn). Net sales were Rs23.3bn, (+59.2% YoY). Operating margins expanded ~1,073bps to 41.1%, due to high margins inTaro (led by price rise), Lipidox, and favourable rupee/US$. Reported PAT after minority interest was Rs8.2bn (+85% YoY). Excluding Taro’s high margin andtemporary US supplies of Lipidox, base business grew at ~27% with 37% in OPM.

Key catalyst on watch: In our view with moderating growth in US (~14% till F14) and miniscule presence in ROW markets (7% of F12 Sales); in-organicKey catalyst on watch: In our view, with moderating growth in US ( 14% till F14) and miniscule presence in ROW markets (7% of F12 Sales); in-organicacquisition 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% Apr’11 till date), moderate to low F12-14e core earnings (6%),and limited upside potential with stock beingreasonably valued at upper band of 23x F14e, we downgrade stock to ADD rating; TP to Rs641/shF13 guidance of 18-20%; but high tax may drain earnings:


F13 guidance of 18 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 Apr’12, US Supreme Courtruled pending litigation in favor of Caraco, d) Expects NPM pressure on downward side, and e) Tax rate to be below 20%.


June 07, 2012

Company financials



June 07, 2012

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

Performance & Market Ratio Cash flow statementF 09 F 10 F 11 F 12e F 13e F 14e Y/E March (Rs mn) F 09 F 10 F 11 F 12e F 13e F 14e

Per Share Data (Rs) Profit After tax 214 283 465 665 720 888 ( )EPS 18.3 25.3 40.0 64.2 61.6 75.9 Add: Dep & Amor. 129 195 232 307 408 551 CEPS 29.5 42.2 60.4 90.5 96.4 123.0 Deferred Taxes 37 51 51 - - - BV 130.0 150.1 183.6 231.6 279.6 339.1 Net Extra-ordinary income - 18 6 87 - - DPS 2.9 4.1 5.8 8.8 13.6 16.3 W. C Inflow / (Outflow) (265) 287 236 (265) (542) (47) Valuation Ratios Operating 116 834 990 793 586 1,392 Basic PE (x) 2.8 7.2 5.0 7.1 10.3 8.3 Purchase of Fixed Assets (805) (420) (388) (600) (1,500) (1,500) P/BV (x) 0.4 1.2 1.1 2.0 2.3 1.9 Purchase of Investments (3) - - - - - EV/EBITDA (x) 4 6 5 4 4 6 5 7 6 4 5 2 Acquisition of Goodw ill - - - - - -EV/EBITDA (x) 4.6 5.4 4.6 5.7 6.4 5.2 Acquisition of Goodw ill - - - - - - EV/Sales (x) 0.9 1.0 0.9 1.2 1.3 1.0 Investing (808) (420) (388) (600) (1,500) (1,500) Dividend Yield (%) 5.7 2.2 2.9 1.9 2.2 2.6 Issue of Share Capital - - - - - - Profitability Ratios (%) Proceeds from fresh borrow ings 751 (369) (451) 318 920 78 RoCE 11.9 13.8 17.3 19.9 16.6 17.4 Buyback of Shares - - - - - - RoNW 14.1 16.8 21.8 27.7 22.0 22.4 Dividend paid including tax (34) (48) (68) (103) (159) (191) Turnover Ratios Others (0) (0) (5) 62 0 0 Avg Collection Period (days) 108 82 60 77 80 75 Financing 717 (417) (523) 276 761 (113) A P t P i d (d ) 106 135 138 149 130 130 N t E t di i (18) (6) (87)


Avg Payment Period (days) 106 135 138 149 130 130 Net Extra-ordinary income - (18) (6) (87) - - Solvency Ratios (%) Opening Cash & Bank bal. 49 73 52 125 508 355 Debt Equity Ratio 1.6 1.2 0.7 0.7 0.9 0.7 Closing Cash & Bank bal. 73 52 125 508 355 135 Interest Coverage Ratio 2.1 2.8 4.2 6.8 4.1 5.3 Inc/(Dec) in Cash & Bank bal. 24 (21) 73 383 (153) (220) Source: Company, SSLe


June 07, 2012

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


Per Share Data (Rs) Profit After tax 931 2,932 3,675 3,386 3,361 3,852 ( ) , , , , ,EPS 10.6 15.3 18.0 16.2 16.8 19.3 Add: Dep & Amor. 1,102 1,249 1,466 1,744 2,048 2,308 CEPS 16.1 22.4 25.8 24.9 27.0 30.8 Deferred Taxes 1 42 (12) - - - BV 76.8 89.6 103.5 113.5 124.8 137.8 Net Extra-ordinary income 1,584 59 (215) (150) - - DPS 3.5 3.9 5.0 5.5 5.5 6.3 W. C Inflow / (Outflow) (1,185) (291) 4,102 3,211 (1,359) (1,381) Valuation Ratios Operating 2,433 3,991 9,017 8,191 4,050 4,780 Basic PE (x) 13.6 18.5 19.1 14.7 13.0 11.3 Purchase of Fixed Assets (2,888) (1,452) (2,622) (5,041) (4,041) (4,041) P/BV (x) 1.9 3.2 3.3 2.1 1.7 1.6 Purchase of Investments 1,071 (630) (299) (316) - - EV/EBITDA (x) 9 1 11 8 12 0 9 1 7 5 6 5 Acquisition of Goodw ill (1 355) (96) (616) - - -EV/EBITDA (x) 9.1 11.8 12.0 9.1 7.5 6.5 Acquisition of Goodw ill (1,355) (96) (616) - - - EV/Sales (x) 1.9 2.4 2.5 2.3 1.8 1.6 Investing (3,171) (2,177) (3,537) (5,357) (4,041) (4,041) Dividend Yield (%) 2.4 1.4 1.4 2.3 2.5 2.9 Issue of Share Capital 500 - - - - - Profitability Ratios (%) Proceeds from fresh borrow ings 2,689 (103) (1,794) (770) - - RoCE 10.7 14.3 16.6 13.3 13.2 14.1 Buyback of Shares - - - - - - RoNW 13.8 17.1 17.4 14.3 13.5 14.0 Dividend paid including tax (702) (774) (991) (1,101) (1,093) (1,252) Turnover Ratios Others (142) 403 104 (295) (0) (0) Avg Collection Period (days) 83 69 68 84 84 84 Financing 2,344 (474) (2,680) (2,166) (1,093) (1,252) A P t P i d (d ) 81 58 66 118 100 100 N t E t di i (1 584) (59) 215 150


Avg Payment Period (days) 81 58 66 118 100 100 Net Extra-ordinary income (1,584) (59) 215 150 - - Solvency Ratios (%) Opening Cash & Bank bal. 96 118 1,399 4,414 5,232 4,149 Debt Equity Ratio 0.3 0.3 0.2 0.1 0.1 0.1 Closing Cash & Bank bal. 118 1,399 4,414 5,232 4,149 3,635 Interest Coverage Ratio 12.7 20.0 15.9 27.9 23.9 28.0 Inc/(Dec) in Cash & Bank bal. 22 1,281 3,015 818 (1,083) (513) Source: Company, SSLe


June 07, 2012

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


Per Share Data (Rs) Profit After tax 3 032 5 051 7 110 6 526 8 521 10 066Per Share Data (Rs) Profit After tax 3,032 5,051 7,110 6,526 8,521 10,066 EPS 17.8 27.1 37.1 39.0 43.0 50.6 Add: Dep & Amor. 1,054 1,162 1,260 1,579 1,876 2,125 CEPS 23.3 33.6 43.3 46.7 52.2 60.9 Deferred Taxes 84 (183) (14) - - - BV 59.3 81.0 109.3 130.1 160.0 195.4 Net Extra-ordinary income 644 380 334 1,178 - - DPS 3.9 6.0 7.5 9.0 11.7 13.8 W. C Inflow / (Outflow) (932) (403) (2,107) (1,004) (1,582) (1,539) Valuation Ratios Operating 3,881 6,007 6,583 8,278 8,815 10,651 Basic PE (x) 10.2 20.4 21.3 19.5 16.8 14.3 Purchase of Fixed Assets (4,240) (3,301) (4,570) (12,261) (5,500) (5,500) P/BV (x) 3.1 6.8 7.2 5.8 4.5 3.7 Purchase of Investments 5 42 - (35) - - EV/EBITDA (x) 7 7 15 6 17 3 15 8 12 1 10 4 Acquisition of Goodw illEV/EBITDA (x) 7.7 15.6 17.3 15.8 12.1 10.4 Acquisition of Goodw ill - - - - - - EV/Sales (x) 1.6 3.3 3.8 3.2 2.5 2.1 Investing (4,235) (3,259) (4,570) (12,296) (5,500) (5,500) Dividend Yield (%) 2.1 1.1 0.9 1.2 1.6 1.9 Issue of Share Capital 54 - 341 - - - Profitability Ratios (%) Proceeds from fresh borrow ings 4,296 (1,768) 68 9,121 (500) (500) RoCE 19.1 22.4 24.8 18.4 20.5 21.5 Buyback of Shares - - - - - - RoNW 30.0 33.5 33.9 30.0 26.9 25.9 Dividend paid including tax (796) (1,237) (1,529) (1,834) (2,395) (2,829) Turnover Ratios Others (966) 627 (114) (377) (0) 0 Avg Collection Period (days) 57 47 62 62 62 62 Financing 2,588 (2,378) (1,234) 6,910 (2,895) (3,329)


Avg Payment Period (days) 170 160 172 171 171 171 Net Extra-ordinary income (644) (380) (334) (1,178) - - Solvency Ratios (%) Opening Cash & Bank bal. 926 2,517 2,507 2,952 4,666 5,086 Debt Equity Ratio 1.0 0.7 0.5 0.8 0.6 0.5 Closing Cash & Bank bal. 2,517 2,507 2,952 4,666 5,086 6,908 Interest Coverage Ratio 5.1 7.9 11.0 8.2 10.5 12.7 Inc/(Dec) in Cash & Bank bal. 1,591 (10) 445 1,714 420 1,822 Source: Company, SSLe


June 07, 2012

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


Per Share Data (Rs) Profit After tax 4 166 3 403 4 293 5 333 6 666 8 367Per Share Data (Rs) Profit After tax 4,166 3,403 4,293 5,333 6,666 8,367 EPS 33.3 25.2 32.3 38.1 50.2 63.0 Add: Dep & Amor. 478 502 527 621 705 769 CEPS 36.9 29.1 36.4 42.7 55.5 68.8 Deferred Taxes 50 42 26 - - - BV 93.5 114.3 135.4 160.6 191.9 231.3 Net Extra-ordinary income 367 (83) - (280) - - DPS 3.4 7.0 11.6 15.1 18.9 23.7 W. C Inflow / (Outflow) (1,855) 146 (813) (2,087) (2,075) (2,066) Valuation Ratios Operating 3,205 4,010 4,033 3,587 5,296 7,070 Basic PE (x) 14.3 26.9 20.9 20.1 18.6 14.8 Purchase of Fixed Assets (970) (544) (1,583) (2,632) (1,800) (1,800) P/BV (x) 5.1 5.9 5.0 4.8 4.9 4.0 Purchase of Investments (1,162) (2,695) (844) 486 (1,200) (2,100) EV/EBITDA (x) 11 8 20 7 17 1 14 0 13 1 10 5 Acquisition of Goodw illEV/EBITDA (x) 11.8 20.7 17.1 14.0 13.1 10.5 Acquisition of Goodw ill - - - - - - EV/Sales (x) 5.2 9.0 6.5 5.1 4.9 4.0 Investing (2,133) (3,239) (2,427) (2,146) (3,000) (3,900) Dividend Yield (%) 0.7 1.0 1.7 2.0 2.0 2.5 Issue of Share Capital 0 135 1 0 - - Profitability Ratios (%) Proceeds from fresh borrow ings (334) (198) (98) 297 - - RoCE 35.5 22.7 23.8 28.0 31.5 33.1 Buyback of Shares - - - - - - RoNW 35.6 22.0 23.9 23.7 26.2 27.3 Dividend paid including tax (455) (925) (1,541) (2,003) (2,504) (3,143) Turnover Ratios Others 89 151 44 118 (0) (0) Avg Collection Period (days) 82 86 102 96 95 95 Financing (700) (837) (1,594) (1,588) (2,504) (3,143)


Avg Payment Period (days) 103 140 122 112 112 112 Net Extra-ordinary income (367) 83 - 280 - - Solvency Ratios (%) Opening Cash & Bank bal. 142 148 165 177 309 101 Debt Equity Ratio 0.0 0.0 0.0 0.0 0.0 0.0 Closing Cash & Bank bal. 148 165 177 309 101 128 Interest Coverage Ratio 65.6 130.3 201.8 168.0 224.5 281.8 Inc/(Dec) in Cash & Bank bal. 6 17 12 133 (208) 27 Source: Company, SSLe


June 07, 2012

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


Per Share Data (Rs) Profit After tax 1 462 1 173 800 568 894 1 245Per Share Data (Rs) Profit After tax 1,462 1,173 800 568 894 1,245 EPS 19.4 12.4 6.5 7.0 11.1 15.4 Add: Dep & Amor. 835 528 798 765 807 834 CEPS 27.2 19.7 15.0 16.5 21.1 25.8 Deferred Taxes 66 115 (2) - - - BV 88.5 97.8 108.9 112.8 122.9 136.9 Net Extra-ordinary income 145 (256) (363) (0) - - DPS 1.4 1.4 1.4 0.8 1.0 1.4 W. C Inflow / (Outflow) (644) 639 346 236 (500) (1,018) Valuation Ratios Operating 1,864 2,199 1,578 1,568 1,201 1,061 Basic PE (x) 5.2 17.2 15.7 6.5 4.9 3.5 Purchase of Fixed Assets (2,593) (2,530) (3,030) (1,500) (800) (800) P/BV (x) 1.1 2.2 0.9 0.4 0.4 0.4 Purchase of Investments (0) (0) 0 - - - EV/EBITDA (x) 5 4 12 0 9 6 4 7 4 4 3 7 Acquisition of Goodw ill 79 6 0EV/EBITDA (x) 5.4 12.0 9.6 4.7 4.4 3.7 Acquisition of Goodw ill 79 6 0 - - - EV/Sales (x) 1.4 2.7 1.6 1.0 0.9 0.8 Investing (2,514) (2,524) (3,030) (1,500) (800) (800) Dividend Yield (%) 1.4 0.7 1.4 1.8 1.9 2.7 Issue of Share Capital 2 - - - - - Profitability Ratios (%) Proceeds from fresh borrow ings 937 503 949 211 (336) - RoCE 14.6 9.1 5.3 8.5 9.8 11.5 Buyback of Shares - - - - - - RoNW 22.0 12.6 6.0 6.2 9.0 11.3 Dividend paid including tax (113) (113) (113) (66) (83) (116) Turnover Ratios Others 50 (317) 223 (188) 0 (0) Avg Collection Period (days) 51 45 64 60 60 60 Financing 875 73 1,059 (42) (420) (116)


Avg Payment Period (days) 45 83 145 130 115 100 Net Extra-ordinary income (145) 256 363 0 - - Solvency Ratios (%) Opening Cash & Bank bal. 371 451 455 425 451 433 Debt Equity Ratio 1.0 1.0 1.0 1.0 0.9 0.8 Closing Cash & Bank bal. 451 455 425 451 433 578 Interest Coverage Ratio 4.6 3.7 2.2 2.1 2.6 3.3 Inc/(Dec) in Cash & Bank bal. 80 3 (29) 26 (18) 145 Source: Company, SSLe


June 07, 2012

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


Per Share Data (Rs) Profit After tax (5 168) 1 068 11 040 14 262 14 866 16 689Per Share Data (Rs) Profit After tax (5,168) 1,068 11,040 14,262 14,866 16,689 EPS 45.9 56.6 63.3 86.0 94.0 104.7 Add: Dep & Amor. 2,168 2,199 2,961 3,628 4,067 4,506 CEPS 68.4 81.1 87.8 116.8 127.4 140.7 Deferred Taxes - - - - - - BV 248.4 253.5 271.7 339.4 401.1 471.8 Net Extra-ordinary income 634 (72) 57 (689) - - DPS 4.4 7.3 11.3 13.8 14.3 16.1 W. C Inflow / (Outflow) (6,585) 3,407 (4,390) (15,955) (7,706) (6,601) Valuation Ratios Operating (8,951) 6,602 9,668 1,246 11,226 14,594 Basic PE (x) 10.6 22.6 25.9 20.5 17.2 15.4 Purchase of Fixed Assets (6,285) (3,776) (10,144) (7,232) (7,232) (7,232) P/BV (x) 2.0 5.0 6.0 5.2 4.0 3.4 Purchase of Investments 4,201 (3,118) - - - - EV/EBITDA (x) 7 2 15 5 17 9 12 7 11 0 9 9 Acquisition of Goodw ill 11 423 8 206 (1 273) 1 718EV/EBITDA (x) 7.2 15.5 17.9 12.7 11.0 9.9 Acquisition of Goodw ill 11,423 8,206 (1,273) 1,718 - - EV/Sales (x) 1.4 3.1 3.8 3.1 2.5 2.2 Investing 9,339 1,312 (11,417) (5,514) (7,232) (7,232) Dividend Yield (%) 0.9 0.6 0.7 0.8 0.9 1.0 Issue of Share Capital 1 6 (2) 2 - - Profitability Ratios (%) Proceeds from fresh borrow ings (59) (4,827) 8,916 8,639 (1,786) (1,608) RoCE 14.5 17.0 16.3 20.3 19.8 20.0 Buyback of Shares - - - - - - RoNW 18.5 22.3 23.3 25.3 23.4 22.2 Dividend paid including tax (738) (1,233) (1,907) (2,327) (2,426) (2,723) Turnover Ratios Others (761) (944) (6,056) (483) (2,000) (2,000) Avg Collection Period (days) 77 62 86 96 96 96 Financing (1,556) (6,998) 951 5,830 (6,212) (6,331)


Avg Payment Period (days) 66 100 90 89 80 80 Net Extra-ordinary income (634) 72 (57) 689 - - Solvency Ratios (%) Opening Cash & Bank bal. 7,398 5,596 6,584 5,729 7,979 5,761 Debt Equity Ratio 0.5 0.3 0.5 0.6 0.4 0.4 Closing Cash & Bank bal. 5,596 6,584 5,729 7,979 5,761 6,791 Interest Coverage Ratio 17.1 27.0 61.6 26.9 30.2 35.8 Inc/(Dec) in Cash & Bank bal. (1,802) 988 (855) 2,250 (2,218) 1,031 Source: Company, SSLe


June 07, 2012

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


Per Share Data (Rs) Profit After tax 1 008 2 054 2 554 2 801 3 539 4 087Per Share Data (Rs) Profit After tax 1,008 2,054 2,554 2,801 3,539 4,087 EPS 11.8 15.8 18.6 26.4 28.1 32.4 Add: Dep & Amor. 376 411 444 653 841 976 CEPS 15.0 19.6 23.1 31.7 34.8 40.3 Deferred Taxes 78 142 14 - - - BV 50.2 68.8 83.8 100.4 126.4 156.4 Net Extra-ordinary income 762 (63) (433) 528 - - DPS 2.6 3.3 3.7 3.7 2.2 2.5 W. C Inflow / (Outflow) (737) (1,664) (1,183) (1,723) (1,113) (1,925) Valuation Ratios - - - - - - Operating 1,487 880 1,396 2,259 3,267 3,137 Basic PE (x) 5.6 17.0 16.2 12.7 11.9 10.3 Purchase of Fixed Assets (869) (1,261) (1,793) (2,911) (3,000) (2,500) P/BV (x) 1.3 3.9 3.6 3.3 2.7 2.1 Purchase of Investments (316) 86 (164) 59 - - EV/EBITDA (x) 4 7 11 7 11 5 9 5 8 3 7 2 Acquisition of Goodw illEV/EBITDA (x) 4.7 11.7 11.5 9.5 8.3 7.2 Acquisition of Goodw ill - - - - - - EV/Sales (x) 1.0 2.4 2.2 2.0 1.7 1.5 Investing (1,185) (1,174) (1,957) (2,852) (3,000) (2,500) Dividend Yield (%) 3.9 1.2 1.2 1.1 0.7 0.8 Issue of Share Capital (1) 1 1 1 - - Profitability Ratios (%) - - - - - - Proceeds from fresh borrow ings 1,069 (54) 762 1,723 200 200 RoCE 19.2 19.7 18.5 20.3 19.6 19.4 Buyback of Shares - - - - - - RoNW 23.6 23.1 22.3 26.4 22.3 20.8 Dividend paid including tax (147) (184) (217) (217) (274) (317) Turnover Ratios - - - - - - Others (443) 464 (442) (377) (0) 0 Avg Collection Period (days) 91 98 92 91 78 80 Financing 479 226 104 1,129 (74) (117)


Avg Payment Period (days) 45 40 33 36 41 41 Net Extra-ordinary income (762) 63 433 (528) - - Solvency Ratios (%) - - - - - - Opening Cash & Bank bal. 94 113 108 84 93 285 Debt Equity Ratio 0.7 0.5 0.5 0.6 0.5 0.4 Closing Cash & Bank bal. 113 108 84 93 285 806 Interest Coverage Ratio 7.0 10.5 9.9 10.6 11.6 13.1 Inc/(Dec) in Cash & Bank bal. 19 (5) (23) 8 193 521 Source: Company, SSLe


June 07, 2012

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


Per Share Data (Rs) Profit After tax 2 832 4 215 2 297 146 4 216 5 932Per Share Data (Rs) Profit After tax 2,832 4,215 2,297 146 4,216 5,932 EPS 23.6 22.2 15.2 24.8 28.7 39.8 Add: Dep & Amor. 3,198 1,231 1,458 2,207 2,383 2,494 CEPS 33.9 30.0 26.5 38.6 43.7 55.5 Deferred Taxes (127) 761 (120) - - - BV 81.6 139.8 139.0 150.6 172.4 203.2 Net Extra-ordinary income 1,516 (972) 210 3,488 - - DPS 1.6 2.3 2.3 3.5 4.6 6.5 W. C Inflow / (Outflow) 1,581 (1,162) (549) (4,327) (2,490) (2,107) Valuation Ratios Operating 9,000 4,073 3,298 1,513 4,108 6,320 Basic PE (x) 4.0 15.2 11.5 8.1 6.1 4.4 Purchase of Fixed Assets (21,708) (1,995) (4,901) (6,974) (3,600) (2,100) P/BV (x) 1.2 2.4 1.3 1.3 1.0 0.9 Purchase of Investments (2,257) 149 2,237 136 - - EV/EBITDA (x) 6 9 11 8 9 8 6 4 5 0 4 1 Acquisition of Goodw illEV/EBITDA (x) 6.9 11.8 9.8 6.4 5.0 4.1 Acquisition of Goodw ill - - - - - - EV/Sales (x) 1.3 2.1 1.5 1.3 1.0 0.8 Investing (23,965) (1,846) (2,665) (6,839) (3,600) (2,100) Dividend Yield (%) 1.7 0.7 1.3 1.7 2.6 3.7 Issue of Share Capital 1 11 0 - - - Profitability Ratios (%) Proceeds from fresh borrow ings 17,697 (7,054) 7,517 (1,095) (2,000) (2,000) RoCE 9.8 9.6 5.5 10.2 12.1 14.9 Buyback of Shares - - - - - - RoNW 28.9 15.9 10.9 16.4 16.7 19.6 Dividend paid including tax (261) (370) (370) (555) (735) (1,034) Turnover Ratios Others (2,377) 5,434 (2,150) 2,679 (0) (0) Avg Collection Period (days) 52 50 55 56 56 56 Financing 15,060 (1,979) 4,997 1,029 (2,735) (3,034)


Avg Payment Period (days) 104 89 95 141 130 130 Net Extra-ordinary income (1,516) 972 (210) (3,488) - - Solvency Ratios (%) Opening Cash & Bank bal. 5,238 3,817 5,037 10,457 2,672 445 Debt Equity Ratio 3.0 1.4 1.8 1.6 1.3 1.1 Closing Cash & Bank bal. 3,817 5,037 10,457 2,672 445 1,631 Interest Coverage Ratio 4.9 3.6 3.3 3.1 4.0 5.5 Inc/(Dec) in Cash & Bank bal. (1,421) 1,220 5,420 (7,785) (2,227) 1,186 Source: Company, SSLe


June 07, 2012

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


Per Share Data (Rs) Profit After tax 5 015 6 816 8 626 8 675 12 818 14 409Per Share Data (Rs) Profit After tax 5,015 6,816 8,626 8,675 12,818 14,409 EPS 11.7 15.6 19.7 20.8 29.2 32.7 Add: Dep & Amor. 1,491 884 2,003 2,275 2,373 2,653 CEPS 13.6 18.4 23.5 25.9 34.5 38.7 Deferred Taxes 106 250 (27) - - - BV 32.3 58.1 74.7 91.6 113.6 138.3 Net Extra-ordinary income 178 (57) - 400 - - DPS 2.8 3.3 3.7 4.1 6.7 7.5 W. C Inflow / (Outflow) 860 (4,477) (2,402) (4,440) (2,914) (2,473) Valuation Ratios Operating 7,649 3,417 8,200 6,910 12,277 14,589 Basic PE (x) 11.8 20.8 21.1 25.5 18.9 16.9 Purchase of Fixed Assets (4,617) (6,075) (5,185) (6,542) (5,032) (5,000) P/BV (x) 4.3 5.6 5.6 5.8 4.9 4.0 Purchase of Investments (157) (49) 233 (249) - - EV/EBITDA (x) 10 0 16 6 16 4 16 5 13 6 12 2 Acquisition of Goodw ill (1 301) (23) (58) (1 785)EV/EBITDA (x) 10.0 16.6 16.4 16.5 13.6 12.2 Acquisition of Goodw ill (1,301) (23) (58) (1,785) - - EV/Sales (x) 1.9 3.2 3.3 3.5 3.0 2.6 Investing (6,076) (6,147) (5,011) (8,576) (5,032) (5,000) Dividend Yield (%) 2.0 1.0 0.9 0.8 1.2 1.4 Issue of Share Capital 7 61 3 1 - - Profitability Ratios (%) Proceeds from fresh borrow ings 204 (834) 226 3,185 - - RoCE 23.0 20.7 22.0 22.0 24.6 23.4 Buyback of Shares - - - - - - RoNW 36.1 26.8 26.4 22.7 25.7 23.7 Dividend paid including tax (1,235) (1,483) (1,658) (1,823) (2,990) (3,361) Turnover Ratios Others (2,336) 6,167 426 704 (0) 0 Avg Collection Period (days) 95 99 86 79 89 89 Financing (3,359) 3,911 (1,003) 2,066 (2,990) (3,361)


Avg Payment Period (days) 112 132 109 118 133 133 Net Extra-ordinary income (178) 57 - (400) - - Solvency Ratios (%) Opening Cash & Bank bal. 2,742 778 2,015 4,201 4,201 8,456 Debt Equity Ratio 0.9 0.4 0.3 0.4 0.3 0.2 Closing Cash & Bank bal. 778 2,015 4,201 4,201 8,456 14,683 Interest Coverage Ratio 12.8 20.9 31.4 35.4 44.4 49.3 Inc/(Dec) in Cash & Bank bal. (1,964) 1,238 2,186 (0) 4,254 6,228 Source: Company, SSLe


June 07, 2012

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

Performance & Market Ratio Cash flow statementC 08 C 09 C 10 C 11 C 12e C 13e Y/E Dec (Rs mn) C 08 C 09 C 10 C 11 C 12e C 13e

Per Share Data (Rs) Profit After tax (9 512) 2 965 14 968 (28 997) 20 053 11 190Per Share Data (Rs) Profit After tax (9,512) 2,965 14,968 (28,997) 20,053 11,190 EPS 8.6 1.7 32.1 27.9 37.5 26.9 Add: Dep & Amor. 3,397 839 3,691 3,109 4,199 4,367 CEPS 15.4 8.0 45.2 37.3 47.5 37.3 Deferred Taxes (6,510) 5,888 - - - - BV 103.7 104.4 134.7 73.6 121.2 147.8 Net Extra-ordinary income 18,558 (3,424) (5,512) 40,954 (4,400) - DPS - - 2.3 - - - W. C Inflow / (Outflow) 23,792 (11,296) (6,333) 19,355 (7,594) (2,525) Valuation Ratios Operating 29,725 (5,028) 6,814 34,421 12,258 13,033 Basic PE (x) 29.1 307.0 18.6 14.5 13.2 18.4 Purchase of Fixed Assets (7,385) (2,367) (1,852) (5,040) (4,000) (4,000) P/BV (x) 2.4 5.0 4.4 5.5 4.1 3.3 Purchase of Investments (3,028) 24 423 4,003 - (1,018) EV/EBITDA (x) 20 5 33 2 13 8 10 9 9 6 12 8 Acquisition of Goodw illEV/EBITDA (x) 20.5 33.2 13.8 10.9 9.6 12.8 Acquisition of Goodw ill - - - - - - EV/Sales (x) 1.6 3.1 2.9 1.7 1.9 2.0 Investing (10,413) (2,343) (1,429) (1,037) (4,000) (5,018) Dividend Yield (%) - - 0.4 - - - Issue of Share Capital 236 0 3 5 - - Profitability Ratios (%) Proceeds from fresh borrow ings 1,433 (6,553) 7,053 1,559 (4,153) (3,738) RoCE 4.1 5.9 13.1 16.0 19.6 12.3 Buyback of Shares - - - - - - RoNW 8.3 1.6 23.8 37.9 30.9 18.2 Dividend paid including tax - - (982) - - - Turnover Ratios Others 17,155 (1,040) 3,257 4,043 0 0 Avg Collection Period (days) 66 88 65 108 85 85 Financing 18,824 (7,593) 9,331 5,607 (4,153) (3,738)


Avg Payment Period (days) 110 144 189 258 180 140 Net Extra-ordinary income (18,558) 3,424 5,512 (40,954) 4,400 - Solvency Ratios (%) Opening Cash & Bank bal. 4,379 23,956 12,416 32,644 30,681 39,186 Debt Equity Ratio 1.0 0.8 0.8 1.4 0.8 0.6 Closing Cash & Bank bal. 23,956 12,416 32,644 30,681 39,186 43,462 Interest Coverage Ratio 1.5 6.3 21.4 15.9 12.7 9.5 Inc/(Dec) in Cash & Bank bal. 19,577 (11,540) 20,228 (1,963) 8,504 4,277 Source: Company, SSLe


June 07, 2012

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


Per Share Data (Rs) Profit After tax 18 178 13 511 18 161 25 873 26 390 26 046Per Share Data (Rs) Profit After tax 18,178 13,511 18,161 25,873 26,390 26,046 EPS 17.6 13.0 17.5 25.0 25.5 25.2 Add: Dep & Amor. 1,244 1,162 12,274 2,911 3,247 3,546 CEPS 19.3 14.3 20.1 31.6 30.9 31.1 Deferred Taxes (481) (428) 433 - - - BV 69.9 77.5 99.8 128.7 144.6 166.4 Net Extra-ordinary income - (334) (376) 127 - - DPS 3.1 3.2 4.1 4.9 5.9 5.8 W. C Inflow / (Outflow) 1,815 (4,674) (532) (5,243) (4,006) (854) Valuation Ratios Operating 20,756 9,237 29,959 23,668 25,631 28,738 Basic PE (x) 12.7 27.4 25.2 22.8 22.7 23.0 Purchase of Fixed Assets (6,401) (1,742) (23,438) (7,713) (5,500) (5,500) P/BV (x) 3.2 4.6 4.4 4.4 4.0 3.5 Purchase of Investments (11,035) (12,069) 8,354 (4,148) - - EV/EBITDA (x) 10 6 26 6 21 5 17 1 16 1 16 2 Acquisition of Goodw ill (1 524) (807) (3 659) (2 498)EV/EBITDA (x) 10.6 26.6 21.5 17.1 16.1 16.2 Acquisition of Goodw ill (1,524) (807) (3,659) (2,498) - - EV/Sales (x) 4.6 8.4 7.4 6.9 5.9 5.5 Investing (18,959) (14,617) (18,743) (14,359) (5,500) (5,500) Dividend Yield (%) 1.4 0.9 0.9 0.9 1.0 1.0 Issue of Share Capital - - - - - - Profitability Ratios (%) Proceeds from fresh borrow ings 353 (77) 2,544 - - - RoCE 23.7 13.7 17.0 22.4 21.3 18.2 Buyback of Shares - - - - - - RoNW 25.9 16.5 18.2 22.4 19.2 16.6 Dividend paid including tax (3,332) (3,321) (4,213) (5,115) (6,134) (6,054) Turnover Ratios Others 5,484 (2,173) 5,940 7,669 (3,748) 2,575 Avg Collection Period (days) 75 107 75 88 88 80 Financing 2,505 (5,571) 4,271 2,554 (9,883) (3,479)


Avg Payment Period (days) 84 63 97 145 120 100 Net Extra-ordinary income - 334 376 (127) - - Solvency Ratios (%) Opening Cash & Bank bal. 12,389 16,690 6,073 21,936 33,672 43,920 Debt Equity Ratio 0.0 0.0 0.0 0.0 0.0 0.0 Closing Cash & Bank bal. 16,690 6,073 21,936 33,672 43,920 63,679 Interest Coverage Ratio - - - - - - Inc/(Dec) in Cash & Bank bal. 4,302 (10,618) 15,864 11,736 10,248 19,759 Source: Company, SSLe

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Key to investment Ratings

Guide to the expected return over the next 12 months. 1=BUY (expected to give absolute returns of 20 or more percentage points); 2=ACCUMULATE/ADD (expected to give absolute returns between 10 to 20 percentage points); 3=REDUCE (expected to give absolute returns between 0 to 10 percentage points); 4=SELL (expected to give absolute negative returns)

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