July 27, 2018
ICICI Securities Ltd | Retail Equity Research
Result Update
Biologics, Syngene maintain momentum…
Revenues grew 20% YoY to | 1124 crore (I-direct estimate: | 1214
crore) mainly due to 35.5% YoY growth in Biologics to | 250 crore (I-
direct estimate: | 239 crore) and 39.5% YoY growth in contract
research to | 406 crore (I-direct estimate: | 425 crore)
EBITDA margins increased 60 bps YoY to 21.2% (I-direct estimate:
20.7%) mainly due to lower R&D spend. EBITDA grew 23.8% YoY to
| 238 crore against I-direct estimates of | 251 crore
Net profit grew 47.4% YoY to | 119.8 crore (I-direct estimate: | 127.6
crore) mainly due to a strong operational performance and lower
interest and depreciation expenses
Well poised to capitalise on global biosimilars opportunity
Biologics segment (18% of FY18 in total revenues) includes biosimilars,
encompassing Rh-insulin, insulin analogs, monoclonal antibodies &
recombinant proteins. It is the first Indian pharmaceutical company to
receive biosimilar approval in the US. The company has invested heavily
in this space in the last two to three years, especially the Malaysian
facility. So far, the progress has been encouraging with Trastuzumab and
Pegfilgrastim approvals in the US, Glargine launch in Japan and approval
in EU and Australia besides launches in emerging markets. We expect
biologics to grow at 46.5% CAGR to | 1652 crore in FY18-20E.
Research services (Syngene) to maintain growth momentum
Biocon’s contract research organisation (CRO) arm Syngene contributes
33% of total revenues. The company caters to 316 clients including eight
out of global top 10 global players. This segment has consistently been
growing in double digits and has recently been the major growth driver
for the company as the small molecules segment is slowing down. We
expect revenues to grow at a CAGR of 20% to | 2051 crore in FY18-20E.
Small molecules under pressure; branded formulations growing decently
Small molecules (35% of FY18 total revenue) comprise APIs like statins,
immunosuppressants, specialty APIs & also include generic formulations
business is witnessing steep pricing pressure in the US. The company is
exploring fewer opportunities but with higher profitability in this segment
like moving into formulations & filing own ANDAs, 505 (b)(2) filing, etc. It
has already filed few ANDAs, which include complex generics & injectables.
We expect small molecules segment to grow at ~7% CAGR to | 1709 crore
in FY18-20E. Branded formulations (14% of FY18 total revenue) include
finished dosages business in India and UAE. It comprises Indian domestic
formulations. The company owns 80+ brands encompassing therapies
like diabetology, oncology, nephrology, cardiology, immunotherapy, etc.
Biosimilar deals, approvals, launches to sustain investors interest
As expected, the beginning of FY19 was on a strong footing mainly due
to continuous strong traction in its “growth segments” (Biologics and
Syngene). The management has sounded confident on achieving US$200
million sales from the Biologics segment by FY19. Progress in biosimilar
approvals/launches in developed markets is also promising. Although
these approvals do not imply immediate launch of the product in these
regions, it endorses the development and manufacturing capabilities of
Biocon in the realm of biosimilars. Progress on the biosimilars regulatory
front in developed markets and launches in the developed as well as
emerging markets are likely to maintain investors optimism for the
company. We continue to value the stock on SOTP basis. Accordingly, we
arrive at a target price of | 740 per share.
Rating matrix
Rating : Buy
Target : | 740
Target Period : 12 months
Potential Upside : 25%
What’s Changed?
Target Unchanged
EPS FY19E Changed from | 9.3 to | 8.8
EPS FY20E Changed from | 14 to | 13.3
Rating Unchanged
Quarterly Performance
Q1FY19 Q1FY18 YoY (%) Q4FY18 QoQ (%)
Revenue 1,123.8 933.7 20.4 1,169.5 -3.9
EBITDA 237.9 192.1 23.8 233.0 2.1
EBITDA (%) 21.2 20.6 60 bps 19.9 125 bps
Net Profit 119.8 81.3 47.4 130.4 -8.1
Key Financials
(| Crore) FY17 FY18 FY19E FY20E
Revenues 3921.6 4129.7 5072.8 6206.4
EBITDA 851.2 829.1 1154.9 1506.8
Adj. Net Profit 508.7 372.4 530.8 797.1
Adj. EPS (|) 8.5 6.2 8.8 13.3
Valuation summary
FY17 FY18 FY19E FY20E
PE(x) 57.8 95.1 66.7 44.4
EV to EBITDA (x) 10.5 7.2 9.4 12.5
Price to book (x) 9.4 8.1 10.9 14.2
RoNW (%) 41.4 42.7 31.0 23.8
RoCE (%) 9.4 8.1 10.9 14.2
Stock data
Particular
Market Capitalisation
Debt (FY18)
Cash (FY18)
EV
52 week H/L 697/318
Equity capital (|Crore)
Face value (|) | 5
| 300 crore
| 35997 crore
Amount
| 35400 crore
| 1920 crore
| 1323 crore
Price performance (%)
1M 3M 6M 1Y
Biocon -12.2 -15.7 -7.9 38.6
Glenmark -4.8 0.5 -10.3 -19.3
Torrent Pharma 2.4 7.5 6.2 18.1
Aurobindo Pharma -4.2 -7.5 -8.8 -21.8
Research Analyst
Siddhant Khandekar
Mitesh Shah
Biocon (Biocon) | 590
ICICI Securities Ltd | Retail Equity Research Page 2
Variance analysis
Q1FY19 Q1FY19E Q1FY18 Q4FY18 YoY (%) QoQ (%) Comments
Revenue 1,123.8 1,213.9 933.7 1,169.5 20.4 -3.9 YoY growth was mainly due to 36% growth in Biologics segment and 40% YoY
growth in contract research. Miss in I-Direct estimates mainly due to inter
segment revenue adjustments
Raw Material cost 433.8 475.6 365.8 475.2 18.6 -8.7
Employee cost 261.4 273.1 213.3 257.0 22.6 1.7 Increased mainly due to commissioning of Malaysian facility
R & D Expenditure 44.0 55.2 58.2 51.0 -24.4 -13.7 Higher capitalisation during the quarter
Other Expenditures 146.7 159.1 104.3 153.3 40.7 -4.3
Total Expenditure 885.9 963.0 741.6 936.5 19.5 -5.4
EBITDA 237.9 250.8 192.1 233.0 23.8 2.1
EBITDA (%) 21.2 20.7 20.6 19.9 60 bps 125 bps YoY improvement mainly due to lower R&D spend
Interest 17.6 10.7 16.1 16.9 9.3 4.1 Increased mainly due to commissioning of Malaysian facility
Depreciation 99.1 110.4 98.8 95.3 0.3 4.0 Increased YoY mainly due to commissioning of Malaysian facility
Other income 68.8 60.7 54.0 67.5 27.4 1.9 Includes | 39 crore of forex gains against | 17 crore of forex gains in Q1FY18
EO 0.0 0.0 0.0 0.0 0.0 0.0
PBT 190.0 190.5 131.2 188.3 44.8 0.9
Tax 52.1 41.9 37.6 40.7 38.6 28.0
MI 18.6 26.0 16.4 22.3 13.4 -16.6
PAT 119.8 127.6 81.3 130.4 47.4 -8.1 Delta vis-à-vis EBITDA due to higher other income and lower Interest and
depreciation. Miss vis-à-vis I-Direct estimates mainly due to cascading effect of
lower-than-expected revenues
Key Metrics
Small Molecules 395.0 397.8 355.2 424.0 11.2 -6.8 YoY growth was largely driven by sales of key APIs including immunosuppressants
and generic formulations
Biologics 250.0 239.1 183.9 241.0 35.9 3.7 YoY growth was largely driven by higher sales of biosimilar monoclonal antibodies
(mAbs) in emerging markets, supported by Insulins business
Branded Formulations 147.0 150.0 130.4 149.0 12.7 -1.3 YoY growth was mainly due to lower base and volume gain in existing products
Contract Research 406.0 425.0 291.1 409.0 39.5 -0.7 YoY growth mainly on the back of 1) | 40 crore of one-off raw material pass
through 2) traction in biologics manufacturing, discovery services and chemical
development services, 3) lower base of Q1FY18 (fire incident impact) and 4)
favourable currency movement
Licensing income 5.0 2.0 7.7 2.0 -35.1 150.0
Source: Company, ICICI Direct Research
Change in estimates
(| Crore) Old New % Change Old New % Change
Revenues 5,148.9 5,072.8 -1.5 6,115.5 6,206.4 1.5
EBITDA 1,204.4 1,154.9 -4.1 1,583.8 1,506.8 -4.9
EBITDA Margin (%) 23.4 22.8 -63 bps 25.9 24.3 -162 bps Changed as per management guidance
Net Profit 558.2 530.8 -4.9 839.2 797.1 -5.0 Changed mainly in sync with EBITDA
EPS (|) 9.3 8.8 -4.9 14.0 13.3 -5.1
FY19E FY20E
Source: Company, ICICI Direct Research
Assumptions
Current
Growth (%) FY17 FY18 FY19E FY20E FY19E FY20E
Small Molecules 1,607.5 1,484.9 1,582.0 1,708.6 1,584.8 1,711.6
Biologics 622.5 770.2 1,139.4 1,652.1 1,075.7 1,506.0 Changed mainly due to strong traction from emerging markets and launches of
biosimilars in developed markets
Branded Formulations 548.9 611.5 673.8 774.8 676.7 778.2
Contract Research 1,192.7 1,423.1 1,736.8 2,051.0 1,779.9 2,101.8
Earlier
Source: Company, ICICI Direct Research; * excludes Licensing income
ICICI Securities Ltd | Retail Equity Research Page 3
Company Analysis
Biocon was established in 1978 by first generation entrepreneur Dr Kiran
Mazumdar-Shaw. Unlike most pharma companies that are chemical
based, Biocon has carved out its niche in the more complex
biotechnology field. Over the decades, Biocon has successfully evolved
into an emerging global biopharma enterprise, serving its partners and
customers in over 75 countries. As a fully integrated biopharma company,
it delivers innovative biopharmaceutical solutions, ranging from discovery
to development & commercialisation. In 2004, it came out with its maiden
IPO.
Four of its biosimilar products (Trastuzumab, Pegfilgrastim, Adalimumab
and Insulin Glargine) have already reached the critical milestone of global
Phase III clinical trials. The company has initiated filings of biosimilars in
the US and EU besides launches in Japan. It has entered into a
partnership with Mylan for six biosimilar programs (Trastuzumab,
Pegfilgrastim, Adalimumab, Bevacizumab, Etanercept and Filgrastim) and
three insulin analog programmes (Glargine, Lispro and Aspart).
The company has received approval for its Insulin Glargine from the
Japanese regulator in March 2016. It has developed and manufactured
Insulin Glargine BS Injection Kit (FFP). FFP in Japan has commercialised it.
The company also achieved its first ANDA approval, Rosuvastatin
Calcium in US.
Recently, the company also entered into a partnership with Sandoz, a
Novartis division and a global leader in biosimilars, for an exclusive
portfolio of next-generation biosimilars in the area of immunology and
oncology. This synergistic partnership will leverage the capabilities of
both partners for an ‘end to end’ play encompassing development,
manufacturing, regulatory approval and commercialisation globally. This
collaboration addresses some of the long term biosimilars opportunities
beyond the near term opportunities being addressed by existing
partnership with Mylan.
Exhibit 1: Biosimilars: Insulin pipeline
Molecule Type Status
Rh Insulin Regular Acting Insulin Pre-clinical (US), Marketed EM
Glargine Long Acting Insulin Global Phase III, Aprroved & launched in Japan
Aspart Rapid Acting Insulin Analog Global Phase I
Lispro Rapid Acting Insulin Analog Preclinical
Total Market Size
Source: Company, ICICI Direct Research
Exhibit 2: Biosimilars: MAbs & biologics pipeline
Molecule Indication Status
Adalimumab Chronic Plaque Psoriasis Global Phase III completed
Trastuzumab mBreast Cancer Aproved in US, UR in EU
Pegfilgrastim Chemo-induced Neutropenia Aprroved & launched in US, UR in EU
Bevacizumab mColorectal Cancer Global Phase III, RoW Phase III
Filgrastim Chemo-induced Neutropenia Preclinical/Scale Up
Etanercept Auto-immune Preclinical/Scale Up
Total Market Size
Source: Company, ICICI Direct Research
ICICI Securities Ltd | Retail Equity Research Page 4
Exhibit 3: Revenues to grow at CAGR of 22.6% in FY18-20E
2485.3
2877.33089.8
3381.0
3921.64129.7
5072.8
6206.4
0.0
1000.0
2000.0
3000.0
4000.0
5000.0
6000.0
7000.0
FY13 FY14 FY15 FY16 FY17 FY18 FY19E FY20E
Revenues(|
crore)
Source: Company, ICICI Direct Research
Biocon has realigned its segments after the adoption of Ind-As. They are-
1) small molecules, 2) research services (Syngene), 3) branded
formulations and 4) biologics.
Small molecules- Small molecules (35% of FY18 total revenue) comprise
APIs like statins, immunosuppressants, specialty APIs & also include
generic formulations business witness steep pricing pressure. The
company is exploring fewer opportunities but with higher profitability in
this segment like moving into formulations & filing own ANDAs, 505 (b)(2)
filing, etc. It has already filed few ANDAs, which include complex generics
& injectables. We expect small molecules segment to grow at a CAGR 7%
CAGR to | 1709 crore in FY18-20E.
Biologics – The biologics segment includes novel biologics and
biosimilars, including Rh-insulin, insulin analogs, monoclonal antibodies
and recombinant proteins. This segment accounts for ~18% of FY18 total
revenue. Biocon is mainly focusing on the following therapies-
diabetology, oncology and immunology. This segment has been
specifically carved out to tap numerous biosimilar opportunities
especially in the next three to five years. Globally, the biosimilar space is
still in a nascent state for want of guidelines by most countries including
the US. The now defunct Pfizer deal was also based on biosimilar
opportunities. Biocon’s biosimilar pipeline currently includes 10 products
in different phases of completion. Out of these 10 products, the four
diabetic products- Rh Insulin, Glargine, Lispro and Aspart were the
subject matter of two deals first with Pfizer and then with Mylan
(excluding Rh Insulin). In Q3, Biocon secured its first ever biosimilar
approval (gTrastuzumab) by an Indian pharma company in the US.
Although Trastuzumab approval does not imply immediate launch of the
product in the US, it endorses the development and manufacturing
capabilities of Biocon in the realm of biosimilars. The company has also
announced a second partnership in the biosimilar space with Sandoz for
global development of next generation biosimilars. The company has
invested heavily in this space over the last two to three years, especially
the Malaysian facility, which is now functional. The progress, so far, has
been encouraging with launches in emerging markets, Glargine launch in
Japan and filing arrangements in the EU and the US. We expect biologics
to grow at a CAGR of 46.5% to | 1652 crore in FY18-20E.
10.7% CAGR
22.6% CAGR
ICICI Securities Ltd | Retail Equity Research Page 5
Exhibit 4: Recent Progress on the biosimilars front
Date Event
Jun-18 Mylan entered in to a commercialization agreement with Lupin for biosimilar Etanercept for certain markets. Biocon has retains its economic interest in this
arrangement vis-a -vis Mylan in accordance with its existing collaboration agreement and would benefit from the accelerate commercialization of this product
Apr-18 Biocon/Mylan have in-licensed Humira biosimilar from Fujifilm and expects to launch in Europe in H2CY18
Mar-18 Mylan and Biocon receive approval for Semglee Biosimilar Insulin Glargine in EU and Australia
Jan-18 Collaborates with Sandoz for a global partnership to develop, manufacture and commercialize a number of next generation biosimilars
Dec-17 USFDA approval for Ogivri, a biosimilar Trastuzumab co-developed by Biocon and Mylan
Jul-17 Biocon's partner Fujifilm launches insulin Glargine in Japan
Jul-17 USFDA Oncologic Drugs Advisory Committee (ODAC) recommended approval of Biocon-Mylan's proposed biosimilar Trastuzumab in all eligible indications
Jan-17 USFDA accepts Biocon’s biologics licence application for its biosimilar oncology drug Trastuzumab
Aug-16 European Medicines Agency has accepted Biocon-Mylan Proposed Biosimilar Trastuzumab (gHerceptin) for Review
Jul-16 European Medicines Agency has accepted Biocon-Mylan Proposed Biosimilar Pegfilgrastim (gNeulasta) for Review
Jul-16 Biocon's Insulin Glargine Launched in Japan
Jun-16 Biocon and Mylan to present Phase 3 Trastuzumab Biosimilar Data at the American Society of Clinical Oncology (ASCO) Annual Meeting
Mar-16 Biocon's Insulin Glargine Receives Regulatory Approval in Japan
Mar-16 Biocon inks co-development & commercialisation agreement with Lab PiSA for Rh-insulin in US
May-15 Biocon-Mylan's PEG-G-CSF and Adalimumab enter Phase III clinical trials; patient recruitment for one Insulin Glargine Phase III study completed
Source: Company, ICICI Direct Research
Exhibit 5: Small molecules & biologics to grow at CAGR of 22% in FY18-20E
1503.7
1732.0 1765.0 1729.0
2230.0 2256.1
2721.4
3360.6
0
500
1000
1500
2000
2500
3000
3500
4000
FY13 FY14 FY15 FY16 FY17 FY18 FY19E FY20E
(|
crore)
Small Molecules+Biologics
Source: Company, ICICI Direct Research
Branded formulations - It comprises India and UAE formulations. Biocon
owns 80+ brands encompassing seven therapeutic segments viz.
diabetology, oncology, nephrology, cardiology, immunotherapy,
comprehensive care and bio-products. However, with ~0.35% market
share (AIOCD MAT March 2018) and 56th rank in the IPM market (AIOCD),
the company is still a marginal player in the Indian context. Among
therapies, diabetology is the largest therapy, which accounts for 58% of
branded formulations. Some of its unique launches are INSUPen (insulin
delivery device), Biomab (novel biologic for oncology) and Alzumab
(novel biologic for psoriasis). The list includes CANMAb (biosimilar
version of oncology product Herceptin). This segment constitutes ~14%
of total revenue (FY18).
8.5% CAGR
22.2% CAGR
ICICI Securities Ltd | Retail Equity Research Page 6
Exhibit 6: Branded formulation sales to grow at CAGR of 13% in FY18-20E
347.9
391.4430.0 440.0
548.9
611.5
673.8
774.8
0
100
200
300
400
500
600
700
800
900
FY13 FY14 FY15 FY16 FY17 FY18 FY19E FY20E
(|
crore)
Branded Formulations
Source: Company, ICICI Direct Research
Research services (Syngene) - Biocon’s research arm Syngene
contributed ~33% to FY18 total revenue. This is the CRO business of
Biocon, which deploys over 3500 scientists (FY18). The company
provides end-to-end discovery and development services for novel
molecular entities (NMEs) across industrial sectors including
pharmaceutical, biotechnology, agrochemicals, consumer health, animal
health, cosmetic and nutrition companies under one roof with a
distinctive economic advantage. It also provides support for biosimilar
and generic molecules development. The company provides variable cost
alternative like full-time equivalent (FTE) and fee-for-service (FFS) to the
traditionally fixed cost, in-house, resource intensive business model of
R&D focused organisations. Currently, the company has 316 clients
ranging from large multinational corporations to start-ups, including eight
of the top 10 global pharmaceutical companies. The company has
developed long-term relationships and has multi-year contracts with its
clients, including four long-duration multidisciplinary partnerships with
Bristol-Myers Squibb (BMS), Herbalife, Baxter International and Amgen.
This segment has consistently been growing at double digit and has
recently been the major growth driver for the company as the biopharma
segment is slowing down. We expect revenues to grow at a CAGR of 20%
to | 2051 crore in FY18-20E.
Research services revenues (FY18)
Dedicated,
35%
Discovery,
25%
Development,
40%
11.9% CAGR
12.6% CAGR
ICICI Securities Ltd | Retail Equity Research Page 7
Exhibit 8: Trends in overall R&D cost (ex-capitalisation)
167.8
130.6
168.8
265.5 272.4
215.8227.3
290.9
6.8
4.5
5.5
7.9
6.9
5.2
4.7
4.5
0
100
200
300
400
FY13 FY14 FY15 FY16 FY17 FY18 FY19E FY20E
(|
crore)
3.0
4.5
6.0
7.5
9.0
(%
)
R & D cost R & D cost (% revenues)
Source: Company, ICICI Direct Research
Exhibit 9: Trends in EBITDA margins
543.0
687.1 695.8635.8
851.2 829.1
1154.9
1506.8
23.9
22.5
18.8
21.7
21.8
20.1 22.8
24.3
0
400
800
1200
1600
FY13 FY14 FY15 FY16 FY17 FY18 FY19E FY20E
(|
crore)
18
20
22
24
26
(%
)
EBITDA EBITDA Margins (%)
Source: Company, ICICI Direct Research
Exhibit 7: Contract research to grow at CAGR of 20% in FY18-20E
558.0
714.7822.0
1060.0
1192.7
1423.1
1736.8
2051.0
0
500
1000
1500
2000
2500
FY13 FY14 FY15 FY16 FY17 FY18 FY19E FY20E
(|
crore)
Contract Research
Source: Company, ICICI Direct Research
20.6% CAGR
20.0% CAGR
ICICI Securities Ltd | Retail Equity Research Page 8
Exhibit 10: Net profit to grow at CAGR of 50% in FY18-20E
508.9
413.8
497.4550.4
612.1
372.4
530.8
797.1
14.4
20.516.1 16.3
15.6 9.0
10.5
12.8
0
200
400
600
800
1000
1200
FY13 FY14 FY15 FY16 FY17 FY18 FY19E FY20E
(|
crore)
4
6
8
10
12
14
16
18
20
22
(%
)
Net Profit Net Profit Margins (%)
Source: Company, ICICI Direct Research
Exhibit 11: Return ratios likely to improve on the back of better profitability…
11.9
10.4
6.5
9.4
8.1
10.9
11.7
14.2
12.6
13.7
12.5
7.8
10.5
7.2
9.4
12.5
6
10
14
18
22
FY13 FY14 FY15 FY16 FY17 FY18 FY19E FY20E
(%
)
4
6
8
10
12
14
16
(%
)
RoCE (RHS) RoNW (LHS)
Source: Company, ICICI Direct Research
SWOT Analysis
Strengths – It is an early entrant in the more lucrative biotech space with a
proven track record. The space has high entry barriers due to complexity
of the molecules and tougher trials requirement. Four dedicated centres
catering to the top global players.
Weakness - Its largest segment i.e. small molecules has been witnessing
constant pricing pressure and capacity constraints.
Opportunities – A huge opportunity beckons for biosimilars as globally
seven out of the top 10 drug brands are biologics. Some of them will lose
patent exclusivity in the next five to seven years. The price erosion in
biosimilars is much less than that of chemical compound based drugs.
Threats- (i) Backtracking by Mylan may increase the R&D cost sharply, (ii)
pricing pressure in branded formulations, (iii) increased scrutiny by
USFDA and other regulators worldwide.
ICICI Securities Ltd | Retail Equity Research Page 9
Exhibit 12: Trends in quarterly performance
(| Crore) Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 YoY (%) QoQ(%)
Revenues 813.9 796.2 807.1 945.0 992.0 954.1 1044.4 931.1 933.7 968.6 1057.9 1169.5 1123.8 20.4 -3.9
Raw Material Cost 293.9 326.3 303.1 322.6 400.2 353.8 374.7 348.4 365.8 377.6 423.8 475.2 433.8 18.6 -8.7
% to revenues 36.1 41.0 37.6 34.1 40.3 37.1 35.9 37.4 39.2 39.0 40.1 40.6 38.6
Gross Profit 520.0 469.9 504.0 622.4 591.8 600.3 669.7 582.7 567.9 591.0 634.1 694.3 690.0 21.5 -0.6
Gross Profit Margin (%) 63.9 59.0 62.4 65.9 59.7 62.9 64.1 62.6 60.8 61.0 59.9 59.4 61.4 58 bps 203 bps
Employee cost 148.3 143.1 152.2 166.5 178.5 180.4 194.2 193.9 213.3 225.5 235.3 257.0 261.4 22.6 1.7
% to revenues 18.2 18.0 18.9 17.6 18.0 18.9 18.6 20.8 22.8 23.3 22.2 22.0 23.3 42 bps 129 bps
R & D 50.0 57.4 67.9 100.0 51.4 65.0 85.0 65.0 58.2 53.9 52.9 51.0 44.0
% to revenues 6.1 7.2 8.4 10.6 5.2 6.8 8.1 7.0 6.2 5.6 5.0 4.4 3.9 -232 bps -45 bps
Other Expenditure 113.4 100.3 99.1 159.0 98.8 114.9 114.4 136.3 104.3 129.3 124.2 153.3 146.7 40.7 -4.3
% to revenues 13.9 12.6 12.3 16.8 10.0 12.0 11.0 14.6 11.2 13.3 11.7 13.1 13.1 188 bps -5 bps
Total Expenditure 605.6 627.1 622.3 748.1 728.9 714.1 768.3 743.6 741.6 786.3 836.2 936.5 885.9 19.5 -5.4
% to revenues 74.4 78.8 77.1 79.2 73.5 74.8 73.6 79.9 79.4 81.2 79.0 80.1 78.8
EBIDTA 208.3 169.1 184.8 196.9 263.1 240.0 276.1 187.5 192.1 182.3 221.7 233.0 237.9 23.8 2.1
EBITDA Margin (%) 25.6 21.2 22.9 20.8 26.5 25.2 26.4 20.1 20.6 18.8 21.0 19.9 21.2 60 bps 125 bps
Depreciation 59.0 61.0 63.9 64.8 66.1 68.3 70.3 72.5 98.8 93.6 97.4 95.3 99.1 0.3 4.0
Interest 4.4 2.9 1.5 16.6 5.7 6.5 8.8 5.0 16.1 13.8 14.7 16.9 17.6 9.3 4.1
OI 19.9 22.7 21.6 21.4 40.9 38.4 47.5 43.2 54.0 50.8 33.9 67.5 68.8 27.4 1.9
PBT 164.8 127.9 141.0 136.9 232.2 203.6 244.5 153.2 131.2 125.7 143.5 188.3 190.0 44.8 0.9
Tax 37.6 28.2 21.8 59.1 55.2 41.7 54.4 10.3 37.6 42.5 36.1 40.7 52.1 38.6 28.0
Tax Rate (%) 22.8 22.1 15.5 43.2 23.8 20.5 22.2 6.7 28.7 33.8 25.2 21.6 27.4
PAT 127.2 99.7 119.2 77.8 177.0 161.9 190.1 142.9 93.6 83.2 107.4 147.6 137.9 47.3 -6.6
PAT Margin (%) 15.6 12.5 14.8 8.2 17.8 17.0 18.2 15.3 10.0 8.6 10.2 12.6 12.3
Exceptional Items (EI) 0.0 107.8 0.0 -268.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Net Profit before MI 127.2 -8.1 119.2 346.2 177.0 161.9 190.1 142.9 93.6 83.2 107.4 147.6 137.9 47.3 -6.6
Add/(less) MI 7.1 12.5 17.7 21.1 15.8 19.8 19.5 20.9 16.4 20.3 21.7 22.3 18.6
Net Profit after MI 120.1 -20.6 101.5 325.1 161.2 142.1 170.6 122.0 77.2 62.9 85.7 125.3 119.3 54.5 -4.8
Net Profit (excl.EI) 120.1 87.2 101.5 56.7 161.2 142.1 170.6 122.0 77.2 62.9 85.7 125.3 119.3 54.5 -4.8
Source: Company, ICICI Direct Research
ICICI Securities Ltd | Retail Equity Research Page 10
Conference call highlights
The management has reiterated FY19 Biologics sales guidance of
US$200 million
EU approvals for Trastuzumab and Pegfilgrastim (both oncology)
are expected by 2018 end
Insulin Glargine launch in EU is also likely to be by 2018 end
The management expects R&D trajectory (gross) to remain at
| 450-500 crore. With Q1 gross R&D at | 88 crore, the remaining
three quarters are expected to witness a significant ramp-up
R&D expenses during the quarter include some component
pertaining to Sandoz deal
During the quarter, the company launched Pegfilgrastim (branded
as Fulphila) in the US in partnership with Mylan. The profit sharing
for the same will be reflected in the subsequent quarter
Fulphila has been offered at 33% discount to the reference price
in the US
The management expects to complete clinical trials for Insulin
Glargine in the US by the end of 2018. The 30-month stay on the
same pertaining to a litigation is till March 2020
The EIR from the USFDA for Bengaluru facility includes clearance
for Biologics and drug substance facility
The management expects the Malaysia facility to achieve break
even during the current fiscal. Operating expenses for this facility
during the quarter were at ~US$50 million
During the quarter, the company has received | 340 crore from
stake sale in Syngene, which was utilised for capex
ICICI Securities Ltd | Retail Equity Research Page 11
Valuation
As expected, FY19 began on a strong footing mainly due to continuous
strong growth in its growth segments (Biologics, Syngene). The
management is confident of achieving US$200 million sales from
biologics segment by FY19. Progress in biosimilar approvals/launches in
developed markets is also remarkable. Although these approvals do not
imply immediate launch of the product in these regions, it endorses the
development and manufacturing capabilities of Biocon in the realm of
biosimilars. Progress on the biosimilars regulatory front in developed
markets and launches in the developed as well as emerging markets are
likely to maintain investors optimism for the company. We continue to
value the stock on an SOTP basis. Accordingly, we arrive at a target price
of | 740 per share.
Exhibit 13: Valuation
Particulers FY20E EPS (| cr) Multiple (x) Per share (| )
Biocon (ex Syngene) 7.7 36.0 275.9
Syngene
Targeted Market Cap 13700
Biocon's Holding 71.7%
Holding Company Discount 20.0%
Syngene valuation 7853
Per share valuation 131
NPV (BIosimilars) 331
SOTP valuation 740
Source: ICICI Direct Research
ICICI Securities Ltd | Retail Equity Research Page 12
Exhibit 14: One year forward PE
0.0
100.0
200.0
300.0
400.0
7/1
0/2
01
2
1/1
0/2
01
3
7/1
0/2
01
3
1/1
0/2
01
4
7/1
0/2
01
4
1/1
0/2
01
5
7/1
0/2
01
5
1/1
0/2
01
6
7/1
0/2
01
6
1/1
0/2
01
7
7/1
0/2
01
7
1/1
0/2
01
8
7/1
0/2
01
8
(|)
Series1 46.7x 35.6x 17.2x 9.8x 2.4x
[
Exhibit 15: One year forward PE of company vs. CNX Pharma Index
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.007/10/201
2
1/10/201
3
7/10/201
3
1/10/201
4
7/10/201
4
1/10/201
5
7/10/201
5
1/10/201
6
7/10/201
6
1/10/201
7
7/10/201
7
1/10/201
8
7/10/201
8
(x)
Biocon CNX Pharma
Source: Company, ICICI Direct Research
Exhibit 16: Valuation
Revenues Growth EPS Growth P/E EV/EBITDA RoNW RoCE
(| crore) (%) (|) (%) (x) (X) (%) (%)
FY17 3922 16.0 8.5 61.6 57.8 41.4 10.5 9.4
FY18E 4130 5.3 6.2 -26.8 95.1 42.7 7.2 8.1
FY19E 5073 22.8 8.8 42.5 66.7 31.0 9.4 10.9
FY20E 6206 22.3 13.3 50.2 44.4 23.8 12.5 14.2
Source: Company, ICICI Direct Research
ICICI Securities Ltd | Retail Equity Research Page 13
Recommendation history vs. Consensus
0
100
200
300
400
500
600
700
800
Jul-18May-18Feb-18Dec-17Sep-17Jul-17May-17Feb-17Dec-16Sep-16Jul-16May-16Feb-16Dec-15Sep-15Jul-15
(|
)
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
(%
)
Price Idirect target Consensus Target Mean % Consensus with BUY
Source: Reuters, Company, ICICI Direct Research
Key events
Date Event
Jul-15 Syngene IPO starts from July 27, 2015 at a price range of | 240-250
Oct-15 Acquired API unit of Acacia Life Sciences Private Limited at Vizag
Jun-16 Biocon and Mylan to Present Phase 3 Trastuzumab Biosimilar Data at the American Society of Clinical Oncology (ASCO) Annual Meeting
Jul-16 Biocon's Insulin Glargine launched in Japan
Jul-16 European Medicines Agency accepts Biocon-Mylan proposed biosimilar Pegfilgrastim (gNeulasta) for review
Aug-16 European Medicines Agency accepts Biocon-Mylan proposed biosimilar Trastuzumab (gHerceptin) for review
Jan-17 USFDA accepts Biocon’s biologics licence application for its biosimilar oncology drug Trastuzumab
Jul-17 USFDA Oncologic Drugs Advisory Committee (ODAC) recommends approval of Biocon/Mylan’s proposed biosimilar Trastuzumab, a biologically similar version
of Roche's breast-cancer drug Herceptin
Dec-17 USFDA approval for Ogivri, a biosimilar Trastuzumab co-developed by Biocon and Mylan
Jan-18 Collaborates with Sandoz for a global partnership to develop, manufacture and commercialize a number of next generation biosimilars
Mar-18 Mylan and Biocon receive approval for Semglee Biosimilar Insulin Glargine in EU and Australia
Apr-18 Biocon/Mylan have in-licensed Humira biosimilar from Fujifilm and expects to launch in Europe in H2CY2018
Jun-18 USFDA Approves Mylan and Biocon’s Fulphila (pegfilgrastim-jmdb), the First Biosimilar to Neulasta
Jun-18 The company has received an Establishment Inspection Report (EIR) from the USFDA for its Sterile Drug Product manufacturing facility in Bangalore
Jun-18 Mylan entered in to a commercialization agreement with Lupin for biosimilar Etanercept for certain markets. Biocon has retains its economic interest in this
arrangement vis-a -vis Mylan in accordance with its existing collaboration agreement and would benefit from the accelerate commercialization of this product
Jul-18 Biocon has received the EU GMP certification for its Sterile Drug Product manufacturing facility in Bangalore, which was inspected in March 2018
Source: Company, ICICI Direct Research
Top 10 Shareholders Shareholding Pattern
Rank Investor Name Latest Filing Date % O/S Position Position Change
1 Shaw (Kiran Mazumdar) 30-Jun-18 43.1 258.8m 10.5
2 Glentec International 30-Jun-18 19.8 118.6m 0.0
3 OppenheimerFunds, Inc. 30-Jun-18 4.3 25.9m 0.0
4 Biocon India Ltd Employee Welfare Trust 19-Jun-18 1.5 9.0m 0.0
5 Franklin Templeton Asset Management (India) Pvt. Ltd. 31-May-18 1.3 7.7m 0.3
6 Jupiter Asset Management Ltd. 30-Jun-18 1.2 6.9m 0.1
7 Templeton Asset Management Ltd. 31-Mar-18 1.1 6.7m -0.1
8 Chandavarkar (Arun Suresh) 30-Jun-18 1.1 6.6m 0.0
9 Suresh (Arun) 31-Mar-18 1.1 6.6m 6.6
10 Aditya Birla Sun Life AMC Limited 30-Jun-18 0.9 5.2m 0.0
(in %) Jun-17 Sep-17 Dec-17 Mar-18 Jun-18
Promoter 60.7 60.7 60.7 60.7 60.7
Public 39.3 39.3 39.3 39.3 39.3
Source: Reuters, ICICI Direct Research
Recent Activity
Investor Name Value ($ mn) Shares Investor Name Value ($ mn) Shares
Shaw (Kiran Mazumdar) 94.91 10.49 Fidelity International -18.86 -2.24
Suresh (Arun) 60.16 6.60 BlackRock Institutional Trust Company, N.A. -18.93 -1.92
Norges Bank Investment Management (NBIM) 7.90 0.94 Aberdeen Asset Management (Asia) Ltd. -4.67 -0.47
Kotak Mahindra Asset Management Company Ltd. 8.29 0.84 Causeway Capital Management LLC -2.38 -0.28
Reliance Nippon Life Asset Management Limited 5.98 0.66 BlackRock Asset Management Ireland Limited -2.67 -0.27
BUYS SELLS
Source: Reuters, ICICI Direct Research
ICICI Securities Ltd | Retail Equity Research Page 14
.
Financial summary
Profit and loss statement | Crore
Year-end March FY17 FY18 FY19E FY20E
Total Operating Income 3921.6 4129.7 5072.8 6206.4
Growth (%) 16.0 5.3 22.8 22.3
Raw Material Expenses 1477.1 1642.4 1971.6 2397.6
Employee Expenses 747.0 931.1 1108.9 1295.8
R&D Expenditure 272.4 215.8 227.3 290.9
Other Expenditures 573.9 511.3 610.1 715.3
Total Operating Expenditure 3070.4 3300.6 3917.9 4699.6
Operating Profit (EBITDA) 851.2 829.1 1154.9 1506.8
Growth (%) 33.9 -2.6 39.3 30.5
Depreciation 277.2 385.1 429.3 477.8
Interest 26.0 61.5 54.1 42.6
Other Income 157.1 206.2 147.8 186.2
PBT before Exceptional Items 705.1 588.7 819.4 1172.6
Less: Exceptional Items -128.3 0.0 0.0 0.0
Total Tax 161.6 156.9 190.6 258.0
PAT before MI 671.8 431.8 628.8 914.6
Minority Interest 76.0 80.7 100.0 125.5
Adjusted PAT 508.7 372.4 530.8 797.1
Growth (%) 61.6 -26.8 42.5 50.2
EPS (Adjusted) 8.5 6.2 8.8 13.3
Source: Company, ICICI Direct Research
Cash flow statement | Crore
Year-end March FY17 FY18 FY19E FY20E
Profit/(Loss) after taxation 612.1 453.1 530.8 797.1
Add: Depreciation & Amortization 277.2 385.1 429.3 477.8
Net Increase in Current Assets -380.8 -248.7 -318.3 -473.1
Net Increase in Current Liabilities 310.4 128.4 215.3 302.5
Other Operating Activities 26.0 -55.8 54.1 42.6
CF from operating activities 844.9 662.1 911.1 1146.8
(Increase)/Decrease in Investments -394.0 168.9 0.0 0.0
(Purchase)/Sale of Fixed Assets -632.2 -913.1 -1100.0 -1100.0
Increase/ (Decrease) in Minority Interest 110.3 0.0 -93.1 0.0
Other Investing Activities -65.2 600.3 -42.0 -26.2
CF from investing activities -981.1 -143.9 -1235.1 -1126.2
Proceeds from issues of Equity Shares 0.0 16.8 0.0 0.0
Inc/(dec) in loan funds -261.9 -114.1 -300.0 -200.0
(Payment) of Dividend and Dividend Tax -70.2 -78.7 -53.4 -79.7
Interest Paid -26.0 -63.7 -54.1 -42.6
Other Financing Activities 0.0 0.0 0.0 0.0
CF from financing activities -358.1 -239.7 -407.4 -322.3
Net Cash flow -494.3 278.5 -731.5 -301.6
Opening Cash 1538.6 1044.3 1322.8 591.3
Closing Cash 1044.3 1322.8 591.3 289.7
Free Cash Flow 212.7 -251.0 -188.9 46.8
Source: Company, ICICI Direct Research
Balance sheet | Crore
Year-end March FY17 FY18 FY19E FY20E
Liabilities
Equity Capital 100.0 300.0 300.0 300.0
Reserve and Surplus 4737.7 4880.8 5358.2 6075.6
Total Shareholders funds 4837.7 5180.8 5658.2 6375.6
Total Debt 2205.4 1920.1 1620.1 1420.1
Minority Interest 376.1 467.7 374.6 374.6
Other NCL & LT Provisions 393.9 410.1 392.3 392.3
Source of Funds 7813.1 7978.7 8045.1 8562.5
Assets
Gross Block - Fixed Assets 5409.7 5847.4 6772.4 7963.3
Accumulated Depreciation 1811.0 2174.3 2603.6 3081.4
Net Block 3598.7 3673.1 4168.8 4881.9
Capital WIP 839.2 1302.8 1477.8 1386.9
Total Fixed Assets 4437.9 4975.9 5646.6 6268.8
Goodwill on Consolidation 26.4 26.4 26.4 26.4
Investments 1382.7 675.2 675.2 675.2
Inventory 635.3 722.5 849.8 1039.7
Debtors 883.2 1063.9 1251.3 1531.0
Cash 1044.3 1322.8 591.3 289.7
Other Current Assets 419.9 428.0 431.6 435.2
Total Current Assets 2982.7 3537.2 3124.0 3295.5
Creditors 739.7 1005.3 1182.4 1446.6
Provisions 46.8 46.5 76.7 106.8
Other Current Liabilities 698.2 959.2 967.2 975.2
Total Current Liabilities 1484.7 2011.0 2226.3 2528.7
Net Current Assets 1498.0 1526.2 897.7 766.8
Deferred Tax Assets 190.6 193.4 212.7 234.0
Other Non Current assets 277.5 581.6 586.4 591.3
Application of Funds 7813.1 7978.7 8045.1 8562.5
Source: Company, ICICI Direct Research
Key ratios
Year-end March FY17 FY18 FY19E FY20E
Per share data (|)
Reported EPS 10.2 6.2 8.8 13.3
BV per share 80.6 86.3 94.3 106.3
Dividend per share 1.2 0.5 0.9 1.3
Cash Per Share 17.4 22.0 9.9 4.8
Operating Ratios (%)
Gross Margin 62.3 60.2 61.1 61.4
EBITDA margin 21.7 20.1 22.8 24.3
EBIT Margin 14.6 10.8 14.3 16.6
PAT Margin 13.0 9.0 10.5 12.8
Inventory days 59.1 63.9 61.1 61.1
Debtor days 82.2 94.0 90.0 90.0
Creditor days 68.8 88.9 85.1 85.1
Asset Turnover 0.5 0.5 0.6 0.7
EBITDA Conversion Ration 99.3 79.9 78.9 76.1
Return Ratios (%)
RoE 10.5 7.2 9.4 12.5
RoCE 9.4 8.1 10.9 14.2
RoIC 13.1 9.8 14.2 17.1
Valuation Ratios (x)
P/E 57.8 95.1 66.7 44.4
EV / EBITDA 41.4 42.7 31.0 23.8
EV / Net Sales 9.0 8.6 7.1 5.8
Market Cap / Sales 9.0 8.6 7.0 5.7
Price to Book Value 7.3 6.8 6.3 5.6
Solvency Ratios
Debt / EBITDA 2.6 2.3 1.4 0.9
Debt / Equity 0.5 0.4 0.3 0.2
Current Ratio 1.3 1.1 1.1 1.2
Quick Ratio 0.9 0.7 0.8 0.8
Source: Company, ICICI Direct Research
ICICI Securities Ltd | Retail Equity Research Page 15
ICICI Direct coverage universe (Healthcare)
Company I-Direct CMP TP Rating M Cap
Code (|) (|) (| Cr) FY17 FY18E FY19E FY20E FY17 FY18E FY19E FY20E FY17 FY18E FY19E FY20E FY17 FY18E FY19E FY20E
Ajanta Pharma AJAPHA 1044 1,190 Hold 9185.3 57.4 53.0 46.4 59.6 18.2 19.7 22.5 17.5 42.3 31.0 23.3 24.8 33.7 23.8 18.0 19.7
Alembic Pharma ALEMPHA 558 460 Hold 10510.7 21.2 21.9 22.6 25.5 26.3 25.5 24.7 21.9 25.3 17.9 14.6 16.5 21.0 18.5 16.6 16.3
Apollo Hospitals APOHOS 937 1,230 Hold 13040.9 15.9 10.3 23.8 31.6 59.0 91.1 39.4 29.7 6.1 6.8 9.3 10.8 6.0 3.8 8.2 10.0
Aurobindo Pharma AURPHA 582 640 Hold 34120.3 38.8 41.8 36.7 40.7 15.0 13.9 15.9 14.3 24.4 20.5 16.7 16.9 24.2 21.0 15.7 15.0
Biocon BIOCON 590 740 Buy 35400.0 8.5 6.2 8.8 13.3 69.6 95.1 66.7 44.4 9.4 8.1 10.9 14.2 10.5 7.2 9.4 12.5
Cadila Healthcare CADHEA 371 380 Hold 37991.1 14.5 17.5 16.8 19.0 25.5 21.2 22.1 19.5 13.1 17.1 14.7 15.5 21.4 21.5 17.8 17.5
Cipla CIPLA 628 640 Hold 50553.9 12.5 18.3 21.3 26.4 50.2 34.2 29.5 23.8 7.7 9.9 12.0 14.5 8.0 10.8 11.4 12.7
Divi's Lab DIVLAB 1076 1,070 Hold 28556.5 39.9 32.8 41.0 48.6 26.9 32.8 26.2 22.1 25.3 19.8 21.1 21.9 19.8 14.8 16.3 16.9
Dr Reddy's Labs DRREDD 2133 2,170 Hold 35391.4 78.0 57.0 80.3 120.5 27.4 37.4 26.6 17.7 7.3 6.1 7.5 9.3 10.5 7.2 9.4 12.6
Glenmark Pharma GLEPHA 569 500 Hold 16061.0 42.2 28.5 30.4 33.3 13.5 19.9 18.7 17.1 19.5 14.2 13.8 14.0 26.5 15.4 14.2 13.6
Indoco Remedies INDREM 192 190 Hold 1771.1 8.4 4.5 8.2 13.5 23.0 43.0 23.4 14.2 8.7 5.7 8.8 13.9 11.8 6.0 10.2 15.0
Ipca Laboratories IPCLAB 626 760 Buy 9621.1 15.4 19.0 30.4 42.2 40.6 33.0 20.6 14.8 8.7 9.1 13.7 17.2 7.9 9.0 12.9 15.6
Jubilant Life JUBLIF 780 1,090 Buy 12427.1 36.9 41.3 61.2 77.0 21.1 18.9 12.7 10.1 13.8 14.9 18.9 21.1 16.8 16.0 19.4 19.8
Lupin LUPIN 813 760 Hold 36753.3 56.7 13.3 34.0 40.4 14.3 61.3 23.9 20.1 16.6 10.6 11.0 12.6 19.0 4.4 10.4 11.2
Narayana Hrudalaya NARHRU 250 310 Buy 5109.0 4.1 2.5 6.4 9.9 60.5 99.4 39.0 25.2 12.5 6.4 12.7 16.4 8.8 5.1 11.4 15.1
Natco Pharma NATPHA 780 860 Hold 14390.5 26.3 37.7 42.7 27.5 29.6 20.7 18.3 28.3 33.6 27.3 27.3 16.1 29.5 22.6 21.5 12.6
Sun Pharma SUNPHA 555 510 Hold 133255.2 29.0 13.0 18.1 21.6 19.1 42.8 30.6 25.8 20.3 9.8 11.5 12.7 19.0 8.1 10.4 11.2
Syngene Int. SYNINT 577 685 Buy 11538.0 14.4 15.3 17.6 19.6 40.2 37.8 32.8 29.4 16.0 15.9 17.0 17.4 20.3 17.7 17.1 16.1
Torrent Pharma TORPHA 1495 1,420 Hold 25292.8 55.2 40.1 46.5 64.6 27.1 37.3 32.1 23.1 18.9 11.6 13.7 17.4 21.5 13.8 14.3 17.2
RoE (%)EPS (|) PE(x) RoCE (%)
Source: Company, ICICI Direct Research
ICICI Securities Ltd | Retail Equity Research Page 16
RATING RATIONALE
ICICI Direct endeavours to provide objective opinions and recommendations. ICICI Direct assigns ratings to its
stocks according to their notional target price vs. current market price and then categorises them as Strong
Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is
defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;
Pankaj Pandey Head – Research [email protected]
ICICI Direct Research Desk,
ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
ICICI Securities Ltd | Retail Equity Research Page 17
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accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or
view(s) in this report.
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Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject
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It is confirmed that Siddhant Khandekar CA-INTER, Mitesh Shah MS (Finance) Research Analysts do not serve as an officer, director or employee of the companies mentioned in the report.
ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.
Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report.
We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities.
This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution,
publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities
described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and
to observe such restriction.