Apollo Hospitals (APOHOS) 1176

Transcription

1 Result Update Rating matrix Rating : Buy Target : 144 Target Period : months Potential Upside : 22% What s Changed? Target Unchanged EPS FY17E Changed from 22.3 to 23.1 EPS FY18E Changed from 31.8 to 33 EPS FY19E Introducing FY19E to 47.1 Rating Changed from Hold to Buy Standalone Quarterly Performance Q2FY17 Q2FY16 YoY (%) Q1FY17 QoQ (%) Revenue 1, , , EBITDA EBITDA (%) bps bps Adj. Net Profit Key Financials ( Crore) FY16 FY17E FY18E FY19E Revenues EBITDA Adjusted PAT Adj. EPS ( ) Valuation summary FY16 FY17E FY18E FY19E PE (x) EV to EBITDA (x) Target EV/EBITDA (x) Price to book (x) RoNW (%) RoCE (%) Stock data Particular Amount Market Capitalisation crore Debt (FY16) 2656 crore Cash (FY16) 364 crore EV crore 52 week H/L 1544/1213 Equity capital 69.6 crore Face value 5 Price performance (%) 1M 3M 6M 1Y Apollo Hospitals Fortis Healthcare Research Analyst Siddhant Khandekar siddhant.khandekar@icicisecurities.com Mitesh Shah mitesh.sha@icicisecurities.com November 17, 216 Apollo Hospitals (APOHOS) 1176 New hospitals, pharmacies drive growth Revenues increased 16% YoY to 1634 crore (I-direct estimate: 1499 crore) on the back of 22% YoY increase in pharmacy business to 71 crore (I-direct estimate: 652 crore) and 12% YoY increase in healthcare business to 924 crore (I-direct estimate: 847 crore) EBITDA margins were at 13.6% (-34 bps YoY) vs. I-direct estimate of 12.8% due to higher-than-expected margins in new hospitals (9%) Adjusted net profit grew mere 2.7% to 92 crore (I-direct estimate: 78 crore) as higher operational performance and other income were largely offset by higher interest expenses and depreciation Healthcare business growth to piggyback on sustained expansions The healthcare services segment (51% of consolidated revenues) has grown at 12% CAGR in FY11-16 on account of incremental hospital addition in all three clusters i.e. Chennai, Hyderabad and others. Rapid expansion and maturity of older hospitals has kept overall growth tempo at 12-14% per annum. The next phase of expansion includes addition of 145 beds to the existing network of 42 hospitals and 762 beds (own hospitals) by FY19 with an additional capex of 89 crore. This is likely to put some pressure on EBITDA margins and return ratios in the short to medium term. However, in the past, the company has demonstrated its ability to balance between expansion and margins. We expect more focus on improvement of important parameters like average length of stay (ALOS) and average revenue per operating bed (AROPB), which were flat in the last few quarters due to incremental bed additions. We expect healthcare sales to grow at 14% CAGR in FY16-19E to 4549 crore as the company keeps on investing in new assets. Pharmacy business EBITDA positive; candidate for value unlocking The pharmacy business (39% of consolidated revenues) has grown at ~29% CAGR in the last five years on the back of consistent addition of new pharmacies and timely closure of non-performing pharmacies. This business has become EBITDA positive as old stores are maturing and making contribution. We expect the pharmacy business to grow at 18% CAGR in FY16-19E to 3793 crore on the back of higher sales from existing stores. The company added 47 stores in Q2FY17 taking total stores to 243. In the last three years, we have seen a strong improvement in revenues per store from 63 lakh in FY12 to 1 crore in FY16. The Hetero acquisition may put some pressure on margins initially but augurs well in the long run. Margin improvement, return ratios key in competitive scenario Strong Q2 revenue growth was mainly due to robust growth in new hospitals, AHLL and better-than-expected pharmacy store realisation. Margins, on the other hand, continued to be impacted due to adverse segment mix and Ind-AS adoption. With increasing number of players getting listed in the healthcare space, we believe the scrutiny for margin improvement and improvement in return ratios is likely to intensify. The newly commissioned hospitals have achieved the BE level fairly ahead of our expectations. Focus now is likely to shift to operational gauges for different cluster hospitals. On the pharmacy front, margins have showed a substantial improvement in the last few quarters. We continue to value the stock on an SOTP basis by valuing the healthcare business at 15x FY19E EV/EBITDA and pharmacy business at 1.5x FY19E EV/sales. We have arrived at a target price of 144. ICICI Securities Ltd Retail Equity Research

2 Variance analysis Q2FY17 Q2FY17E Q2FY16 Q1FY17 YoY (%) QoQ (%) Comments Revenue 1, ,499. 1,49.7 1, Growth mainly driven by 22% growth in pharmacy segment Raw Material Expenses Employee Expenses Marketing Expenses Other expenditure EBITDA EBITDA (%) bps 83 bps YoY lower EBITDA growth due to change in accounting norms and a continued shift in the mix towards low margin pharmacy Interest Increased in interest cost was mainly due to new hospital capex Depreciation Higher depreciation due to new hospital capex Other Income PBT before EO & Forex EO PBT after Exceptional Items Tax Tax rate (%) Adj. Net Profit YoY growth was due to improvement in operational performance and higher other income, largely offset by higher depreciation and interest expenses EPS ( ) Key Metrics Healthcare Services Gorwth was driven by 58% YoY growth in new hospitals to 142 crore Pharmacy Growth was driven by 47 stores (net) addition and traction from matured stores Change in estimates FY17E FY18E ( Crore) Old New % Change Old New % Change Revenue 6, , , , EBITDA ,14.8 1, EBITDA Margin (%) bps bps PAT EPS ( ) Assumptions C urrent E arlier (% G rowth) FY 15 FY 16 FY 17E FY 18E FY 17E FY 18E Healthcare Services 2,82.7 3,85.8 3,5.6 3,99.7 3,54.4 4,71.5 P harmacy 1, , ,87.7 3, , ,283.8 ICICI Securities Ltd Retail Equity Research Page 2

3 Company Analysis Established in 1983, the company is one of the few listed players in the healthcare space. It derives revenues from two broader segments in the standalone accounts - 1) healthcare services i.e. hospitals and 2) standalone pharmacies. In the consolidated accounts, other reporting segments are 1) hospital revenues from JVs/subsidiaries and associates, 2) Apollo-Munich Health insurance JV, 3) Apollo Health & Lifestyle Ltd, which is the retail healthcare business of Apollo Hospitals. Apollo owns 7 hospitals with a total bed capacity of 9739 beds. Of these 7 hospitals, 42 are owned by the company (including JVs, subsidiaries and associates) while eight are managed by the company with 1359 beds while 11 are day care/short surgical stay centres with 312 beds and nine cradles with 184 beds. This business has been categorised as the healthcare business and comprises ~57% of standalone revenues. In case of managed hospitals, the company charges 5-6% management fees for third party hospitals for project management and consultancy covering all facets of development and operation of a hospital, including market research, technical design, arranging finance, hiring manpower and running the facility. The healthcare segment has been divided into three clusters- 1) Chennai, 2) Hyderabad and 3) others that include hospitals in Madurai, Karur, Karaikudi, Trichy, Mysore, Vizag, Pune, Karimnagar, Bilaspur, Bhubaneswar, Vanagaram, Nasik, Nellore, Jayanagar, etc. In June 215, the company acquired a 51% stake in Assam Hospitals, which runs a 22 bed hospital in Guwahati. The Apollo Healthcare and Lifestyle (AHLL) subsidiary covers the retail healthcare business of the Apollo group, comprising Apollo Clinics, Apollo Sugar, White Dental, Apollo Day Surgery centres and Apollo Cradle. AHLL reported crore of sales in FY16. Apollo Sugar Clinics is a one-stop shop for diabetics and offer packages to better manage diabetes through a combination of prescriptions, dietary, exercise regimens and other lifestyle changes apart from management of diabetes related complications. Sanofi has a 2% stake in Apollo Sugar Clinics business. The company has 26 Apollo Sugar Clinics. Apollo Day Surgery centres focus on planned surgeries done in a day/short stay basis. The company has 12 centres as of FY16. Apollo Cradle denotes lifestyle birthing centres. It launched the first Apollo Cradle in Delhi a decade ago and currently has three centres in the network, and plans to add five more centres - two in Hyderabad, two in Delhi and one in Bengaluru. In FY15, AHLL acquired 11 day and short stay surgery centres (over 35 beds) from Nova Specialty Hospitals with a presence in eight cities across India. This acquisition provides APL an opportunity to provide quality healthcare delivery closer to home and also entry in new markets such as Mumbai, Jaipur and Kanpur. In case of standalone pharmacies, which are basically drug stores chain selling prescription, OTC and private label FMCG products, the company owns 2326 stores. In FY15, the company acquired Hyderabad-based ICICI Securities Ltd Retail Equity Research Page 3

4 Hetero Med Solutions (HMSL). HMSL has ~32 stores across Telangana, Andhra Pradesh and Tamil Nadu. Overall, we expect revenues to grow at 12.9% CAGR in FY16-19E to crore. Exhibit 1: Revenues to grow at CAGR of 13% in FY16-19E ( crore) % CAGR % CAGR FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E Revenues The healthcare services segment (51% of consolidated revenues) has grown at a CAGR of 12.3% in FY12-16 on account of incremental hospital addition in all three clusters i.e. Chennai, Hyderabad and others. Rapid expansion and maturity of older hospitals has kept the overall growth tempo of ~14% per annum. The next phase of expansion includes addition of 145 beds to the existing network of 42 hospitals (own hospitals) by FY19 with an additional capex of 89 crore. This is likely to put some pressure on EBITDA margins in the short to medium term. However, in the past, the company has demonstrated its ability to balance between expansion and margins. By acquiring Nova Speciality and Assam Hospitals, the company also adopted the inorganic route for expansion. We expect more focus on the improvement of important parameters such as average length of stay (ALOS) and average revenue per operating bed (AROPB), which were flat in the last few quarters on account of incremental bed additions. We expect healthcare sales to grow at a CAGR of 14% in FY16-19E to 4549 crore as the company keeps on investing in new assets. Exhibit 2: Healthcare services to grow at CAGR of 14% in FY16-19E ( crore) % CAGR % CAGR FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E Healthcare Services The pharmacy business (39% of consolidated revenues) has grown at a CAGR of ~29% over the last five years on the back of consistent addition of new pharmacies, timely closure of non-performing pharmacies and ICICI Securities Ltd Retail Equity Research Page 4

5 acquisition of Hetero s pharmacy chain. This business has become EBITDA positive as more and more old stores are maturing and making a contribution. We expect the pharmacy business to grow at a CAGR of 17.7% in FY16-19E to crore on the back of higher sales from existing stores. The company added 47 stores in Q2FY17 taking total stores to 243. In the last three years we have seen a substantial improvement in revenue/store from 15 lakh in FY11 to 28 lakh in FY16. The pharmacy business is also a candidate for possible value unlocking. Exhibit 3: Pharmacy business to grow at CAGR of 18% in FY16-19E ( crore) % CAGR % CAGR FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E Pharmacy Exhibit 4: EBITDA to grow at CAGR of 16% in FY16-19E ( crore) (%) FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E EBITDA EBITDA Margins (%) Exhibit 5: Net profit to grow at CAGR of 26% in FY16-19E ( crore) (%) 1 FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E Net Profit Net Profit Margins (%) ICICI Securities Ltd Retail Equity Research Page 5

6 Exhibit 6: Trends in return ratios (%) FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E RoCE (%) RoNW (%) Exhibit 7: Trends in standalone quarterly financials ( crore) Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 YoY (%) QoQ (%) Total Operating Income Raw Material Expenses as % revenues Gross Profit GPM (%) Employee Expenses as % revenues Marketing Expenses as % revenues Other expenditure as % revenues Total expenditure EBITDA EBITDA Margins (%) bps 83 bps Depreciation Interest Other Income PBT Less: Exceptional Items Total Tax Tax rate (%) Net Profit Net Profit Margin (%) EPS (Adjusted) Exhibit 8: Standalone healthcare service performance ( Crore) Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 YoY (%) QoQ (%) Sales EBITDA NA NA NA EBITDA Margins (%) NA NA NA Exhibit 9: Standalone pharmacy performance Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 YoY (%) QoQ (%) Sales ( crore) EBITDA ( crore) NA NA NA NA NA NA EBITDA Margins (%) NA NA NA NA NA NA No of Stores Rev per store ( lakh) ICICI Securities Ltd Retail Equity Research Page 6

7 SWOT Analysis Strengths - Early mover in the healthcare space. Strong balance sheet despite being in a business with higher gestation period. Strong brand value - a significant aspect in this business Weakness - Presence in the low margin pharmacy space Opportunities - Under-penetrated Indian healthcare space with favourable demographics and disease pattern Threats - Too much capacity build-up may lead to lower capacity utilisation and the cost associated with it ICICI Securities Ltd Retail Equity Research Page 7

8 Conference call highlights Consolidated revenues grew 17.7% YoY to crore. EBITDA margins contracted 19 bps to 12%. PAT declined 36.8% to 11. crore Healthcare EBITDA margins contracted 41 bps to 2.4%. Pharmacy EBITDA margins improved 141 bps to 4.9%. Excluding the Hetero network of stores, pharmacy revenue growth was 21.7% and EBITDA growth was 6.1% with EBITDA margin of 5.1% in Q2FY17 Of the 7 hospitals with total bed capacity of 9739 beds, 42 are owned hospitals including JVs/subsidiaries and associates with 7884 beds, 11 day care/short surgical stay centres with 312 beds, nine Cradles with 184 beds and eight managed hospitals with 1359 beds. Of the 7884 owned hospital beds capacity, 695 beds were operational and the overall occupancy rate was 65%. Total 1,945 beds in 12 locations commissioned in the last 36 months Vanagaram 26, Jayanagar 14, Trichy 2, Nashik 12, Women and Child - OMR 6, Indore 12, Nellore 19, Perungudi 15, Women & Child - SMR 5, Vizag new 247, Malleswaram 19, Assam 22 The company plans to add 545 beds in Navi Mumbai (48 beds) and Indore (65 beds). The Navi Mumbai hospital was commissioned on November 14, 216. The company expects to achieve EBITDA break even in this hospital in the next months The company dose not expects any impact of currency shortage in pharmacy. In healthcare it expects some temporary short term impact The company plans to add another 5 beds in FY19 - South Chennai 2, South Mumbai 3. Total capex estimated for this expansion plan is crore. The company added 69 pharmacy stores and closed 22 stores in Q2FY17, taking the total number of pharmacy stores to 243 It has set a target to reach 8% occupancy with 25% margins in next five years. In mature hospitals, the company expects that in the next two or three years EBITDA margins will increase 2 bps on the back of an improvement in occupancy rates to 7-75% from 62-64% currently AHLL s occupancy rate is ~4%.Till date capital deployed in AHLL was ~ 55 crore. The company expects to reach AHLL segment break even by FY19 Post the investment of 4-45 crore by PE in AHLL, the company s holding has reduced to 7% in AHLL Capex for FY17-19E is ~75 crore excluding maintenance capex. Annual maintenance capex is ~ 12 crore Hetero pharmacy EBITDA margins were 1.2% in Q2FY17 against negative 3% in Q2FY16. The company expects Hetero EBITDA to match overall pharmacy margins in the next 6-8 quarters The company does not expect any impact of demonetisation on the pharmacy segment. However, it expects short-term temporary impact on the healthcare segment ICICI Securities Ltd Retail Equity Research Page 8

9 Valuation Strong Q2 revenue growth was mainly due to robust growth in new hospitals, AHLL and better-than-expected pharmacy store realisation. Margins, on the other hand, continued to be impacted due to adverse segment mix and Ind-AS adoption. With increasing number of players getting listed in the healthcare space, we believe the scrutiny for margin improvement and improvement in return ratios is likely to intensify. The newly commissioned hospitals have achieved the BE level fairly ahead of our expectations. Focus now is likely to shift to operational gauges for different cluster hospitals. On the pharmacy front, margins have showed a substantial improvement in the last few quarters. We continue to value the stock on an SOTP basis by valuing the healthcare business at 15x FY19E EV/EBITDA and pharmacy business at 1.5x FY19E EV/sales. We have arrived at a target price of 144. Exhibit 1: One year forward EV/EBITDA ( crore) Nov-6 May-7 Nov-7 May-8 Nov-8 May-9 Nov-9 May-1 Nov-1 May-11 Nov-11 May-12 Nov-12 May-13 Nov-13 May-14 Nov-14 May-15 Nov-15 May-16 Nov-16 [ EV 2.1x 19.3x 17.7x 15.4x 13.8x Exhibit 11: Valuation Particulers Valuation Matrix Multiple (x) Enterprise value ( cr) Healthcare EV/EBITDA ,49 Pharmacy EV/Sales 1.5 5,689.2 Others EV/Sales Net Debt FY19E ( cr) 1,374.6 EV ( cr) 2,63 No of shares (cr) 13.9 Per Share Value ( ) 1,44 Exhibit 12: Valuation Revenues Growth EPS Growth P/E EV/EBITDA RoNW RoCE ( crore) (%) ( ) (%) (x) (X) (%) (%) FY FY17E FY18E FY19E ICICI Securities Ltd Retail Equity Research Page 9

10 Recommendation history vs. Consensus ( ) 1,6 1,4 1,2 1, (%) 2 Oct-14 Dec-14 Mar-15 May-15 Jul-15 Oct-15 Dec-15 Mar-16 May-16 Aug Oct-16. Price Idirect target Consensus Target Mean % Consensus with BUY Source: Reuters, Company, ICICIdirect.com Research Key events Date Event Sep-8 Opens first reach hospital at Karimnagar, Andhra Pradesh Jun-9 Issues 15 unsecured foreign currency convertible bonds of US$1 each to International Finance Corporation aggregating to US$15 million. IFC also granted a loan May-11 Pharmacy business of company turns profitable for first time Sep-12 Government allows foreign direct investment in multi brand retail. Pharmacy business of Apollo Hospitals falls into this category Dec-12 Sells stake in its BPO company Apollo Health Street to US based company Sutherland Global Services. It holds 39.4% in Apollo Health Street Jan-13 Plans to establish a proton therapy centre in India. It will be first of its kind across South East Asia, Africa and Australia. May-13 Apollo Hospitals and Yash Birla Group call off their JV & shut down their plans to set up super specialty hospitals in Thane, Mumbai Sep-14 Enters into agreement to acquire 32 pharmacy stores from Hetero for 146 crore Jan-15 Acquires Bengaluru-based Nova Specialty Hospitals at an estimated cost of crore Jun-15 Acquires 51% stake in Assam Hospitals Top 1 Shareholders Rank Investor Name Latest Filing Date % O/S Position Position Chan 1 PCR Investments, Ltd. 3-Sep m.m 2 Integrated Mauritius Healthcare Holdings, Ltd. 3-Sep m.m 3 OppenheimerFunds, Inc. 3-Sep m -1.6m 4 Reddy (Prathap C) 3-Sep m.m 5 Schroder Investment Management Ltd. (SIM) 3-Sep m.3m 6 Schroder Investment Management (Hong Kong) Ltd. 31-Jul m.m 7 Reddy (Suneeta) 3-Sep m.m 8 Reddy (Sangita) 3-Sep m.m 9 MEAG Munich ERGO Kapitalanlagegesellschaft mbh 3-Sep m.m 1 Khamineni (Shobana) 3-Sep m.m Source: Reuters, ICICIdirect.com Research Shareholding Pattern (in %) Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Promoter Others Recent Activity Buys Sells Investor name Value ($) Shares Investor name Value ($) Shares Schroder Investment Management Ltd. (SIM) 6.4m.3m OppenheimerFunds, Inc m -1.6m Schroder Investment Management (Singapore) Ltd. 4.1m.2m Fidelity Management & Research Company -5.4m -.3m William Blair & Company, L.L.C. 3.6m.2m China International Fund Management Co., Ltd. -2.5m -.1m Kotak Mahindra Asset Management Company Ltd. 1.2m.1m Invesco PowerShares Capital Management LLC -2.3m -.1m William Blair Investment Management, LLC 1.2m.1m Amundi Hong Kong Limited -2.m -.1m Source: Reuters, ICICIdirect.com Research ICICI Securities Ltd Retail Equity Research Page 1

11 Financial summary Profit and loss statement Crore (Year-end March) FY16 FY17E FY18E FY19E Revenues 6,85.6 6,81.5 7, ,681.8 Growth (%) Raw Material Expenses 3,55.8 3, ,891. 4,45.5 Employee Expenses 1, ,15.2 1,32.3 Marketing Expenses Other expenditure 1,92.1 1, , ,453.9 Total Operating Expenditure 5,33.3 5, , ,47.4 EBITDA ,11.7 1,211.4 Growth (%) Depreciation Interest Other Income PBT Total Tax MI & Profit from Associates Adjusted PAT Growth (%) EPS (Adjusted) Cash flow statement Crore (Year-end March) FY16 FY17E FY18E FY19E Profit/(Loss) after taxation Add: Depreciation & Amortization Working Capital Changes CF from operating activities Change in Capex (Inc)/dec in Investments Others CF from investing activities Issue of Equity Inc/(dec) in loan funds Dividend paid & dividend tax Others CF from financing activities Net Cash flow Opening Cash Closing Cash Free Cash Flow Balance sheet Crore (Year-end March) FY16 FY17E FY18E FY19E Equity Capital Reserve and Surplus 3, , ,42.7 4,66.4 Total Shareholders funds 3, , , ,676. Total Debt 2, , , ,656.1 Deferred Tax Liability Minority Interest Long term provisions Other Non Current Liabilities Total Liabilities 6, ,4.9 6, ,115.6 Gross Block - Fixed Assets 4,77.5 5,37.5 5,77.5 5,957.5 Accumulated Depreciation 1, , , ,75.5 Net Block 3, , , ,882. Capital WIP Net Intangible assets Goodwill on Consolidation Total Fixed Assets 4,42.2 4,73.4 4,84.5 4,826.9 Investments Inventory Debtors Loans & Advances, & other CA Cash Total Current Assets 2, , ,23.9 2,524. Creditors Provisions & Other CL Total Current Liabilities ,76.1 1,178.9 Net Current Assets 1, ,277. 1, ,345.1 Long term loans & advances Deferred Tax Assets Application of Funds 6, ,4.8 6, ,115.6 Key ratios (Year-end March) FY16 FY17E FY18E FY19E Per share data ( ) Adjusted EPS BV per share Dividend per share Cash Per Share Operating Ratios (%) Gross Profit Margins EBITDA margins Net Profit margins Inventory days Debtor days Creditor days Asset Turnover EBITDA Conversion Rate Return Ratios (%) RoE RoCE RoIC Valuation Ratios (x) P/E EV / EBITDA EV / Net Sales Market Cap / Sales Price to Book Value Solvency Ratios Debt / EBITDA Debt / Equity Net Debt / Equity Current Ratio ICICI Securities Ltd Retail Equity Research Page 11

12 ICICIdirect.com coverage universe (Healthcare) Company I-Direct CMP TP Rating M Cap EPS ( ) PE(x) EV/EBITDA (x) RoCE (%) RoE (%) Code ( ) ( ) ( Cr) FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E Ajanta Pharma AJAPHA ,22 Buy Apollo Hospitals APOHOS ,44 Buy Aurobindo Pharma AURPHA 715 1,1 Buy Alembic Pharma ALEMPHA 69 7 Hold Biocon BIOCON 869 1,3 Hold Cadila Healthcare CADHEA Buy Cipla CIPLA Hold Divi's Laboratories DIVLAB ,415 Buy Dr Reddy's Labs DRREDD ,3 Hold Glenmark Pharma GLEPHA 858 1,2 Buy Indoco Remedies INDREM Buy Ipca Laboratories IPCLAB Buy Jubilant Life Sciences VAMORG Buy Lupin LUPIN 148 1,89 Buy Natco Pharma NATPHA Buy Sun Pharma SUNPHA Buy Syngene International SYNINT Hold Torrent Pharma TORPHA ,7 Buy Unichem Laboratories UNILAB Hold ICICI Securities Ltd Retail Equity Research Page 12

13 RATING RATIONALE ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com 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%/2% for large caps/midcaps, respectively, with high conviction; Buy: >1%/15% for large caps/midcaps, respectively; Hold: Up to +/-1%; Sell: -1% or more; Pankaj Pandey Head Research pankaj.pandey@icicisecurities.com ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai 4 93 research@icicidirect.com ICICI Securities Ltd Retail Equity Research Page 13

14 ANALYST CERTIFICATION We /I, Siddhant Khandekar, CA Inter and Mitesh Shah, MS (finance) Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report 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. Terms & conditions and other disclosures: ICICI Securities Limited is a Sebi registered Research Analyst having registration no. INH99. ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. 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