Cadila Healthcare Ltd.

Transcription

1 Cadila Healthcare Ltd. Absolute : Short Relative : Underweight 4QFY16 Results: Estimate (Ø), TP ( ), Rating ( ) Regular Coverage -8% ATR in 14 months Quarter Misses estimates; Muted earnings growth ahead Pharmaceuticals 2016 Equirus All rights reserved Rating Information Price (Rs) 327 Target Price (Rs) 296 Target Date 30th Jun 17 Target Set On 14th May'16 Implied yrs of growth (DCF) 20 Fair Value (DCF) 296 Fair Value (DDM) 84 Ind Benchmark BSETHC Model Portfolio Position - Stock Information Market Cap (Rs Mn) 334,303 Free Float (%) % 52 Wk H/L (Rs) 454.4/295 Avg Daily Volume (1yr) 1,418,145 Avg Daily Value (Rs Mn) 510 Equity Cap (Rs Mn) 1,024 Face Value (Rs) 1 Bloomberg Code CDH IN Ownership Recent 3M 12M Promoters 74.8 % 0.0 % 0.0 % DII 7.8 % 0.1 % 0.0 % FII 6.6 % 0.2 % -0.2 % Public 10.9 % -0.7 % 0.4 % Price % 1M 3M 12M Absolute 2.0 % 6.6 % -1.4 % Vs Industry 2.4 % 3.5 % 5.2 % IPCALAB -5.1 % % % TORNTPHARM -5.4 % 14.0 % 12.3 % Consolidated Quarterly EPS forecast Rs/Share 1Q 2Q 3Q 4Q EPS (16A) EPS (17E) Cadila s 4QFY16 Sales, EBITDA and Earnings were lower than EE estimates due to price erosion in high value HCQs and significant increase in employee expenses. Although Moraiaya remedial process is nearing completion, we continue to believe key approval will start from FY18. Consecutively, FY17 earnings will remain shadowed by erosion in high value HCQs. On the back of steep erosion in HCQs and guided increase in R&D expenditure, we cut down our FY17E/18E earnings estimate by 10%/4% respectively. We reiterate Short rating on the stock with the target price of Rs. 296, valuing it at 19x PE (~15% discount to peers due to flattish growth) on Jun 17 earning. Moriaya remediation over; approvals from FY18E: Management commentary on completion of Moriaya remediation came as surprise to us, as we were expecting remedial process to take longer because of recent data falsification observation by WHO in the same facility. Additionally, the SEZ facility mirrored Moriaya observations in regards incomplete analysis of OOS. We continue to believe that their key approvals from the facility won t start before FY18E. We are factoring Toprol XL, Duac Gel and Suprenza to be launched in FY18E and Exelon Patch towards FY19 end. No commentary on WHO resolution and Ahmedabad SEZ observations: Company had not mentioned any resolution timelines or remediation status for pending WHO issues and Ahmedabad SEZ Observations. Management still tentative about Asacol HD; factoring AG: Management has mentioned that they will take decision about Asacol HD in July, whether they want to launch their own version or go through AG (Authorized generic) route. We continue to factor AG launch of Asacol HD in 2QFY17 and company will generate $ 54mn in revenues with 15% EBITDA margin, which could be much higher if launched their own. Guidance of 20 approvals; seems to be on higher side: Company has guided for 20 USFDA approvals from their Badi and Ahmedabad SEZ facility, as against its 9/10 approvals in FY15/16. Change in estimates: Rs. Mn FY17E Chg (%) FY18E Chg (%) Sales 107,376-3% 123,826-1% EBITDA 22,900-9% 27,051-4% EPS (Rs.) 15-10% 18-4% Consolidated Financials Rs. Mn YE Mar FY16A FY17E FY18E FY19E Sales 98, , , ,726 EBITDA 23,829 22,900 27,051 28,050 Depreciation 3,022 3,851 4,005 4,165 Interest Expense Other Income Reported PAT 15,226 14,843 18,113 18,826 Recurring PAT 15,251 14,891 18,161 18,874 Total Equity 53,909 65,093 78,744 92,932 Gross Debt 23,131 23,431 23,812 24,281 Cash 14,488 22,295 30,938 41,169 Rs Per Share FY16A FY17E FY18E FY19E Earnings Book Value Dividends FCFF P/E (x) P/B (x) EV/EBITDA (x) ROE (%) 32 % 25 % 25 % 22 % Core ROIC (%) 23 % 22 % 25 % 24 % EBITDA Margin (%) 24 % 21 % 22 % 21 % Net Margin (%) 16 % 14 % 15 % 14 % May 15, 2016 Produced by ResearchDelta Advisors. Analyst: Nimish Mehta/Bharat Celly, nimish.researchdelta@equirus.com ( / ) Page 1 of 9 Before reading this report, you must refer to the disclaimer on the last page.

2 Other key highlights Domestic Business The Company reported 13% yoy growth in domestic formulation business. During the fiscal, they launched 40 new products, including line extension, of which 10 were 1st time launches in India. Company has mentioned that impact of NLEM and FDCs ban will be limited to Rs. 250mn in top line and Rs. 100mn in bottom line. R&D expenses for this quarter were Rs. 1,812mn (7.4% of net sales). Company has guided that R&D expenses for FY17 will be between 7-8%. Latin America Business grew by 1% yoy in INR terms. Company has mentioned that their profit and loss gap has decreased in Brazil, while they had guided for breakeven in FY16. Fund Raising: BOD has approved Rs. 185bn fund raising plan. Tax: Company has guided for 20% tax rate in FY17. Capex for FY16 was ~Rs 9.5bn. Exhibit 1: Quarterly Sales break up Key Segments Rs Mn. Q4FY15 Q4FY16 Total Domestic Sales % of sales 34% 36% Growth yoy (%) 12% Formulations % of sales 29% 32% Growth yoy (%) 13% Zydus Wellness % of sales 5% 5% Growth yoy (%) 5% Exports % of sales 61% 58% Growth yoy (%) -1% US % of sales 42% 40% Growth yoy (%) -2% Europe % of sales 3% 3% Growth yoy (%) -5% Latin America % of sales 2% 2% Growth yoy (%) 1% Emerging Markets % of sales 5% 6% Growth yoy (%) 20% API % of sales 5% 4% Growth yoy (%) -16% Animal Health & Others % of sales 4% 3% Growth yoy (%) 3% All JV Sales % of sales 5% 6% Growth yoy (%) 25% Total sales Source: Company, Equirus Securities, Research Delta Advisors May 15, 2016 Produced by ResearchDelta Advisors. Analyst: Nimish Mehta/Bharat Celly, nimish.researchdelta@equirus.com( / ) Page 2 of 10

3 Quarterly Result Table (Consolidated ) % Change Q4FY16 Q4FY16E Q3FY16 Q4FY15 Q4FY16E Q3FY16 Q4FY15 Net Sales 24,491 25,471 24,284 22,882-4% 1% 7% Comments Lower due to erosion in HCQs and muted growth in LA. COGS 8,228 8,390 7,996 8,021-2% 3% 3% Employees Cost 3,572 3,200 3,175 3,141 12% 13% 14% Significantly higher Qoq and from our expectations. Other Expenditure 6,877 6,783 7,326 6,762 1% -6% 2% Total Expenditures % 1% 4% EBITDA % 0% 17% Depreciation % 2% 4% Due to erosion in HCQs and significant increase in Employee expenses. EBIT 5,031 6,304 5,017 4,203-20% 0% 20% Interest % -21% -39% Other Income % -5% 18% PBT 5,172 6,276 5,146 4,244-18% 1% 22% Tax 1,259 1,401 1, % 10% 78% PAT before MI & Associates % -2% 11% Minority Interest % -63% -50% Recurring PAT 3,879 4,805 3,905 3,468-19% -1% 12% Extraordinaries % -189% -78% Reported PAT 3,887 4,796 3,896 3,504-19% 0% 11% EPS (Rs) % -1% 12% EBITDA Margin 24% 28% 24% 22% EBIT Margin 21% 25% 21% 18% PBT Margin 21% 25% 21% 19% PAT Margin 16% 19% 16% 15% Tax Rate 24% 22% 22% 17% May 15, 2016 Produced by ResearchDelta Advisors. Analyst: Nimish Mehta/Bharat Celly, nimish.researchdelta@equirus.com( / ) Page 3 of 10

4 Company Snapshot How we differ from Consensus EPS Sales PAT Key Estimates: - Equirus Consensus % Diff Comment FY17E % Expecting margins to be lower on the FY18E % account of erosion in high value HCQs. FY17E 107, ,364-2 % FY18E 123, ,053-1 % FY17E 14,843 16,280-9 % FY18E 18,113 19,899-9 % Particular (Rs. Mn) FY15A FY16A FY17E FY18E FY19E Domestic formulations US Brazil Europe and Ems All JV Sales Risk to Our View: Upside risk Launch of some undisclosed high value products in US that can lead to better margin expansion Company launches Asacol HD on their own- with higher margins. Down side risk As the domestic business is witnessing many challenges, its margins may impact overall margins of the company in a big way. Key triggers No new key launches in US market in FY17 Delay in USFDA resolution of facility under warning letter Sensitivity to Key Variables % Change % Impact on EPS EBITDA Margin -1 % -5 % DCF Valuations & Assumptions Rf Beta Ke Term. Growth Debt/IC in Term. Yr 7.5 % % 3.0 % 32.7 % - FY17E FY18E FY19-21E FY22-26E FY27-31E Sales Growth 9 % 15 % 10 % 10 % 8 % NOPAT Margin 14 % 15 % 14 % 14 % 14 % IC Turnover RoIC 21.9 % 24.7 % 24.2 % 24.2 % 24.0 % Years of strong growth Valuation as on date (Rs) Valuation as of Jun Based on DCF, assuming 20 years of growth and ~24% average ROIC, we derive current fair value of Rs. 264 and 30 th Jun 2017 fair value of Rs Company Description: CDH is a leading Indian pharmaceutical company with global presence. With ~3.8% market share in domestic formulations business, CDH is ranked 6th in the domestic market. It has distinct presence in US, Spain, France, Japan, Brazil and many emerging markets. In the past, CDH entered strategic collaborations with Hospira & Nycomed for formulation and API exports. With 14 manufacturing facilities (9 formulation, 5 APIs), 4 R&D centers, 4500 MRs; >1050 dedicated scientists and significant capacity expansion plans CDH is eyeing $3Bn revenues by 2015 & patent molecules of its own by Comparable valuation Mkt Cap Price Target EPS P/E BPS P/B RoE Div Yield Company Reco. CMP Rs. Mn. Target Date FY13A FY17E FY18E FY13A FY17E FY18E FY13A FY17E FY13A FY17E FY18E FY13A FY17E Cadila Healthcare Short , th Jun % 25 % 25 % 1.0 % 0.9 % IPCA Short , st Mar' % 5 % 15 % 0.9 % 1.1 % Torrent Pharma Long 1, ,497 1,858 31st Jun % 31 % 28 % 0.6 % 1.7 % May 15, 2016 Produced by ResearchDelta Advisors. Analyst: Nimish Mehta/Bharat Celly, nimish.researchdelta@equirus.com( / ) Page 4 of 10

5 Consolidated Quarterly Earnings Forecast and Key Drivers Rs in Mn 1Q16A 2Q16A 3Q16A 4Q16A 1Q17E 2Q17E 3Q17E 4Q17E 1Q18E 2Q18E 3Q18A 4Q18E FY16A FY17E FY18E FY19E Revenue 25,007 24,595 24,284 24,491 26,162 27,085 26,185 27,944 31,850 30,755 29,619 31,602 98, , , ,726 COGS 8,480 8,066 7,996 8,228 8,750 9,814 9,504 10,111 11,435 11,058 10,666 11,350 32,770 38,178 44,508 48,269 Employees Cost 3,230 3,340 3,175 3,572 3,618 3,741 3,556 3,751 4,088 4,227 4,018 4,238 13,317 14,665 16,572 18,726 Other Expenditure 7,281 6,976 7,326 6,877 8,287 7,959 7,566 7,819 9,472 8,946 8,496 8,780 28,460 31,632 35,695 39,682 EBITDA 6,015 6,213 5,787 5,814 5,507 5,571 5,559 6,264 6,854 6,524 6,439 7,234 23,829 22,900 27,051 28,050 Depreciation ,001 1,001 1,001 1,001 3,022 3,851 4,005 4,165 EBIT 5,278 5,480 5,017 5,031 4,545 4,608 4,596 5,301 5,853 5,523 5,437 6,232 20,807 19,049 23,046 23,885 Interest Other Income PBT 5,353 5,591 5,146 5,172 4,518 4,587 4,569 5,285 5,858 5,522 5,429 6,237 21,262 18,959 23,046 23,938 Tax 1,723 1,580 1,149 1, ,057 1,172 1,104 1,086 1,247 5,711 3,792 4,609 4,788 PAT bef. MI & Assoc. 3,630 4,011 3,997 3,913 3,614 3,670 3,655 4,228 4,687 4,417 4,343 4,989 15,552 15,167 18,437 19,150 Minority Interest Profit from Assoc Recurring PAT 3,555 3,912 3,905 3,879 3,545 3,601 3,586 4,159 4,618 4,348 4,274 4,920 15,251 14,891 18,161 18,874 Extraordinaries Reported PAT 3,534 3,909 3,896 3,887 3,533 3,589 3,574 4,147 4,606 4,336 4,262 4,908 15,226 14,843 18,113 18,826 EPS (Rs) Key Drivers Domestic Formulation Revenues 7,416 7,513 7,130 7,674 8,380 8,490 8,057 8,672 9,469 9,593 9,104 9,799 29,733 33,598 37,966 42,522 International Revenues 13,615 13,466 13,974 13,284 13,658 14,455 14,369 15,007 17,904 16,669 16,444 17,179 54,340 57,489 68,196 73,357 Revenues from JVs 1,459 1,423 1,002 1,459 1,459 1,423 1,002 1,459 1,605 1,565 1,102 1,605 5,343 5,343 5,877 6, Sequential Growth (%) Revenue 9 % -2 % -1 % 1 % 7 % 4 % -3 % 7 % 14 % -3 % -4 % 7 % COGS 6 % -5 % -1 % 3 % 6 % 12 % -3 % 6 % 13 % -3 % -4 % 6 % EBITDA 21 % 3 % -7 % 0 % -5 % 1 % 0 % 13 % 9 % -5 % -1 % 12 % EBIT 26 % 4 % -8 % 0 % -10 % 1 % 0 % 15 % 10 % -6 % -2 % 15 % Recurring PAT -1 % 10 % 0 % -1 % -9 % 2 % 0 % 16 % 11 % -6 % -2 % 15 % EPS 3 % 10 % 0 % -1 % -9 % 2 % 0 % 16 % 11 % -6 % -2 % 15 % Yearly Growth (%) Revenue 22 % 17 % 11 % 7 % 5 % 10 % 8 % 14 % 22 % 14 % 13 % 13 % 14 % 9 % 15 % 9 % EBITDA 60 % 48 % 29 % 17 % -8 % -10 % -4 % 8 % 24 % 17 % 16 % 15 % 36 % -4 % 18 % 4 % EBIT 71 % 58 % 33 % 20 % -14 % -16 % -8 % 5 % 29 % 20 % 18 % 18 % 42 % -8 % 21 % 4 % Recurring PAT 39 % 31 % 28 % 8 % 0 % -8 % -8 % 7 % 30 % 21 % 19 % 18 % 32 % -2 % 22 % 4 % EPS 47 % 41 % 41 % 12 % 0 % -8 % -8 % 7 % 30 % 21 % 19 % 18 % 32 % -2 % 22 % 4 % Margin (%) EBITDA 24 % 25 % 24 % 24 % 21 % 21 % 21 % 22 % 22 % 21 % 22 % 23 % 24 % 21 % 22 % 21 % EBIT 21 % 22 % 21 % 21 % 17 % 17 % 18 % 19 % 18 % 18 % 18 % 20 % 21 % 18 % 19 % 18 % PBT 21 % 23 % 21 % 21 % 17 % 17 % 17 % 19 % 18 % 18 % 18 % 20 % 22 % 18 % 19 % 18 % PAT 14 % 16 % 16 % 16 % 14 % 13 % 14 % 15 % 14 % 14 % 14 % 16 % 16 % 14 % 15 % 14 % May 15, 2016 Produced by ResearchDelta Advisors. Analyst: Nimish Mehta/Bharat Celly, nimish.researchdelta@equirus.com( / ) Page 5 of 10

6 Consolidated Financials Cadila Healthcare Ltd. Absolute Short Relative Underweight -8% ATR in 14 months P&L (Rs Mn) FY16A FY17E FY18E FY19E Balance Sheet (Rs Mn) FY16A FY17E FY18E FY19E Cash Flow (Rs Mn) FY16A FY17E FY18E FY19E Revenue 98, , , ,726 Equity Capital 1,024 1,024 1,024 1,024 PBT 21,262 18,959 23,046 23,938 Op. Expenditure 74,547 84,475 96, ,676 Reserve 52,885 64,069 77,720 91,909 Depreciation 3,022 3,851 4,005 4,165 EBITDA 23,829 22,900 27,051 28,050 Networth 53,909 65,093 78,744 92,932 Others Depreciation 3,022 3,851 4,005 4,165 Long Term Debt 23,131 23,431 23,812 24,281 Taxes Paid 5,711 3,792 4,609 4,788 EBIT 20,807 19,049 23,046 23,885 Def Tax Liability Change in WC -1,220-1,815-3,411-2,320 Interest Expense Minority Interest 1,989 2,265 2,541 2,817 Operating C/F 17,329 17,155 18,983 20,947 Other Income Account Payables 16,735 18,266 21,064 22,918 Capex -5,348-6,000-6,271-6,562 PBT 21,262 18,959 23,046 23,938 Other Curr Liabi 2,695 2,942 3,392 3,691 Change in Invest Tax 5,711 3,792 4,609 4,788 Total Liabilities & Equity 99, , , ,429 Others PAT bef. MI & Assoc. 15,552 15,167 18,437 19,150 Net Fixed Assets 44,660 43,010 41,293 39,508 Investing C/F -5,348-6,000-6,271-6,562 Minority Interest Capital WIP ,178 7,160 11,342 Change in Debt 11, Profit from Assoc Others Change in Equity Recurring PAT 15,251 14,891 18,161 18,874 Inventory 17,519 19,122 22,051 23,992 Others -17,030-3,649-4,450-4,622 Extraordinaires Account Receivables 13,476 14,709 16,962 18,456 Financing C/F -5,403-3,349-4,068-4,154 Reported PAT 15,226 14,843 18,113 18,826 Other Current Assets 9,568 10,325 11,802 12,841 Net change in cash 6,577 7,806 8,643 10,231 FDEPS (Rs) Cash 14,488 22,295 30,938 41,169 RoE (%) 32 % 25 % 25 % 22 % DPS (Rs) Total Assets 99, , , ,429 RoIC (%) 21 % 18 % 19 % 17 % CEPS (Rs) Non-cash Working Capital 21,133 22,948 26,359 28,680 Core RoIC (%) 23 % 22 % 25 % 24 % FCFPS (Rs) Cash Conv Cycle Div Payout (%) 25 % 25 % 25 % 25 % BVPS (Rs) WC Turnover P/E EBITDAM (%) 24 % 21 % 22 % 21 % FA Turnover P/B PATM (%) 16 % 14 % 15 % 14 % Net D/E P/FCFF Tax Rate (%) 27 % 20 % 20 % 20 % Revenue/Capital Employed EV/EBITDA Sales Growth (%) 14 % 9 % 15 % 9 % Capital Employed/Equity EV/Sales FDEPS Growth (%) 32 % -2 % 22 % 4 % Dividend Yield (%) 1.0 % 0.9 % 1.1 % 1.2 % TTM P/E vs. 2 yr forward EPS growth TTM EV/EBITDA vs. 2 yr forward EBITDA growth TTM P/B vs. 2 yr forward RoE EPS Growth 60% 50% 40% 30% 20% 10% 0% -10% 34x 24x 18x 12x 6x EBITDA Growth 45% 24x 40% 20x 35% 30% 15x 25% 20% 10x 15% 5x 10% 5% 0% RoE 10x 50% 7x 40% 6x 30% 5x 4x 20% 10% 0% Mar/08 Sep/08 Mar/09 Sep/09 Mar/10 Sep/10 Mar/11 Sep/11 Mar/12 Sep/12 Mar/13 Sep/13 Mar/14 Sep/14 Mar/15 Sep/15 Mar/16 Sep/16 Mar/17 Sep/17 Mar/18 Mar/08 Sep/08 Mar/09 Sep/09 Mar/10 Sep/10 Mar/11 Sep/11 Mar/12 Sep/12 Mar/13 Sep/13 Mar/14 Sep/14 Mar/15 Sep/15 Mar/16 Sep/16 Mar/17 Sep/17 Mar/18 Mar/08 Sep/08 Mar/09 Sep/09 Mar/10 Sep/10 Mar/11 Sep/11 Mar/12 Sep/12 Mar/13 Sep/13 Mar/14 Sep/14 Mar/15 Sep/15 Mar/16 Sep/16 Mar/17 Sep/17 Mar/18 May 15, 2016 Produced by ResearchDelta Advisors. Analyst: Nimish Mehta/Bharat Celly, nimish.researchdelta@equirus.com( / ) Page 6 of 10

7 Historical Consolidated Financials P&L (Rs Mn) FY13A FY14A FY15A FY16A Balance Sheet (Rs Mn) FY13A FY14A FY15A FY16A Cash Flow (Rs Mn) FY13A FY14A FY15A FY16A Revenue 63,581 72,240 86,513 98,376 Equity Capital 1,024 1,024 1,024 1,024 PBT 8,112 9,594 14,560 21,262 Op. Expenditure 52,324 60,239 68,956 74,547 Reserve 29,379 33,366 41,492 52,885 Depreciation 1,828 2,012 2,873 3,022 EBITDA 11,257 12,001 17,557 23,829 Networth 30,403 34,390 42,515 53,909 Others Depreciation 1,828 2,012 2,873 3,022 Long Term Debt 26,814 22,646 23,340 23,131 Taxes Paid 2,720 1,728 3,869 5,711 EBIT 9,429 9,989 14,685 20,807 Def Tax Liability 2,119 2,270 2, Change in WC -2, ,770-1,220 Interest Expense 1, Minority Interest 1,193 1,443 1,689 1,989 Operating C/F 6,034 8,870 9,936 17,329 Other Income Account Payables 6,558 9,108 10,909 16,735 Capex -7,133-4,576-4,955-5,348 PBT 8,112 9,594 14,560 21,262 Other Curr Liabi 7,704 10,008 9,905 2,695 Change in Invest Tax 1,195 1,060 2,594 5,711 Total Liabilities & Equity 74,791 79,865 90,471 99,210 Others PAT bef. MI & Assoc. 6,917 8,534 11,966 15,552 Net Fixed Assets 25,460 31,238 41,501 44,660 Investing C/F -6,823-4,222-4,647-5,348 Minority Interest Capital WIP 4,492 8, Change in Debt 6,285-2, ,626 Profit from Assoc Others 8, Change in Equity Recurring PAT 6,553 8,208 11,589 15,251 Inventory 12,136 13,675 15,357 17,519 Others -3,427-3,055-3,020-17,030 Extraordinaires Account Receivables 9,551 11,337 15,884 13,476 Financing C/F 2,858-5,287-3,511-5,403 Reported PAT 6,553 8,036 11,506 15,226 Other Current Assets 7,568 8,346 9,487 9,568 Net change in cash 2, ,778 6,577 EPS (Rs) Cash 6,754 6,132 7,911 14,488 RoE (%) 23 % 25 % 30 % 32 % DPS (Rs) Total Assets 74,790 79,865 90,471 99,210 RoIC (%) 15 % 15 % 19 % 21 % CEPS (Rs) Non-cash Working Capital 14,994 14,242 19,913 21,133 Core RoIC (%) 16 % 16 % 20 % 23 % FCFPS (Rs) Cash Conv Cycle Div Payout (%) 26 % 21 % 15 % 25 % BVPS (Rs) WC Turnover P/E EBITDAM (%) 18 % 17 % 20 % 24 % FA Turnover P/B PATM (%) 10 % 11 % 13 % 16 % Net D/E P/FCFF Tax Rate (%) 15 % 11 % 18 % 27 % Revenue/Capital Employed EV/EBITDA Sales growth (%) 21 % 14 % 20 % 14 % Capital Employed/Equity EV/Sales FDEPS growth (%) 0 % 25 % 41 % 32 % Dividend Yield (%) 2.3 % 2.3 % 2.3 % 1.0 % May 15, 2016 Produced by ResearchDelta Advisors. Analyst: Nimish Mehta/Bharat Celly, nimish.researchdelta@equirus.com( / ) Page 7 of 10

8 Equirus Securities Pankaj Sharma Executive Director /41 Research Analysts Sector/Industry Equity Sales Anirvan Sarkar Banking & Financial Services Vishad Turakhia Ashutosh Tiwari Auto, Metals & Mining Vibhor Rastogi Devam Modi Power & Infrastructure Subham Sinha Dhaval Dama FMCG, Mid-Caps Sweta Sheth Maulik Patel Oil and Gas Dealing Room Nimish Mehta Pharma Ashish Shah Umesh Raut Industrials Ilesh Savla Associates Jigar Chokshi Ankit Choudhary Manoj Kejriwal Manoj Gori Sandip Amrutiya Meet Chande Compliance Officer Parva Soni Smita Sharma Pranav Mehta Raj Kantawala Ram Varun Saylee Warade Vikas Jain Rating & Coverage Definitions: Absolute Rating LONG : Over the investment horizon, ATR >= Ke for companies with Free Float market cap > Rs 5 billion and ATR >= 20% for rest of the companies SHORT: ATR <= negative 5% over investment horizon TRADE: Stocks that do not meet the criteria for either LONG or SHORT Relative Rating OVERWEIGHT: Likely to outperform the benchmark by at least 5% over investment horizon BENCHMARK: likely to perform in line with the benchmark UNDERWEIGHT: likely to under-perform the benchmark by at least 5% over investment horizon Target Price and Investment Horizon Target Price is a point value for stocks with Absolute rating of LONG or SHORT and a range value for stocks rated TRADE. Investment Horizon is set at a minimum 3 months to maximum 15 months with target date falling on last day of a calendar quarter. Lite vs. Regular Coverage vs. Spot Coverage We aim to keep our rating and estimates updated at least once a quarter for Regular Coverage stocks. Generally, we would have access to the company and we would maintain detailed financial model for Regular coverage companies. We intend to publish updates on Lite coverage stocks only an opportunistic basis and subject to our ability to contact the management. Our rating and estimates for Lite coverage stocks may not be current. Spot coverage is meant for one-off coverage of a specific company and in such cases, earnings forecast and target price are optional. Spot coverage is meant to stimulate discussion rather than provide a research opinion. Registered Office: Equirus Securities Private Limited Unit No. 1201, 12th Floor, C Wing, Marathon Futurex, N M Joshi Marg, Lower Parel, Mumbai Tel. No: +91 (0) Fax No: +91- (0) Corporate Office: 3rd floor, House No. 9, Magnet Corporate Park, Near Zydus Hospital, B/H Intas Sola Bridge, S.G. Highway Ahmedabad May 15, 2016 Produced by ResearchDelta Advisors. Analyst: Nimish Mehta/Bharat Celly, nimish.researchdelta@equirus.com( / ) Page 8 of 10 Gujarat Tel. No: +91 (0) Fax No: +91 (0)

9 2016 Equirus Securities Private Limited. All rights reserved. For Private Circulation only. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Equirus Securities Private Limited Analyst Certification I, Nimish Mehta, author to this report, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities.i also certify that no part ofmy compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. Disclaimers Equirus Securities Private Limited (ESPL) having Corporate Identification Number U65993MH2007PTC is registered in India with Securities and Exchange Board of India (SEBI) as a trading member on the Capital Market (Reg. No. INB ), Futures & Options Segment (Reg. No.INF ) of the National Stock Exchange of India Ltd. (NSE) and on Cash Segment (Reg. No.INB ) of Bombay Stock Exchange Limited (BSE).ESPL is also registered with SEBI as Research Analyst under SEBI (Research Analyst) Regulations, 2014 (Reg. No. INH ). There are no disciplinary actions that have been taken by any regulatory authority. ESPL is a subsidiary of Equirus Capital Pvt. Ltd. (ECPL) which is registered with SEBI as Category I Merchant Banker. ESPL/its affiliates provide investment banking services including but not limited to Private Equity, Mergers & Acquisitions, Structured Finance and Institutional Equities. ESPL/its affiliates might have, managed or co-managed public offering of securities of the subject company or have received a mandate from the subject company or might have received compensation from the subject company for investment banking or brokerage services in the past twelve months. ESPL & its affiliates, their directors and employees may from time to time have positions or options in the company and buy or sell the securities of the company (ies) mentioned herein. ESPL or its Analyst did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ESPL nor Research Analysts have any material conflict of interest at the time of publication of this report. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. ESPL has not been engaged in market making activity for the subject company. Research Analyst might have served as an employee of the subject company in the past. 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10 Disclosures Cadila Healthcare Ltd. Absolute Short Relative Underweight -8% ATR in 14 months Disclosure of Interest statement for the subject Company Yes/No If Yes, nature of such interest Analyst/ESPL/Associate/Relatives financial interest Analyst/ESPL/Associate/Relatives actual/beneficial ownership of 1% or more Analyst/ESPL/Associate/Relatives material conflict of interest Whether ECPL managed any public offering in past 12 months * Associate means individual who assist Analyst No No No No May 15, 2016 Produced by ResearchDelta Advisors. Analyst: Nimish Mehta/Bharat Celly, nimish.researchdelta@equirus.com( / ) Page 10 of 10