Lupin Ltd. Pharmaceuticals

Transcription

1 2018 Equirus All rights reserved Rating Information Price (Rs) 751 Target Price (Rs) 759 Target Date 31st Mar 19 Target Set On 15th May'18 Implied yrs of growth (DCF) 20 Fair Value (DCF) 708 Fair Value (DDM) 194 Ind Benchmark BSETHC Model Portfolio Position - Stock Information Market Cap (Rs Mn) 3,39,439 Free Float (%) % 52 Wk H/L (Rs) 1327/ Avg Daily Volume (1yr) 20,95,917 Avg Daily Value (Rs Mn) 1,975 Equity Cap (Rs Mn) 904 Face Value (Rs) 2 Bloomberg Code LPC IN Ownership Recent 3M 12M Promoters 47.0 % 0.0 % 0.3 % DII 12.2 % 0.1 % 2.8 % FII 25.4 % -0.2 % -6.5 % Public 15.4 % 0.1 % 3.3 % Price % 1M 3M 12M Absolute -5.5 % -9.0 % % Vs Industry -2.7 % -1.6 % % Vs CDH -1.6 % -7.2 % % Vs DRRD -4.5 % -9.3 % % Consolidated Quarterly EPS forecast Rs/Share 1Q 2Q 3Q 4Q EPS (18A) EPS (19E) Lupin Ltd. Absolute : Reduce Relative : Underweight 4QFY18 Results: Estimate (), TP (), Rating() Regular Coverage 1% upside in 10 months No signs of revival before FY20 Maintain REDUCE Lupin s Q4 operational performance was in-line but the internals are weak. While EBITDA at Rs. 7.1bn was in-line (EE: Rs6.99bn), it is driven by lower R&D costs (down by ~Rs. 750mn or 200bps qoq). Core EBITDA, in our view, is weak given continued pressure in the US market, lower India sales and Solosec related cost built-up (likely to recur in 1QFY19). On a relatively high US base in FY18 which includes one-off sales from gmethergene and gtamiflu and the impending warning letter at Goa and Indore plants, we expect Lupin s US business to decline in FY19, further pressurizing EBITDA. Key launches granexa, glevothyroxin and gminocycline are all backended and unlikely to compensate. We cut our FY19/20 estimates by 2%/10% and maintain Reduce with a Mar 19 TP of Rs. 759, valuing the stock at 22x P/E. Revenue in-line Sales stood at Rs bn (+1%qoq/-5%yoy) and was in-line with EE. While India sales were weak (+10%yoy), US sales at US$ 224mn positively surprised (US$14mn higher than EE); possibly led by channel filing in gnamenda XR and strong gtamiflu sales given the strong flu season in the US; both these products are likely to decline in ensuing quarters as multiple players have come in gnamenda XR and flu season is over. Other geographies were mixed with LATAM, EMEA outperforming but Japan remaining weak. But internals are weak: EBITDA stood at ~Rs7.1bn with margins of 17.6%. Gross margins improved by 125bps qoq owing to better US sales but were offset by higher other expenses (Solosec built up costs). On the net level, Lupin booked a loss of Rs. 7.84bn, owing to an impairment charge of Rs. 14.6bn related to Gavis (pricing pressure in the Opioid space which consists large part of Gavis portfolio) and related deferred tax adjustments (higher by Rs. 3.2bn due to Gavis + Rs405mn charge due to new US tax regime). Commentary suggests weakness may persist in the medium term: While management guided to some green shoots in the US business with large players like Teva, Mylan etc rationalizing their portfolios, price erosion may continue to remain high at high single digits in the interim. Meanwhile, we believe Lupin s pipeline is thin, with the three key FY19 launches glevothyroxin, granexa and gminocycline all likely to be at the fag end of the year. Further, gmethergene is likely to see competition in FY19, which along-with Solosec built up cost (launch in 1 st week of June-18) and price erosion in the base portfolio, will keep margins muted. Management expects 19-20% margins in FY19. Change in estimates Pharmaceuticals Rs. Mn FY19E Chg (%) FY20E Chg (%) Sales 1,65,767-2% 1,86,294 0% EBITDA 32,605-2% 36,535-9% EPS (Rs.) 35-2% 40-10% Consolidated Financials Rs. Mn YE Mar FY18A FY19E FY20E FY21E Sales 1,58,310 1,65,767 1,86,294 2,06,612 EBITDA 30,185 32,605 36,535 40,095 Depreciation 10,859 11,439 12,461 12,461 Interest Expense 2,044 2,063 2,063 2,063 Other Income 2,794 1,958 2,188 2,495 Reported PAT 2,512 15,609 17,963 20,863 Recurring PAT 13,933 15,609 17,963 20,863 Total Equity 1,35,771 1,48,570 1,63,300 1,80,407 Gross Debt 68,763 68,763 68,763 68,763 Cash 16,670 28,454 34,515 41,605 Rs. Mn YE Mar FY18A FY19E FY20E FY21E Earnings Book Value Dividends FCFF P/E (x) P/B (x) EV/EBITDA (x) ROE (%) 10 % 11 % 12 % 12 % Core ROIC (%) 7 % 8 % 8 % 9 % EBITDA Margin (%) 19 % 20 % 20 % 19 % Net Margin (%) 9 % 9 % 10 % 10 % May 16, 2018 Analyst: PrafulBohra( / ), Bharat Celly ( / ) Page 1 of 10 Before reading this report, you must refer to the disclaimer on the last page.

2 Other highlights Warning letter update: LPC is about to complete its remediation and will request a meeting with USFDA subsequently. R&D spend for FY18 was Rs. 18.5bn (11.5% of net revenues) and FY19 will be around similar levels (Rs bn). 70% of R&D is spent on generics and 20% on bio-similars. Solosec: LPC will launch Solosec in 1 st week of Jun 18. Per the management, the pre-launch feedback from practitioners and payors has been positive so far and they have built a field force of around 166 MR s to market the drug. Biologics: LPC has already filed Ertapenem in Japan and soon will be filing in Europe as well. USA filing will be towards the end of FY20. Depending on how the market shapes up, they will decide on the interchangeability tests for the US market. For other markets i.e. Europe and Japan they will be partnering for marketing. Capex for FY20 would be below Rs. 15bn range. Management stated majority of their expenditure has already been done. ANDA approval guidance: Although LPC has been pruning their pipeline, they maintained their guidance of filing each year. Management stated their focus would be only generics where competition would be less than 5-6 players. They are targeting complex injectables and inhalers in the complex products. Inhalers update: LPC mentioned they have filed for Tiotropium inhaler. On Albuterol, they have already answered the queries and remain optimistic over the approval. They are expecting approval in the fiscal, while the launch would be some time next year. They have settlement on the product. Exhibit 1: Quarterly sales break-up Particulars (Rs Mn) 4QFY17 4QFY18 North America 19,007 14,990 Growth y-o-y (%) 21% As a % of sales 49% 41% India 8,788 9,647 Growth y-o-y (%) 10% As a % of sales 23% 26% APAC 6,118 6,637 Growth y-o-y (%) 8% As a % of sales 16% 18% EMEA 3,012 3,513 Growth y-o-y (%) 17% As a % of sales 8% 10% LATAM 1,269 1,645 Growth y-o-y (%) 30% As a % of sales 3% 4% ROW Growth y-o-y (%) -11% As a % of sales 2% 1% Total 38,804 36,977 Growth y-o-y (%) -5% May 16, 2018 Analyst: Praful Bohra( / )/ Bharat Celly ( / ) Page 2 of 10

3 Quarterly performance, consolidated % Change Q4FY18 Q4FY18E Q3FY18 Q4FY17 Q4FY18E Q3FY18 Q4FY17 Net Sales 40,338 39,365 39,756 42,533 2% 1% -5% Comments Largely in-line. US compensates for lower domestic revenues. (Inc)/ Decrease in Stock in Trade and WIP , % -595% -57% Consumption of Raw and Packing Materials 8,754 6,992 7,407 7,313 25% 18% 20% Purchase of Traded Goods 5,596 6,425 6,374 6,233-13% -12% -10% Employee Cost 7,287 7,100 6,931 7,078 3% 5% 3% Manufacturing and Other Expenses 12,338 11,800 12,015 15,791 5% 3% -22% Total Expenditures % 1% -4% EBITDA % 3% -9% In-line with EE. Depreciation 2,728 2,800 2,804 2,674-3% -3% 2% EBIT 4,359 4,189 4,080 5,140 4% 7% -15% Interest % 8% 44% Other Income 1, % 410% 220% Significantly higher. PBT 5,223 3,934 3,824 5,187 33% 37% 1% Tax 1,590 1,101 1,608 1,367 44% -1% 16% PAT before MI & Associates % 64% -5% Minority Interest % -5300% 163% Recurring PAT 3,586 2,833 2,217 3,802 27% 62% -6% Extra ordinaries 11, Reported PAT -7,835 2,833 2,217 3, % -453% -306% EPS (Rs) % 62% -6% Led by higher other income. Gross Margin 66% 66% 65% 72% EBITDA Margin 18% 18% 17% 18% EBIT Margin 11% 11% 10% 12% PBT Margin 13% 10% 10% 12% PAT Margin -19% 7% 6% 9% -2,662-2,500-2,836 Tax Rate 30% 28% 42% 26% 244-1, May 16, 2018 Analyst: Praful Bohra( / )/ Bharat Celly ( / ) Page 3 of 10

4 Company Snapshot How we differ from Consensus EPS Sales PAT Key estimates: - Equirus Consensus % Diff Comment FY19E % We are below consensus as we expect a FY20E % FY19E 1,65,767 1,72,038-4 % FY20E 1,86,294 1,92,795-3 % FY19E 15,609 17, % FY20E 17,963 21, % few high-value launches in FY19E and Solosec revenues to build up only gradually (as against associated costs to be incurred in the coming quarters) Segment FY18A FY19E FY20E FY21E US 58,901 54,425 63,563 68,763 Domestic 41,252 47,440 54,556 62,739 Japan 23,188 24,348 25,565 28,633 South Africa 4,184 4,393 4,613 4,844 Emerging Markets 9,928 11,418 13,130 15,100 Europe 7,067 7,915 8,865 9,929 APIs 10,931 11,478 12,051 12,654 Risks to Our View Launch of some undisclosed high-value products in the US that can lead to better margin expansion. Increase in price and market share of existing products. Key Triggers Additional competition in existing high-value products in the US, which will lead to a sharper decline in US revenues. Sensitivity to Key Variables % Change % Impact on EPS Revenue -1 % 5 % EBITDAM 1 % 5 % DCF Valuations & Assumptions Rf Beta Ke Term. Growth Debt/IC in Term. Yr 6.9 % % 2.5 % 29.0 % - FY19E FY20E FY21-23E FY24-28E FY29-38E Sales Growth 5 % 12 % 7 % 5 % 4 % NOPAT Margin 10 % 10 % 10 % 13 % 13 % IC Turnover RoIC 7.5 % 8.1 % 10.9 % 11.7 % 11.5 % Years of strong growth Valuation as on date (Rs) Valuation as of 31 st Mar Based on DCF, assuming 20 years of high growth and ~11% average ROIC, we derive our current fair value of Rs 650 and a 31 Mar 19 fair value of Rs 708. Company Description: Headquartered in Mumbai, Lupin is a pharmaceutical company producing anddeveloping a wide range of branded and generic formulations and APIs. The Company is a significant player in the Cardiovascular, Diabetology, Asthma, Pediatric, CNS, GI, Anti Infective and NSAID space and holds globalleadership positions in the Anti TB and Cephalosporin segment. Lupin is the 5 th largest and fastest growing generics player in the US (5.1% market share by prescriptions, IMSHealth) and the 3 rd largest Indian pharmaceutical company by sales. The Company is also the fastest growing top10 generic pharmaceutical players in Japan and South Africa (IMS). Comparable valuation Mkt Cap Price Target EPS P/E BPS P/B RoE Div Yield Company Reco. CMP Rs. Mn. Target Date FY17A FY19E FY20E FY17A FY19E FY20E FY17A FY19E FY17A FY19E FY20E FY17A FY19E Lupin Reduce 751 3,39, st Mar % 11 % 12 % 0.7 % 0.7 % Cadila Healthcare Long 384 3,93, th Jun % 21 % 23 % 0.7 % 0.8 % Dr Reddy's ADD 2,009 3,33,150 2,776 30th Jun' % 7 % 14 % 1.0 % 0.5 % May 16, 2018 Analyst: Praful Bohra( / )/ Bharat Celly ( / ) Page 4 of 10

5 Consolidated Quarterly Earnings Forecast and Key Drivers Rs in Mn 1Q18A 2Q18A 3Q18A 4Q18A 1Q19E 2Q19E 3Q19E 4Q19E 1Q20E 2Q20E 3Q20E 4Q20E FY18A FY19E FY20E FY21E Revenue 38,696 39,520 39,756 40,338 39,582 41,947 41,369 42,869 44,351 47,550 46,970 47,423 1,58,310 1,65,767 1,86,294 2,06,612 (Inc)/ Decrease in Stock in Trade and WIP 1,159 1, , ,172 1,444 Consumption of Raw and Packing Materials 6,927 6,466 7,407 8,754 6,351 6,753 6,654 6,909 6,760 7,703 7,604 7,681 29,554 26,667 29,749 33,116 Purchase of Traded Goods 4,240 5,353 6,374 5,596 6,612 7,031 6,928 7,194 6,959 7,930 7,828 7,907 21,562 27,765 30,624 33,701 EBITDA 26,370 26,654 25,829 26,713 26,479 28,023 27,645 28,601 30,204 31,670 31,290 31,587 1,05,566 1,10,747 1,24,750 1,38,350 Depreciation 2,605 2,722 2,804 2,728 2,860 2,860 2,860 2,860 3,115 3,115 3,115 3,115 10,859 11,439 12,461 12,461 EBIT 23,765 23,933 23,026 23,984 23,619 25,163 24,786 25,741 27,089 28,555 28,174 28,471 94,707 99,309 1,12,289 1,25,890 Interest ,044 2,063 2,063 2,063 Other Income , ,794 1,958 2,188 2,495 PBT 23,645 24,194 22,770 24,848 23,593 25,137 24,759 25,715 27,120 28,586 28,206 28,503 95,457 99,204 1,12,415 1,26,322 Tax 1,368 1,541 1,608 1,590 1,056 1,364 1,369 1,476 1,323 1,581 1,594 1,552 6,106 5,265 6,050 7,017 PAT bef. MI & Assoc. 22,277 22,653 21,162 23,258 22,537 23,772 23,390 24,239 25,798 27,005 26,611 26,950 89,351 93,938 1,06,365 1,19,305 Minority Interest Profit from Assoc Recurring PAT 22,265 22,674 21,163 23,211 22,490 23,726 23,344 24,192 25,751 26,959 26,565 26,904 89,314 93,751 1,06,178 1,19,118 Extraordinaries , , Reported PAT 22,265 22,674 21,163 11,790 22,490 23,726 23,344 24,192 25,751 26,959 26,565 26,904 77,893 93,751 1,06,178 1,19,118 EPS (Rs) Key Drivers Domestic Formulations 9,324 11,593 10,688 9,647 10,723 13,332 12,291 11,094 12,331 15,332 14,135 12,758 41,252 47,440 54,556 62,739 US 16,000 13,611 14,300 14,990 13,520 13,282 13,140 14,484 15,744 15,865 15,854 16,099 58,901 54,425 63,563 68,763 EU 1,423 1,678 1,693 2,273 1,594 1,879 1,896 2,546 1,785 2,105 2,124 2,851 7,067 7,915 8,865 9,929 Japan 5,611 5,676 6,347 5,554 5,892 5,960 6,664 5,831 6,186 6,258 6,998 6,123 23,188 24,348 25,565 28,633 APIs 2,793 2,650 2,680 2,808 2,933 2,783 2,814 2,948 3,079 2,922 2,955 3,096 10,931 11,478 12,051 12,654 Sequential Growth (%) Revenue -9 % 2 % 1 % 1 % -2 % 6 % -1 % 4 % 3 % 7 % -1 % 1 % (Inc)/ Decrease in Stock in Trade and WIP -168 % -10 % -86 % -595 % -119 % 0 % 0 % 17 % 159 % -42 % 0 % 0 % EBITDA 237 % 1 % -3 % 3 % -1 % 6 % -1 % 3 % 6 % 5 % -1 % 1 % EBIT 362 % 1 % -4 % 4 % -2 % 7 % -1 % 4 % 5 % 5 % -1 % 1 % Recurring PAT 558 % 2 % -7 % 10 % -3 % 5 % -2 % 4 % 6 % 5 % -1 % 1 % EPS -6 % 27 % -51 % 62 % -13 % 30 % 0 % 8 % -10 % 20 % 1 % -3 % Yearly Growth (%) Revenue -13 % -8 % -11 % -5 % 2 % 6 % 4 % 6 % 12 % 13 % 14 % 11 % -10 % 5 % 12 % 11 % EBITDA 102 % 159 % 112 % 242 % 0 % 5 % 7 % 7 % 14 % 13 % 13 % 10 % 384 % 5 % 13 % 11 % EBIT 115 % 193 % 134 % 367 % -1 % 5 % 8 % 7 % 15 % 13 % 14 % 11 % 645 % 5 % 13 % 12 % Recurring PAT 178 % 257 % 300 % 586 % 1 % 5 % 10 % 4 % 15 % 14 % 14 % 11 % 6,239 % 5 % 13 % 12 % EPS -59 % -31 % -65 % -6 % -13 % -11 % 83 % 22 % 26 % 16 % 17 % 5 % -46 % 12 % 15 % 16 % Margin (%) EBITDA 68 % 67 % 65 % 66 % 67 % 67 % 67 % 67 % 68 % 67 % 67 % 67 % 67 % 67 % 67 % 67 % EBIT 61 % 61 % 58 % 59 % 60 % 60 % 60 % 60 % 61 % 60 % 60 % 60 % 60 % 60 % 60 % 61 % PBT 61 % 61 % 57 % 62 % 60 % 60 % 60 % 60 % 61 % 60 % 60 % 60 % 60 % 60 % 60 % 61 % PAT 58 % 57 % 53 % 58 % 57 % 57 % 56 % 56 % 58 % 57 % 57 % 57 % 56 % 57 % 57 % 58 % May 16, 2018 Analyst: Praful Bohra( / )/ Bharat Celly ( / ) Page 5 of 10

6 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 Sep-18 Mar-19 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 Sep-18 Mar-19 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 Sep-18 Mar-19 Consolidated Financials Lupin Ltd. Absolute Reduce Relative Underweight 1% upside in 10 months P&L (Rs Mn) FY18A FY19E FY20E FY21E Balance Sheet (Rs Mn) FY18A FY19E FY20E FY21E Cash Flow (Rs Mn) FY18A FY19E FY20E FY21E Revenue 1,58,310 1,65,767 1,86,294 2,06,612 Equity Capital PBT 20,076 21,061 24,200 28,067 Op. Expenditure 1,28,125 1,33,162 1,49,759 1,66,516 Reserve 1,34,866 1,47,665 1,62,395 1,79,503 Depreciation 10,859 11,439 12,461 12,461 EBITDA 30,185 32,605 36,535 40,095 Networth 1,35,771 1,48,570 1,63,300 1,80,407 Others -11, Depreciation 10,859 11,439 12,461 12,461 Long Term Debt 68,763 68,763 68,763 68,763 Taxes Paid 6,106 5,265 6,050 7,017 EBIT 19,326 21,166 24,075 27,635 Def Tax Liability 11,682 23,827 23,827 23,827 Change in WC -6,049-10,545-7,316-8,665 Interest Expense 2,044 2,063 2,063 2,063 Minority Interest Operating C/F 7,359 16,689 23,295 24,845 Other Income 2,794 1,958 2,188 2,495 Account Payables 25,754 25,626 28,664 31,793 Capex -5,344-14,073-14,000-14,000 PBT 20,076 21,061 24,200 28,067 Other Curr Liabi 20,684 11,051 12,420 13,774 Change in Invest Tax 6,106 5,265 6,050 7,017 Total Liabilities & Equity 2,63,054 2,78,424 2,97,748 3,19,526 Others PAT bef. MI & Assoc. 13,970 15,796 18,150 21,050 Net Fixed Assets 79,346 81,908 83,447 84,987 Investing C/F -5,222-14,000-14,000-14,000 Minority Interest Capital WIP 25,982 25,982 25,982 25,982 Change in Debt -10, Profit from Assoc Others 34,801 34,801 34,801 34,801 Change in Equity Recurring PAT 13,933 15,609 17,963 20,863 Inventory 36,625 38,149 40,832 45,285 Others -4,073 9,335-3,233-3,755 Extraordinaires 11, Account Receivables 51,922 54,368 61,100 67,764 Financing C/F -13,843 9,335-3,233-3,755 Reported PAT 2,512 15,609 17,963 20,863 Other Current Assets 17,949 14,763 17,071 19,103 Net change in cash -11,706 12,024 6,061 7,090 FDEPS (Rs) Cash 16,429 28,454 34,515 41,605 RoE (%) 10 % 11 % 12 % 12 % DPS (Rs) Total Assets 2,63,054 2,78,424 2,97,748 3,19,526 RoIC (%) 7 % 7 % 8 % 8 % CEPS (Rs) Non-cash Working Capital 60,058 70,603 77,919 86,584 Core RoIC (%) 7 % 8 % 8 % 9 % FCFPS (Rs) Cash Conv Cycle Div Payout (%) 108 % 18 % 18 % 18 % BVPS (Rs) WC Turnover P/E EBITDAM (%) 19 % 20 % 20 % 19 % FA Turnover P/B PATM (%) 9 % 9 % 10 % 10 % Net D/E P/FCFF Tax Rate (%) 30 % 25 % 25 % 25 % Revenue/Capital Employed EV/EBITDA Sales Growth (%) -10 % 5 % 12 % 11 % Capital Employed/Equity EV/Sales FDEPS Growth (%) -46 % 12 % 15 % 16 % Dividend Yield (%) 0.7 % 0.7 % 0.8 % 0.9 % 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 50% EBITDA Growth % % 45x % 28x 3500 RoE 30% 30x % 22x % 22x % 12x 10% 19x % x x 0% % 6x % -10% % -20% 0-30% % 0 50% 40% 6x 30% 5x 20% 4x 10% 0% 11x 7x May 16, 2018 Analyst: Praful Bohra( / )/ Bharat Celly ( / ) Page 6 of 10

7 Historical Consolidated Financials Lupin Ltd. Absolute Reduce Relative Underweight 1% upside in 10 months P&L (Rs Mn) FY15A FY16A FY17A FY18A Balance Sheet (Rs Mn) FY15A FY16A FY17A FY18A Cash Flow (Rs Mn) FY15A FY16A FY17A FY18A Revenue 1,27,700 1,42,085 1,74,943 1,58,310 Equity Capital PBT 34,149 34,330 35,349 20,076 Op. Expenditure 91,504 1,04,752 1,53,113 1,28,125 Reserve 87,842 1,08,943 1,34,073 1,34,866 Depreciation 4,347 4,635 9,122 10,859 EBITDA 36,196 37,333 21,831 30,185 Networth 88,741 1,09,844 1,34,976 1,35,771 Others -3, ,421 Depreciation 4,347 4,635 9,122 10,859 Long Term Debt 4,710 71,193 79,521 68,763 Taxes Paid 7,984 11,536 9,785 6,106 EBIT 31,849 32,698 12,709 19,326 Def Tax Liability 4,085 6,602 13,068 11,682 Change in WC 1,302-27, ,049 Interest Expense ,525 2,044 Minority Interest Operating C/F 28, ,456 7,359 Other Income 2,398 2,078 1,065 2,794 Account Payables 19,561 21,919 25,889 25,754 Capex -5,049-80,074-28,942-5,344 PBT 34,149 34,330 35,349 20,076 Other Curr Liabi 14,040 14,500 12,274 20,684 Change in Invest -8, Tax 9,704 11,536 9,785 6,106 Total Liabilities & Equity 1,31,377 2,24,378 2,66,073 2,63,054 Others 1, PAT bef. MI & Assoc. 24,445 22,795 25,564 13,970 Net Fixed Assets 27,201 86,379 1,01,410 79,346 Investing C/F -11,780-80,104-29,107-5,222 Minority Interest Capital WIP 5, ,150 25,982 Change in Debt ,483 8,328-10,759 Profit from Assoc Others 17,351 39,402 37,206 34,801 Change in Equity 413 2,350 3, Recurring PAT 24,033 22,704 25,575 13,933 Inventory 25,036 31,787 36,423 36,625 Others -1,632-1,444 2,426-4,073 Extraordinaires ,421 Account Receivables 26,566 45,498 43,073 51,922 Financing C/F -2,211 67,389 14,387-13,843 Reported PAT 24,033 22,704 25,575 2,512 Other Current Assets 8,092 12,912 12,675 17,949 Net change in cash 14,524-12,973 19,736-11,706 EPS (Rs) Cash 21,372 8,399 28,135 16,429 RoE (%) 30 % 23 % 21 % 10 % DPS (Rs) Total Assets 1,31,377 2,24,378 2,66,073 2,63,054 RoIC (%) 27 % 16 % 13 % 7 % CEPS (Rs) Non-cash Working Capital 26,092 53,779 54,009 60,058 Core RoIC (%) 30 % 17 % 13 % 7 % FCFPS (Rs) Cash Conv Cycle Div Payout (%) 13 % 17 % 16 % 108 % BVPS (Rs) WC Turnover P/E EBITDAM (%) 28 % 26 % 12 % 19 % FA Turnover P/B PATM (%) 19 % 16 % 15 % 9 % Net D/E P/FCFF Tax Rate (%) 28 % 34 % 28 % 30 % Revenue/Capital Employed EV/EBITDA Sales growth (%) 13 % 11 % 23 % -10 % Capital Employed/Equity EV/Sales FDEPS growth (%) 31 % -6 % 13 % -46 % Dividend Yield (%) 0.8 % 1.0 % 1.0 % 0.7 % May 16, 2018 Analyst: Praful Bohra( / )/ Bharat Celly ( / ) Page 7 of 10

8 Equirus Securities Research Analysts Sector/Industry Equity Sales Abhishek Shindadkar IT Services VishadTurakhia Ashutosh Tiwari Auto, Metals & Mining SubhamSinha DepeshKashyap Mid-Caps Viral Desai Dhaval Dama FMCG, Mid-Caps Viraj Mehta Manoj Gori Consumer Durables Dealing Room Maulik Patel Oil and Gas Ashish Shah Pranav Mehta Building Materials IleshSavla PrafulBohra Pharmaceuticals Manoj Kejriwal Rohan Mandora Banking & Financial Services Dharmesh Mehta Associates Compliance Officer Ankit Choudhary Jay Soni Bharat Celly Corporate Communications Harshit Patel MahdokhtBharda Hetal Bhatia Meet Chande Nishant Bagrecha Ronak Soni Samkit Shah Shreepal Doshi Varun Baxi 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 ADD: ATR >= 5% but less than Ke over investment horizon REDUCE: ATR >= negative 10% but <5% over investment horizon SHORT: ATR < negative 10% over investment horizon 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 Investment Horizon Investment Horizon is set at a minimum 3 months to maximum 18 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 Gujarat Tel. No: +91 (0) Fax No: +91 (0) May 16, 2018 Analyst: Praful Bohra( / )/ Bharat Celly ( / ) Page 8 of 10

9 2018 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 We, Praful Bohra/ Bharat Celly, authors 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 of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. Disclosures 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 ), as a Portfolio Manager under SEBI (Portfolio Managers Regulations, 1993 (Reg. No.INP ) and as a Depository Participant of the Central Depository Services (India) Limited (Reg. No.IN-DP ). There are no disciplinary actions taken by any regulatory authority against ESPL. ESPL is a subsidiary of Equirus Capital Pvt. Ltd. (ECPL) which is registered with SEBI as Category I Merchant Banker and provides investment banking services including but not limited to merchant banking services, private equity, mergers & acquisitions and structured finance. As ESPL and its associates are engaged in various financial services business, it might have: - (a) received compensation (except in connection with the preparation of this report) from the subject company for investment banking or merchant banking or brokerage services in the past twelve months;(b) managed or co-managed public offering of securities for the subject company in the past twelve months; or (c) have received a mandate from the subject company; or (d) might have other financial, business or other interests in entities including the subject company (ies) mentioned in this Report. ESPL & its associates, 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 and its associates collectively do not own (in their proprietary position) 1% or more of the equity securities of the subject company mentioned in the report as the last day of the month preceding the publication of the research report. ESPL or its Analyst or Associates 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. The Research Analyst engaged in preparation of this Report:- (a) has not received any compensation from the subject company in the past twelve months; (b) has not managed or co-managed public offering of securities for the subject company in the past twelve months; (c) has not received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months; (d) has not received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months; (e) has not received any compensation or other benefits from the subject company or third party in connection with the research report; (f) might have served as an officer, director or employee of the subject company; (g) is not engaged in market making activity for the subject company. 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This document has been prepared solely for information purpose and does not constitute a solicitation to any person to buy, sell or subscribe any security. ESPL or its affiliates are not soliciting any action based on this report. The information and opinions contained herein is from publicly available data or based on information obtained in good faith from sources believed to be reliable but ESPL provides no guarantee as to its accuracy or completeness. The information contained herein is as on date of this report, and is subject to change or modification and any such changes could impact our interpretation of relevant information contained herein. While we would endeavour to update the information herein on reasonable basis, ESPL and its affiliates, their directors and employees are under no obligation to update or keep the information current. Also there may be regulatory, compliance, or other reasons that may prevent ESPL and its group companies from doing so. This document is prepared for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document including the merits and risks involved. This document is intended for general circulation and does not take into account the specific investment objectives, financial situation or particular needs of any particular person. ESPL and its group companies, employees, directors and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. ESPL/its affiliates do and seek to do business with companies covered in its research report. Thus, investors should be aware that the firm may have conflict of interest. May 16, 2018 Analyst: Praful Bohra( / )/ Bharat Celly ( / ) Page 9 of 10

10 A graph of daily closing prices of securities is available at and (Choose a company from the list on the browser and select the three years period in the price chart). Disclosure of Interest statement for the subject Company Yes/No If Yes, nature of such interest Research Analyst or Relatives financial interest Research Analyst or Relatives actual/beneficial ownership of 1% or more Research Analyst or Relatives material conflict of interest No No No Disclaimer for U.S. Persons ESPL/its affiliates are not a registered broker dealer under the U.S. Securities Exchange Act of 1934, as amended (the 1934 act ) and under applicable state laws in the United States. In addition Equirus is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the Acts ), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by Equirus, including the products and services described herein are not available to or intended for U.S. persons. The information contained in this Report is not intended for any person who is a resident of the United States of America or a resident of any jurisdiction, the laws of which imposes prohibition on soliciting the securities business in that jurisdiction without going through the registration requirements and/ or prohibit the use of any information contained in this report. This Report and its respective contents do not constitute an offer or invitation to purchase or subscribe for any securities or solicitation of any investments or investment services and/or shall not be considered as an advertisement tool. "U.S. Persons" are generally defined as a natural person, residing in the United States or any entity organized or incorporated under the laws of the United States. US Citizens living abroad may also be deemed "US Persons" under certain rules May 16, 2018 Analyst: Praful Bohra( / )/ Bharat Celly ( / ) Page 10 of 10