Result Update

February 10, 2017

Rating matrix
Rating : Buy
Lupin (LUPIN) | 1478
Target : | 1760
Target Period : 12-15 months
Potential Upside : 19% US drives good overall performance
Revenues grew 26% YoY to | 4483 crore (I-direct estimate: | 4351
Whats Changed?
crore) mainly on account of 58% growth in the US to | 2176 crore (I-
Target Changed from | 1890 to | 1760
direct estimate: | 1988 crore). Strong US sales were due to Gavis
EPS FY17E Changed from | 62.9 to | 62.2
EPS FY18E Changed from | 67.1 to | 67.5
consolidation and robust sales in Metformin (anti-diabetic). Domestic
EPS FY19E Changed from | 85.7 to | 83.8 sales grew 12% YoY to | 991 crore (I-direct estimate: | 976 crore)
Rating Unchanged EBITDA margins improved 245 bps YoY to 27.1% (I-direct estimate:
24.0%) mainly on account of a strong gross margin performance and
Quarterly Performance lower other expenses
Q3FY17 Q3FY16 YoY (%) Q2FY17 QoQ (%) PAT grew 19% YoY to | 631 crore (I-direct estimate: | 624 crore) due
Revenue 4,482.9 3,555.8 26.1 4,290.5 4.5 to a strong operational performance partly offset by higher tax rate
EBITDA 1,215.8 877.2 38.6 1,028.1 18.3 US business main growth engine despite pricing headwinds
EBITDA (%) 27.1 24.7 245 bps 24.0 316 bps
Lupins US business (~43% of total turnover) is witnessing a shift from
Net Profit 630.7 529.8 19.1 658.0 -4.1
branded to generics with a slowdown in the branded space and
emergence of generics. Post the acquisition of US based Gavis, the
Key Financials company now owns one of the strongest ANDA pipeline comprising 344
(| Crore) FY16 FY17E FY18E FY19E filed ANDAs and 137 pending approvals including 44 FTFs. This
Revenues 14208.5 17654.1 19589.7 22095.3
acquisition will strengthen its position in dermatology, controlled
EBITDA 3733.4 4654.5 5036.8 6012.5
substance products and other high value niche generics segments
Net Profit 2270.7 2801.8 3041.6 3774.5
EPS (|) 50.4 62.2 67.5 83.8
besides its maiden foray into US institutional business. We expect US
sales to grow at 18% CAGR in FY16-19E to | 9642 crore.
Indian formulations growth steady
Valuation summary
FY16 FY17E FY18E FY19E Lupin ranks seventh in domestic formulations with a market share of
PE (x) 29.3 23.8 21.9 17.6 3.3%. The acute: chronic: sub-chronic ratio for the company is at
Target PE (x) 34.9 28.3 26.1 21.0 27:40:33. In terms of MR productivity, at | 60 lakh per MR it has one of
EV to EBITDA (x) 19.5 14.9 13.4 10.8 the best MR productivity among large cap peers. Also, tie-ups with Eli
Price to book (x) 6.1 5.0 4.2 3.5 Lilly, Boehringer for anti-diabetics and with MSD for pneumonia vaccines
RoNW (%) 20.7 21.1 19.2 19.9 are some steps to bolster the domestic franchise. We expect sales from
RoCE (%) 18.6 20.3 20.8 23.9 India to grow at a CAGR of 13% in FY16-19E to | 4951 crore.
Core strength in geographical diversification, strong financials
Stock data Lupin is bearing the fruits of geographical diversification for broad based
Particular Amount growth. It has established a significant presence in the US by 1) focusing
Market Capitalisation | 66696 crore on limited competition/FTF opportunities, 2) concentration on niche
Debt (FY16) | 5720 crore therapies such as oral contraceptives, dermatology, ophthalmology,
Cash (FY16) | 1417 crore
respiratory, etc, and 3) acquiring small but profitable brands at the right
EV | 70999 crore
52 week H/L (|) 1905/1280
price. It is slowly but surely establishing itself in other geographies such
Equity capital | 90.3 crore as Japan and Australia. Higher growth on a fairly consistent basis, a
Face value (|) |2 strong balance sheet (despite Gavis acquisition) and high return ratios are
some of the differentiators for Lupin besides management pedigree.
Price performance (%) Despite challenges, outlook upbeat on strong pipeline; maintain BUY
1M 3M 6M 1Y Both 9MFY17, Q3 have demonstrated strong gross margins and robust
Lupin 0.1 -2.5 -7.2 -21.7 US growth mainly due to Gavis consolidation, Metformin (Diabetic)
Dr Reddy's -1.2 -7.9 -0.5 2.1 traction. The overall profitability was strong despite higher R&D and new
Sun Pharma 3.7 -0.8 -21.0 -23.2 recruitments/capex at Gavis. With the Goa EIR (Indore earlier), the
company can focus on launches at a regular interval. The management is
Research Analyst now guiding for 25+ launches annually in the US in FY18. It expects the
Siddhant Khandekar
trend to continue, going ahead. Ramp up at Gavis is also likely to support
siddhant.khandekar@icicisecurities.com launches. With one of the strongest pending pipelines in the US (137
pending approvals) at its disposal, the company is well poised to address
Mitesh Shah the pricing issue. India and Japan are likely to complement the US driven
mitesh.sha@icicisecurities.com growth. However, due to multiple overhangs in the US for generic players
we have reduced our multiple to 21x from 22x earlier. Accordingly, our
new target price is | 1760 based on FY19E EPS of | 63.8.

ICICI Securities Ltd | Retail Equity Research

Variance analysis
(| crore) Q3FY17 Q3FY17E Q3FY16 Q2FY17 YoY (%) QoQ (%) Comments
Revenue 4,482.9 4,351.0 3,555.8 4,290.5 26.1 4.5 YoY revenue growth mainly driven by robust growth in the US
Raw Material Expenses 1,301.6 1,327.1 1,123.0 1,242.9 15.9 4.7 255 bps YoY improvement in gross margins to 71.0% mainly on the back of
better product mix
Employee Expenses 731.2 674.4 528.4 712.4 38.4 2.6 Increased mainly due to new recruitments at Gavis new facility in the US

Other Expenditure 1,234.3 1,305.3 1,027.3 1,307.2 20.2 -5.6 Increased mainly due to higher R&D expenses. R&D expenses increased 47.7%
YoY to | 578.3 crore
EBITDA 1,215.8 1,044.2 877.2 1,028.1 38.6 18.3
EBITDA (%) 27.1 24.0 24.7 24.0 245 bps 316 bps YoY margin improvement mainly due to strong gross margin. Beat vis--vis I-
direct expectations mainly due to strong gross margins and forex impact

Interest 45.9 29.5 9.2 26.3 400.3 74.6

Depreciation 230.9 211.2 111.4 211.2 107.3 9.3 YoY increase in depreciation mainly due to Gavis amortisation
Other Income 103.6 63.4 65.3 27.1 58.6 282.1 Higher mainly due to forex gains
PBT 1,042.6 866.9 821.9 817.7 26.8 27.5
Tax 409.5 242.7 290.9 158.9 40.8 157.6 YoY and QoQ increase mainly due to higher deferred tax. Normalised tax rate
was 28%
PAT before MI 633.1 624.2 531.0 658.8 19.2 -3.9
Minority Interest 2.4 0.7 1.3 0.8 88.8 206.5
Net Profit 630.7 623.5 529.8 658.0 19.1 -4.1 YoY lower growth vis--vis EBITDA was mainly due to higher tax rate
Key Metrics
India 991.2 975.7 886.0 995.8 11.9 -0.5 YoY growth was impacted by 2-3% due to demonetisation
Japan 449.2 469.9 373.5 436.8 20.3 2.8 Strong sales was mainly due to favourable currency movement. In constant
currency, Japan's total sales grew 5.3%
US 2,175.5 1,987.6 1,380.5 1,997.8 57.6 8.9 QoQ growth was mainly due to incremental product launches, market share
gain in gGlumetza, ramp up in Methergine and seasonality benefit. Beat vis--vis
I-direct expectations was mainly due to higher-than-expected market share
gain in gGlumetza and new product launches

Europe 142.8 119.2 113.9 123.1 25.4 16.0 Beat vis--vis I-direct estimates mainly due to higher-than-expected YoY
constant currency growth in Germany. Constant currency growth in Germany
was 26.1% YoY to 7.2 million
South Africa 112.7 125.7 104.8 112.4 7.5 0.3 Miss vis--vis estimates mainly due to lower-than-expected constant currency
growth. Constant currency growth was 2.8%
ROW markets 265.1 259.8 208.1 253.4 27.4 4.6 YoY growth mainly due to strong growth across geographies
API 268.4 289.8 283.5 291.9 -5.3 -8.1
Change in estimates
FY17E FY18E
(| Crore) Old New % Change Old New % Change
Revenue 18,151.4 17,654.1 -2.7 20,386.4 19,589.7 -3.9
EBITDA 4,455.9 4,654.5 4.5 5,004.1 5,036.8 0.7
EBITDA Margin (%) 24.5 26.4 186 bps 24.5 25.7 121 bps Increased margins estimate in line with management guidance and improvement in
product mix
PAT 2,835.1 2,801.8 -1.2 3,021.5 3,041.6 0.7
EPS (|) 62.9 62.2 -1.1 67.1 67.5 0.6

Assumptions
Current Earlier Comments
(| crore) FY15 FY16 FY17E FY18E FY17E FY18E
India 2,968.0 3,406.4 3,794.0 4,305.3 3,804.7 4,375.4
Japan 1,323.9 1,364.2 1,839.5 2,437.7 1,943.9 2,635.2 Changed mainly due to Japanese government implementation of new reforms for
generic drugs, which have taken away some benefits from generic players

US 5,659.3 5,913.2 8,437.3 8,916.8 8,652.4 9,256.6

Europe 326.2 455.4 531.8 585.0 515.3 566.8
South Africa 421.8 399.7 445.4 511.3 450.5 518.0
ROW markets 706.4 947.0 1,100.5 1,265.6 1,117.8 1,285.4
API 1,194.1 1,214.9 1,145.2 1,168.1 1,194.6 1,218.5

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 2

 Company Analysis
From a global leader in anti-tuberculosis (TB) and other infectious
diseases to one of the fastest growing prescription companies in the US,
Lupin has come a long way to emerge as a leading Indian generic
exporter. Established in 1968, the company adapted well as per the
changed industry dynamics like other peers such as Sun, Dr Reddys,
Ranbaxy and Cipla. During this journey, it changed focus in therapies -
from acute to chronic and also geographies, from domestic driven to
export oriented. It received USFDA approvals for two facilities-
Ankaleshwar and Mandideep way back in 1989. Besides this, the
company has been fairly active on the global M&A front. It has acquired
companies in Japan (significant acquisitions), Australia, Philippines and
South Africa. Similarly, the company also acquired small ticket but
lucrative brands in the US (Suprax, Antara, Locoid lotion, Inspira Chamber
and Alinia). Its latest acquisition, however, has been a complex injectable
technology based company (Nanomi) in the Netherlands. Infrastructure -
11 manufacturing facilities including two in Japan seven formulations
(three USFDA approved) and four APIs (two USFDA approved).

Exhibit 1: Return ratios to improve further Exhibit 2: R&D spend likely to remain at elevated level
40 35.1 15
2100
35 35.7
29.8 1800 1604 12.8 12.813
30
22.5 26.5 1500 11
25 25.4 25.4 26.6 27.1
26.3 1099
21.9 21.6 21.1 1200 929.4
20 9.1 9
(%)

18.6
20.7
15 20.3 900 6.6 681.8 7.7
7.3 7
600 465.95 500.64
10 5.2 6.0
300 5
5
0 0 3
FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E
RoNW RoCE R & D cost (| crore) R & D cost % revenues

Source: Company, ICICIdirect.com Research Source: Company, ICICIdirect.com Research

The current financial health of the company is the culmination of prudent

business decisions in the past. Over the last 10 years, revenues, EBITDA
and PAT have grown at a CAGR of 24%, 29% and 29%, respectively.
Considering more recent numbers, in FY12-16, revenue, EBITDA and PAT
have grown at a CAGR of 15%, 14% and 10% to | 14209 crore, | 3733
crore and | 2271 crore, respectively. Similarly, during the same period,
the R&D spend as a percentage of sales has gone up from 8.2% to 11.3%.

Going ahead, in the near term, we expect revenues, EBITDA and PAT to
grow at a CAGR of 16%, 17% and 19%, respectively, in FY16-19E.
However, from a long term perspective, we believe the company is well
poised to grow at a healthy rate given the strong US pipeline, vast
experience and good understanding of the US market, continued traction
in Indian branded formulations with higher chronic focus and
improvement in the Japanese market, which is perhaps the only
geography where there is a scope for improvement. On the R&D front, we
see the composition spend tilting towards NDDS, NCEs, biosimilars from
the current ANDA/NDA albeit gradually to prepare for the scenario
beyond 2020.

ICICI Securities Ltd | Retail Equity Research Page 3

 Exhibit 3: Revenues to grow at CAGR of 15.9% in FY16-19E
24000 15.9% CAGR 22095.3
21000 19589.7
14.9% CAGR 17654.1
18000
14208.5
15000 12770.0
Revenues to grow at a CAGR of 16% in FY16-19E to 11286.6
12000 9641.3
| 22095 crore driven by 18% growth in the US business,

(| crore)
32% in Japan, 15% in RoW markets, 14% in South Africa, 9000 7082.9
12% in European markets and 13% growth in Indian 6000
formulations business 3000
0
FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E

Source: Company, ICICIdirect.com Research

Lupin is the fifth largest generics player in the US in terms Exhibit 4: New product launches to drive growth in US market
of prescriptions. It owns a healthy product pipeline
17.7% CAGR
(including Gavis) in the US (344 ANDAs filed, 137
pending approvals and 207 approvals), which includes
12000.0
some limited competition products and 44 FTFs 9642.1
10000.0 23.2% CAGR 8916.8
opportunities. It is planning to launch more than 150 (100 8437.3
owns and 50 from GAVIS) products in the US market in 8000.0
5659.3 5913.2
the next four or five years. Acquisition of Gavis will also 6000.0 4887.1
strengthen its position in dermatology, controlled 3769.5
4000.0
substance products and other high value niche generics 2079.8
2000.0
segments besides its maiden foray into US institutional
business. Lupin is one of the few generic companies that 0.0
has a presence in the branded business. Currently, it is FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E
marketing four branded products in the US market,
US (| crore)
including two that were in-licensed in the last 12 months.
With a strong product pipeline in both the generic and
Source: Company, ICICIdirect.com Research
branded space, we expect sales from the US market to
grow at a CAGR of 28% in FY16-19E to | 9642 crore Exhibit 5: Indian formulation sales to grow at CAGR of 13% in FY16-19E
5500.0 13.3% CAGR 4951.1
5000.0
20.3% CAGR 4305.3
4500.0
3794.0
4000.0
Lupin is ranked seventh in domestic formulations with a 3406.4
3500.0 2968.0
market share of 3.3%. The company is adding more drugs 3000.0 2479.6
in chronic therapies, which would drive growth in the 2500.0
domestic market. We expect sales from India to grow at a 2000.0 1573.5
1350.0
CAGR of 13% in FY16-19E to | 4951 crore 1500.0
1000.0
500.0
0.0
FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E

India (| crore)

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 4

 Exhibit 6: Japanese revenue to grow at CAGR of 33% in FY16-19E
3500.0 3172.6
3000.0
The Japanese acquisitions i.e. Kyowa and Irom are yet to
2437.7
achieve expected critical mass both in terms of 2500.0
scalability and profitability. While Kyowa profitability is 1839.5
2000.0
expected to improve on the back of back-ended
1304.0 1295.4 1323.9 1364.2
integration by sourcing of APIs from Goa, the Irom 1500.0
business remains challenging due to the lumpy nature of 860.8
1000.0
the CRAMS business. Kyowa has acquired 21 branded
500.0
products from Shionogi. Recently acquired 21 products
from Shionogi will add to the companys overall growth. 0.0
We expect sales from Japan to grow at a CAGR 33% in FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E
FY16-19E to | 3173 crore mainly due to increase growth
Japan (| crore)
in existing business and consolidation of Shionogis
portfolio.
Source: Company, ICICIdirect.com Research

Exhibit 7: EBITDA to grow at CAGR of 17% in FY16-19E

7000 28.3 27.2 31
6013
6000 26.3 26.4 25.7 29
27.7 25.7 5037
4655 27
5000
23.5
3733 25
4000 3620
(| crore)

2899 23

(%)
3000 2270
1959 21
2000
19
1000 17
0 15
FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E
EBITDA EBITDA Margins (%)

Source: Company, ICICIdirect.com Research

Exhibit 8: Net profit to grow at CAGR of 19% in FY16-19E

4000 3774.5
19.5
18.8 19
3500 3041.6
17.1 17
3000 16.3 2801.8
16.0 15.9 15.5
2403.2 15
2500 2270.7
13.6
1836.4 13
2000
1382.1 1314.1 11
1500
1000 9

500 7

0 5
FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E
Net Profit Net Profit Margins (%)

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 5

Exhibit 9: Trends in quarterly financial performance
(| crore) Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 YoY (%) QoQ (%)
US 1356.7 1469.9 1605.5 1271.6 1404.3 1377.9 1190.6 1155 1380.5 2187.1 2188.6 1997.8 2175.5 57.6 8.9
Europe 66.1 79.5 69.0 87.6 80.5 89.1 100.3 115.8 113.9 125.4 128.0 123.1 142.8 25.4 16.0
Japan 372 321.8 341.5 345.9 342.2 294.3 323.1 323.4 373.5 344.2 422.6 436.8 449.2 20.3 2.8
India 650.4 576.3 761.5 799.0 743.8 663.7 885.1 873.8 886.0 761.5 931.3 995.8 991.2 11.9 -0.5
South Africa 98.3 106.7 86.9 105.7 107.0 122.2 81.6 99.8 104.8 113.5 91.4 112.4 112.7 7.5 0.3
RoW 142.2 205.9 127.1 188.7 191.3 199.3 174.5 288.6 208.1 275.8 264.8 253.4 265.1 27.4 4.6
API 297.3 291.4 292.5 318.3 275.8 307.5 325.7 321.9 283.5 283.8 286.9 291.9 268.4 -5.3 -8.1
Net Sales 2983.0 3051.6 3284.0 3116.8 3144.9 3054.0 3080.9 3192.6 3357.7 4082.3 4313.6 4211.2 4404.9 31.2 4.6
OOI 39.0 69.0 56.9 56.6 32.7 24.1 75.2 137.1 198.2 88.4 125.9 79.3 77.9 -60.7 -1.8
Revenues 3022.0 3120.5 3340.8 3173.4 3177.6 3078.2 3156.1 3329.7 3555.8 4170.7 4439.4 4290.5 4482.9 26.1 4.5
RM Cost 1120.9 980.4 1107.4 1069.8 1023.6 956.4 983.5 1124.9 1123.0 1101.0 1271.9 1242.9 1301.6 15.9 4.7
% of Revenue 37.1 31.4 33.1 33.7 32.2 31.1 31.2 33.8 31.6 26.4 28.7 29.0 29.0
Gross Profit 1901.1 2140.1 2233.5 2103.6 2154.1 2121.8 2172.6 2204.8 2432.8 3069.8 3167.5 3047.7 3181.3 30.8 4.4
GPM (%) 62.9 68.6 66.9 66.3 67.8 68.9 68.8 66.2 68.4 73.6 71.3 71.0 71.0 255 -7
Employee Cost 378.7 389.6 410.4 438.9 415.9 482.2 497.3 532.8 528.4 577.9 705.9 712.4 731.2 38.4 2.6
% of Revenue 12.5 12.5 12.3 13.8 13.1 15.7 15.8 16.0 14.9 13.9 15.9 16.6 16.3 145.0 -29.4
Other expenditure 749.0 873.6 708.4 832.2 855.3 850.2 850.5 1009.4 1027.3 1186.8 1153.5 1307.2 1234.3 20.2 -5.6
% of Revenue 24.8 28.0 21.2 26.2 26.9 27.6 26.9 30.3 28.9 28.5 26.0 30.5 27.5
Total Expenditure 2248.7 2243.6 2226.1 2340.9 2294.7 2288.8 2331.2 2667.1 2678.7 2865.7 3131.4 3262.4 3267.0 22.0 0.1
% of Revenue 74.4 71.9 66.6 73.8 72.2 74.4 73.9 80.1 75.3 68.7 70.5 76.0 72.9 -245.4 -316.0
EBITDA 773.3 876.9 1114.8 832.5 882.9 789.4 824.8 662.6 877.2 1305.0 1308.0 1028.1 1215.8 38.6 18.3
EBITDA Margin (%) 25.6 28.1 33.4 26.2 27.8 25.6 26.1 19.9 24.7 31.3 29.5 24.0 27.1 245.4 316.0
Other income 32.4 5.2 28.9 110.2 83.4 17.2 75.7 57.8 65.3 34.9 82.6 27.1 103.6 58.6 282.1
Interest 4.2 12.2 2.6 2.1 2.7 2.5 7.0 24.1 9.2 21.3 32.0 26.3 45.9 400.3 74.6
Depreciation 63.7 74.3 108.6 108.7 110.3 107.2 101.4 115.5 111.4 148.7 202.7 211.2 230.9 107.3 9.3
PBT 736.9 794.7 1031.5 831.0 852.4 696.0 791.1 579.9 820.9 1168.9 1155.0 816.7 1041.6 26.9 27.5
Tax 254.2 232.7 402.9 192.6 238.7 136.2 225.8 159.1 290.9 418.8 273.4 158.9 409.5 40.8 157.6
Tax rate (%) 34.5 29.3 39.1 23.2 28.0 19.6 28.5 27.4 35.4 35.8 23.7 19.5 39.3
PAT 482.7 562.0 628.6 638.4 613.7 559.7 565.3 420.8 530.0 750.1 881.6 657.8 632.1 19.3 -3.9
PAT Margin (%) 16.0 18.0 18.8 20.1 19.3 18.2 17.9 12.6 14.9 18.0 19.9 15.3 14.1 -80.5 -123.0
Minority Interest 7.6 10.0 4.8 9.4 13.3 13.7 -2.2 2.7 1.3 3.3 0.6 0.8 2.4 88.8 206.5
PAT After MI 475.1 552.0 623.7 629.0 600.5 546.0 567.6 418.1 528.8 746.9 881.0 657.0 629.7 19.1 -4.1
Source: Company, ICICIdirect.com Research

Lupin - SWOT Analysis

Strengths - Prudent geographical mix covering high opportunity
emerging markets as well as developed markets. Formidable US presence
with highest rank among Indian peers in the US generic prescriptions
space. One of the best working capital management in the industry with
strong return ratios and ever improving margins.

Weakness - The Japanese market still remains a low margin business.

Opportunities - In the US generics space, a lot of opportunities are

panning out in the oral contraceptives and respiratory space.

Threats - Increased USFDA scrutiny across the globe regarding cGMP

issues, pricing pressure due to client consolidation in the US, pricing
probe by the Department of Justice (DoJ) in the US, proposed tightening
by the new regime by adapting to the bidding process and imposition of
border adjustment tax on imported drugs in the US. Gavis like costly
acquisitions can stretch the balance sheet further if the product pipeline
fails to deliver the expected payback.

ICICI Securities Ltd | Retail Equity Research Page 6

 Conference call highlights

gGlumetza (Metformin; anti-diabetic) sales grew QoQ on the back

of higher market share (75%). gFortamate (Metformin; anti-
diabetic) faced additional competition from Mylan
The management expects high single digit price erosion in the US
base business (including Gavis)
The company has filed DPI albuterol (respiratory) in Q2FY17 and
expects trials to commence in Q4FY17. It also expects to file
gMinastrin (oral contraceptive) and gEpzicom (antiviral) ANDA in
Q4FY17
The company expects gRenvela (nephrology) launch in Q4FY18
or Q1FY19. It also expects gWelchol (CVS) launch to go beyond
H2FY18, gAdvair (inhaler) launch in FY18
Capex guidance - | 1300-1400 crore in FY18, compared to | 1900
crore in FY17
For FY18, the company expects 25+ launches in the US including
Minastrin (OC), Epzicom (antiviral) and Bupropion XL (CVS)
The US branded business was at US$22 million in Q3FY17 against
US$18 million in Q3FY16. Methergine (obstetric) was the largest
product contributing to incremental growth
The management expects 15% growth in domestic formulations
from April post normalisation of demonetisation issues
During the quarter, Lupin completed acquisition of 21 products
from Shionogi in Japan
Sales from Japan were impacted during the quarter due to
government reforms as the Japanese Government took some
benefits away from pharmacies by substituting original
manufacturer with generic drugs
Sequential improvement in sales from the US business was due
to 1) gGlumetza traction 2) launch of four new products 3)
Methergine (gynaecology) ramp up (25% QoQ) and lastly, 4)
seasonality and cephalosporin contribution
Methergine branded business sales run rate is ~US$50 million
Lupin is targeting US$20 billion worth of control substance market
out of an estimated size of US$30 billion. Gavis alone is targeting
~US$12 billion of this market. The company expects large
number of control substance approval in FY18 from Gavis

ICICI Securities Ltd | Retail Equity Research Page 7

 FY16 Annual Report highlights
Net Sales grew to | 13702 crore. EBITDA was at | 3941 crore
while net profit was at | 2271 crore in FY16. The company has
delivered a CAGR of 19% in net sales, 27% in EBITDA and 21% in
net profit in the last five years
Lupin is the seventh and the ninth largest generic pharmaceutical
company by market cap and sales globally (Bloomberg). The
company is also fifth largest pharma player in the US (by
prescriptions, IMS Health); the third largest Indian Pharma
company by revenues and ninth largest generic pharma company
in Japan
US revenues were at US$887 million in FY16. The US generics
business was at US$841 million, contributing 95% of the
companys US sales. Filed 36 ANDAs (20 oral, 10 dermatology,
two ophthalmic, one inhalation and three other products) in FY16,
including two FTFs. The company received 39 approvals in FY16.
Cumulative ANDA filings with the USFDA were at 343 with 180
approvals received to date. Lupin has 45 FTF ANDAs, which
include 25 exclusive FTFs
US branded business contributed 5% of Lupins US revenues
recording revenues of US$ 46 million. The company has garnered
3.7% market share for InspiraChamber anti-static valved holding
chamber (VHC) in the US market. The chewable tablet
formulations for Suprax grew 66% YoY in prescription terms in
FY16. Prescriptions for Antara grew 16% YoY and branded Antara
revenues increased 14% YoY. Lupin further strengthened its
branded play in the US with the launch of two new products,
Methergine and Methylphenidate. The company has re-
introduced Methergine (methylergonovine maleate) oral tablets
0.2 mg for the prevention and management of postpartum
haemorrhage (PPH). Methergine is the only FDA-approved oral
uterotonic and is a preferred oral agent in management of PPH
Lupins India business grew 14% YoY to | 3391.6 crore. Chronic
and semi-chronic therapy segments contribute 87% of Lupins
overall India revenues. The company has 3.3% market share and
is the eighth largest player in the IPM (IMS MAT March, 2016). In
FY16, the company added 1,000 representatives. It now has
6600+ specialty field forces in domestic market. On key launches,
It has launched Ondero (Linagliptin), in partnership with
Boehringer Ingelheim, marking a foray into the high growth
Dipeptidyl peptidase-4 (DPP-4) inhibitors segment in the anti-
diabetic space
Lupins Japan revenue grew 6% YoY to | 1364.6 crore. Lupin
remains the ninth largest generic pharma player in the Japanese
market with a strong presence in the neurology, cardiovascular,
gastroenterology and injectables segments. The company is
developing a new dedicated oral solids manufacturing facility at
Tottori, Japan
About the Japanese market, Japan is the second largest pharma
market in the world with sales of over US$115 billion. Generics
account for 56% of total pharma volumes, growing 8%. The
Japanese government has a target of 80% generic penetration by
2020, translating to an additional 25-30% of overall pharma
volumes going generic. In addition to this, patent expiries valued
at over US$14-16 billion by 2018. The sum total amounts to one
of the largest growth opportunities available to Lupin
Lupin has a pipeline of 10 innovative NCE in therapies like CNS,
oncology, immunology, pain and metabolic disorders

ICICI Securities Ltd | Retail Equity Research Page 8

 On biotechnology, Lupins 200+ strong biotechnology group has
developed a pipeline of biosimilars addressing therapies like
oncology, anti-inflammatory, anti-virals, rheumatoid arthritis,
endocrinology, diabetes, ophthalmology and womens health. In
FY16, the company launched first time two oncology biosimilars -
Lupifil (Filgrastim) and Lupifil-P (Peg-Filgrastim) in India. The
company is currently doing Phase III trial for Entanecept in Japan
and multiple EU countries. The company has completed Phase-I
PK/PD trial for two products and pre-clinical studies for two
products in India. Lupins own fill finish facility is expected to be
operational in FY17
The company has acquired Gavis Pharmaceuticals LLC and Novel
Laboratories Inc, in the US for US$880 million, the largest buyout
executed by an Indian pharma company in the US. The
acquisition enhances Lupins scale in the US generics market and
also broadens Lupins pipeline in dermatology, controlled
substance products and other high-value and niche generics.
Gavis has 58 ANDA filings pending approval with the USFDA and
a pipeline of over 65 products under development.
Lupin also acquired a specialty product portfolio in Germany from
Temmler Pharma GmbH & CO. KG. The portfolio includes 13 fast
growing specialty products including key central nervous system
products and other specialty products. Lupins acquisition of
100% equity stake in Medqumica Indstria Farmacutica LTDA,
Brazil marked the companys foray into the Brazilian market and
helped shore up its position in the Latin American market. Lupin
entered into a strategic co-marketing agreement with Boehringer
Ingelheim for co-marketing Linagliptin, a novel Dipeptidyl
peptidase-4 (DPP-4) inhibitor in India; the DPP-4 Inhibitors market
in India is growing at 31% (IMS MAT March 2016).
The company invested | 1168.1 crore on capital expenditure. R&D
spend in FY16 was | 1603.8 crore, 11.7% of Net Sales.
Icra has assigned the rating ICRA A1+ (for the companys short-
term credit facilities of | 1310 crore and ICRA AAA for long-term
credit facilities of | 190 crore. Icra has assigned the rating Icra
AAA to the companys non-convertible debenture programme of
| 100 crore. The outlook on the rating is Stable
Remuneration of key managerial personnel in FY16, Dr Desh
Bandhu Gupta, Chairman -- | 44.8 crore, Dr Kamal K Sharma, Vice
Chairman-- | 25.7 crore, Vinita Gupta, Chief Executive Officer -- |
19.0 crore, and Nilesh Gupta, Managing Director -- | 7.6 crore
Recommended dividend (including dividend distribution tax) was
of | 8.1 per share in FY16 with dividend payout ratio of 17.9% (vs.
19.6% in FY15).

ICICI Securities Ltd | Retail Equity Research Page 9

Exhibit 10: Major Facilities
Inspection
Location Segment Regulatory Approvals Type Date Outcome
` Formulations USFDA, TGA Australia, WHO GMP, MCC SA Tablets, Capsules, Liquids Jan-16 483 with 3 observations
Ankaleshwar (India) APIs UKMHRA, WHO GMP, ANVISA Brazil, EDQM, KFDA Intermediates and APIs
Mandideep (India) Formulations / APIs USFDA, UKMHRA,WHO GMP, TGA Auatralia APIs- CVS and Ciphalosporins Feb-16 483 with 4 observations
Tarapur (India) APIs USFDA, UKMHRA, WHO GMP APIs Aug-16 No observations
Goa (India) Formulations USFDA, UKMHRA, WHO GMP Solid orals Mar-16 Received EIR
Jammu (India) Formulations WHO GMP, ANVISA Brazil Formulations
Vadodara (India) APIs WHO GMP Intermediates and APIs
Indore (India) Formulations / APIs USFDA, UKMHRA,TGA Auatralia APIs and Formulations Jan-16 483 with 6 observations

Nagpur (India) Formulations WHO and USFDA Formulations

Kyowa (Japan) Formulations PMDA Orals
I' rom (Japan) Formulations PMDA Injectables
Vishakapatnam, AP APIs Under Initiation
Pune (India) R&D Aug-16 No observations
Oldenzaal, Netherlands R&D
Coral Springs, FL R&D
Somerset, NJ Formulations & R&D
Mexico City, Mexico Formulations & R&D
Minas Gerias, Brazil Formulations & R&D
Source: Company, ICICIdirect.com Research

Exhibit 11: Complex Generics/ Speciality Updates

Targeted market Size (US$ billion)
Focus Areas FY16 R&D Update Filed Development
NDDDs Continue development (10 NCEs) NA NA
Biosimilars 10 under development; Etanercept started PhIII in Japan; NA 19.1
Respiratory 2 filings; Clinical trials started for 1 MDI; DPI clinical trials to commence in FY17 0.3 17.2
Injectables Nanomi-complex depot injectable development ongoing; LRP injectables development Ongoing NA 12.8
Controlled Subst. Gavis 9 products in market; 12 filings; Further Development ongoing 4.1 7.8
Dermatology Gavis 1 product in market; 24 filings; Development ongoing 3 2.7
Ophthalmology 2 in market; 7 filings; Continue development 3.1 1.8
OCs 21 products in market; 10 pending approval 1.2 NA
Total 11.7 61.4
Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 10

 Valuation
Q2 numbers demonstrated strong gross margins and robust US growth
mainly due to Gavis consolidation, gGlumetza/gFortamate traction. The
overall profitability was impacted mainly due to higher R&D, forex loss
and new recruitments/capex at Gavis. However, with the Goa EIR (Indore
earlier), a major overhang has been neutralised and the company can
focus on the launches at a regular interval. The management is now
guiding for 30+ launches annually in the US in FY18. It expects the trend
to continue, going ahead. Ramp up at Gavis is also likely to support
launches. With one of the strongest pending pipelines in the US (142
pending approvals) at its disposal, the company is well poised to address
the pricing issue. India and Japan are likely to complement the US driven
growth. We remain upbeat about future prospects and maintain BUY with
a target price of | 1890 based on 22xFY19E EPS of | 85.7.
Exhibit 12: One year forward PE
2500

2000

1500

1000

500

0
Feb-07

Aug-07

Feb-08

Aug-08

Feb-09

Aug-09

Feb-10

Aug-10

Feb-11

Aug-11

Feb-12

Aug-12

Feb-13

Aug-13

Feb-14

Aug-14

Feb-15

Aug-15

Feb-16

Aug-16

Feb-17
Price 29.4x 21.8x 19.3x 9.2x 4.1x
[

Source: Company, ICICIdirect.com Research

Exhibit 13: One year forward PE of company vs. CNX Pharma

45
40
3.9% Premium
35
30
25
(x)

20
15
10
5
0
Feb-07

Aug-07

Feb-08

Aug-08

Feb-09

Aug-09

Feb-10

Aug-10

Feb-11

Aug-11

Feb-12

Aug-12

Feb-13

Aug-13

Feb-14

Aug-14

Feb-15

Aug-15

Feb-16

Aug-16

Feb-17

Lupin CNX Pharma

Source: Company, ICICIdirect.com Research

Exhibit 14: Valuation

Revenues Growth EPS Growth P/E EV/EBITDA RoNW RoCE
(| crore) (%) (|) (%) (x) (X) (%) (%)
FY16 14209 11.3 50.4 -5.5 29.3 19.5 20.7 18.6
FY17E 17654 24.3 62.2 23.4 23.8 14.9 21.1 20.3
FY18E 19590 11.0 67.5 8.6 21.9 13.4 19.2 20.8
FY19E 22095 12.8 83.8 24.1 17.6 10.8 19.9 23.9
Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 11

Recommendation history vs. Consensus
2,500 90.0
80.0
2,000 70.0
60.0
1,500
50.0
(|)

(%)
40.0
1,000
30.0
500 20.0
10.0
0 0.0
Jan-15 Mar-15 Jun-15 Aug-15 Oct-15 Jan-16 Mar-16 Jun-16 Aug-16 Nov-16 Jan-17

Price Idirect target Consensus Target Mean % Consensus with BUY

Source: Reuters, Company, ICICIdirect.com Research

Key events
Date Event
Sep-11 Receives USFDA approval for its first oral contraceptive drug norethindrone tablets
Nov-11 Japanese subsidiary Kyowa acquires specialty injectables company Irom Pharmaceutical
Nov-12 Launches Fenofibrate 48 mg and 145 mg strengths (generic Tricor) in the US
Aug-13 Signs an agreement with Romark Laboratories, which provides exclusive rights to Lupin to promote, distribute and market Alinia (nitazoxanide) oral suspension
brand in the US market
Sep-13 Signs agreement with US based Onset Dermatologics to market Locoid lotion to paediatricians in the US market
Feb-14 Acquires Dutch firm Nanomi B.V. for an undisclosed amount, foraying into the technology intensive complex injectables space.
Mar-14 Acquires Mexico-based ophthalmic drugs maker Laboratories Grin
Apr-15 Consolidated Pharma Dynamics business in South Africa
May-15 Lupin acquires Brazil's Medquimica Industria Farmaceutica SA
Jul-15 Lupin's Goa facility recieves nine Form 483 observations
Jul-15 Lupin acquires Gavis Pharmaceuticals for US$ 880 million to strengthen its US portfolio
Jul-15 Closes Temmler acquisition in Germany
Mar-16 Completes Gavis acquisition
Jul-16 Goa facility receives establishment inspection report (EIR) from USFDA for July 2015 inspectation
Nov-16 Goa facility receives establishment inspection report (EIR) from USFDA for March 2016 inspectation
Source: Company, ICICIdirect.com Research

Top 10 Shareholders Shareholding Pattern

Rank Investor Name Latest Filing Date % O/S Position Position Chan (in %) Dec-15 Mar-16 Jun-16 Sep-16 Dec-16
1 Zyma Laboratories, Ltd. 31-Dec-16 12.33 55.7m 0.0m Promoter 46.5 46.5 46.8 46.8 46.7
2 Rahas Investments Pvt. Ltd. 31-Dec-16 10.21 46.1m 0.0m Others 53.5 53.5 53.2 53.2 53.3
3 Visiomed Investments Pvt. Ltd. 31-Dec-16 9.77 44.1m 0.0m
4 Lupin Marketing Pvt. Ltd. 31-Dec-16 9.04 40.8m 0.0m
5 Lupin Investments Pvt. Ltd. 31-Dec-16 3.41 15.4m 0.0m
6 Stewart Investors 30-Nov-16 2.49 11.2m 0.0m
7 National Westminster Bank Plc 31-Dec-16 2.43 11.0m 0.0m
8 Jhunjhunwala (Rakesh Radheshyam) 31-Dec-16 1.84 8.3m 0.6m
9 GIC Private Limited 31-Dec-16 1.76 7.9m 0.5m
10 Capital World Investors 31-Dec-16 1.75 7.9m 0.0m
Source: Reuters, ICICIdirect.com Research

Recent Activity
Buys Sells
Investor name Value ($) Shares Investor name Value ($) Shares
Rahas Mercantile Pvt. Ltd. 40.8m 1.9m Lupin International Pvt. Ltd. -40.8m -1.9m
Capital International Investors 20.7m 0.9m Baillie Gifford & Co. -10.3m -0.5m
J.P. Morgan Asset Management (Hong Kong) Ltd. 19.2m 0.9m Reliance Nippon Life Asset Management Limited -8.7m -0.4m
Capital International, Inc. 18.7m 0.8m Aberdeen Asset Management (Asia) Ltd. -7.7m -0.4m
Abu Dhabi Investment Authority 13.3m 0.6m Raiffeisen Kapitalanlage-Gesellschaft mbH -5.2m -0.2m
Source: Reuters, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 12

Financial summary
Profit and loss statement | Crore Cash flow statement | Crore
(Year-end March) FY16 FY17E FY18E FY19E (Year-end March) FY16 FY17E FY18E FY19E
Total Operating Income 14,208.5 17,654.1 19,589.7 22,095.3 Profit/(Loss) after taxation 2270.7 2801.8 3041.6 3774.5
Growth (%) 11.3 24.3 11.0 12.8 Depreciation 463.5 855.5 935.2 979.2
Raw Material Expenses 4,309.4 5,148.8 5,876.9 6,518.1 Other operating Activities 44.6 144.3 118.0 68.0
Employee Expenses 2,107.7 2,837.8 3,036.4 3,424.8 (inc)/dec in Current Assets -3243.7 585.0 -837.5 -1066.2
Other expenditure 4,058.1 5,013.0 5,639.5 6,139.9 Inc/ (dec) in Current Liabilities 347.9 597.1 398.5 485.1
Total Operating Expenditure 10,475.2 12,999.6 14,552.8 16,082.8 CF from Operating Activities -116.9 4983.7 3655.7 4240.6
EBITDA 3,733.4 4,654.5 5,036.8 6,012.5 Purchase of Fixed Assets -5805.4 -1000.0 -1500.0 -1000.0
Growth (%) 3.1 24.7 8.2 19.4 (Inc)/Dec in Investments 1653.9 -1500.0 -500.0 -500.0
Depreciation 463.5 855.5 935.2 979.2 Other Investing Activities -1505.8 115.1 115.1 115.1
Interest 44.6 144.3 118.0 68.0 CF from Investing Activities -5657.3 -2384.9 -1884.9 -1384.9
Other Income 207.8 241.4 191.9 216.4 Inc / (Dec) in Loan Funds 6582.2 -1399.4 -2000.0 -2000.0
PBT 3,433.1 3,896.1 4,175.6 5,181.8 Inc / (Dec) in Equity Capital 0.0 0.0 0.0 0.0
EO 0.0 0.0 0.0 0.0 Dividend and dividend tax -407 -476 -517 -642
Total Tax 1,153.6 1,088.2 1,127.4 1,399.1 Other Financing Activities -44.6 -144.3 -118.0 -68.0
PAT before MI 2,279.5 2,807.9 3,048.2 3,782.7 CF from Financing Activities 6130.8 -2020.0 -2635.0 -2709.6
Minority Interest 8.8 6.1 6.6 8.2 Net Cash Flow 357 579 -864 146
Adjusted PAT 2,270.7 2,801.8 3,041.6 3,774.5 Opening Cash 481 838 1,417 552
Gwoth (%) -5.5 23.4 8.6 24.1 Closing Cash 837.9 1,416.7 552.4 698.5
EPS (Adjusted) 50.4 62.2 67.5 83.8 Free Cash flow -5,922.3 3,983.7 2,155.7 3,240.6
Source: Company, ICICIdirect.com Research Source: Company, ICICIdirect.com Research

Balance sheet | Crore Key ratios

(Year-end March) FY16 FY17E FY18E FY19E (Year-end March) FY16 FY17E FY18E FY19E
Equity Capital 90.1 90.1 90.1 90.1 Per Share data (|)
Reserve and Surplus 10,894.3 13,219.8 15,744.3 18,877.1 Reported EPS 50.4 62.2 67.5 83.8
Total Shareholders funds 10,984.4 13,309.9 15,834.4 18,967.3 BV per share 243.8 295.4 351.5 421.0
Total Debt 7,119.3 5,719.9 3,719.9 1,719.9 Dividend per share 9.0 10.6 11.5 14.2
Deferred Tax Liability 204.5 254.5 304.5 354.5 Cash per Share 18.6 31.4 12.3 15.5
Minority Interest 32.1 154.4 276.7 399.0 Operating Ratios (%)
Other NCL & LT Provisions 455.7 505.7 555.7 605.7 Gross Margin 69.7 70.8 70.0 70.5
Total Liabilities 18,795.9 19,944.4 20,691.2 22,046.3 EBITDA margin 26.3 26.4 25.7 27.2
Gross Block 10,888.4 11,388.4 12,988.4 13,988.4 PAT Margin 16.0 15.9 15.5 17.1
Accumulated Depreciation 2,796.4 3,651.9 4,587.1 5,566.2 Inventory Days 81.7 71.0 71.0 71.0
Net Block 8,092.0 7,736.5 8,401.3 8,422.1 Debtor Days 116.9 75.4 75.4 75.4
Capital WIP 546.0 1,046.0 946.0 946.0 Creditor Days 56.3 55.5 55.5 55.5
Total Fixed Assets 8,638.0 8,782.5 9,347.3 9,368.1 Asset Turnover 0.8 0.9 1.0 1.0
Investments 7.5 1,507.5 2,007.5 2,507.5 EBITDA conversion Rate -3.1 107.1 72.6 70.5
Goodwill on Consolidation 2,964.4 2,964.4 2,964.4 2,964.4 Return Ratio (%)
Inventory 3,178.7 3,436.3 3,813.0 4,300.7 RoE 20.7 21.1 19.2 19.9
Debtors 4,549.8 3,646.3 4,046.1 4,563.6 RoCE 18.6 20.3 20.8 23.9
Loans and Advances 737.2 788.1 839.0 889.9 RoIC 18.9 23.9 24.0 28.2
Other Current Assets 473.4 483.5 493.6 503.7 Valuation Ratios (x)
Cash 837.9 1,416.7 552.4 698.5 P/E 29.3 23.8 21.9 17.6
Total Current Assets 9,777.0 9,770.8 9,744.0 10,956.3 EV / EBITDA 19.5 14.9 13.4 10.8
Creditors 2,191.9 2,684.8 2,979.2 3,360.2 EV / Net Sales 5.1 3.9 3.5 2.9
Provisions & Other CL 1,450.0 1,554.1 1,658.2 1,762.3 Market Cap / Sales 4.7 3.8 3.4 3.0
Total Current Liabilities 3,641.8 4,238.9 4,637.3 5,122.5 Price to Book Value 6.1 5.0 4.2 3.5
Net Current Assets 6,135.2 5,531.9 5,106.7 5,833.8 Solvency Ratios
Deferred Tax Assets 80.6 80.6 80.6 80.6 Debt / EBITDA 1.9 1.2 0.7 0.3
Long term Loans and advances 970.3 1,077.5 1,184.7 1,291.9 Debt / Equity 0.6 0.4 0.2 0.1
Application of Funds 18,796.0 19,944.4 20,691.2 22,046.4 Current Ratio 2.5 2.0 2.0 2.0
Source: Company, ICICIdirect.com Research Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 13

ICICIdirect.com coverage universe (Healthcare)
Company I-Direct CMP TP Rating M Cap EPS (|) PE(x) RoCE (%) RoE (%)
Code (|) (|) (| Cr) FY16 FY17E FY18E FY19E FY16 FY17E FY18E FY19E FY16 FY17E FY18E FY19E FY16 FY17E FY18E FY19E
Ajanta Pharma AJAPHA 1796 1,960 Buy 15801.7 45.4 59.7 66.3 75.3 39.5 30.1 27.1 23.8 42.9 39.2 34.9 31.7 34.2 33.1 28.4 25.6
Alembic Pharma ALEMPHA 558 615 Hold 10509.8 38.2 22.0 24.5 30.6 14.6 25.4 22.8 18.2 51.5 26.0 23.1 24.8 44.9 21.9 20.8 21.9
Apollo Hospitals APOHOS 1234 1,440 Buy 17168.0 22.2 21.8 31.4 45.3 55.6 56.6 39.2 27.3 8.2 8.1 10.3 13.3 8.9 8.2 10.7 13.6
Aurobindo Pharma AURPHA 685 1,100 Buy 40084.1 33.9 41.0 48.1 54.9 20.2 16.7 14.3 12.5 23.3 24.3 24.1 24.0 28.1 25.8 23.5 21.5
Biocon BIOCON 1086 1,120 Buy 21715.0 23.1 32.6 34.4 44.2 46.9 33.3 31.5 24.5 9.1 13.0 13.7 16.5 11.4 14.4 13.7 15.4
Cadila Healthcare CADHEA 364 380 Hold 37294.9 15.0 11.2 15.1 18.9 24.4 32.5 24.1 19.3 26.7 14.4 18.3 20.9 28.6 18.5 21.1 22.0
Cipla CIPLA 582.9 575 Hold 46889.2 18.5 17.8 24.7 31.9 31.5 32.7 23.6 18.3 12.0 10.9 14.0 16.6 12.5 10.9 13.4 15.0
Divi's Lab DIVLAB 760 925 Buy 20165.0 41.8 44.6 51.8 57.9 18.2 17.0 14.7 13.1 30.7 28.5 28.0 26.5 25.9 23.0 22.2 20.7
Dr Reddy's Labs DRREDD 2991 2,930 Hold 49548.7 141.4 74.5 114.5 154.3 21.2 40.1 26.1 19.4 17.3 7.0 11.5 15.1 20.6 10.0 13.6 15.8
Glenmark Pharma GLEPHA 952 1,155 Buy 26868.1 32.2 63.0 54.4 60.8 29.6 15.1 17.5 15.7 16.2 26.8 20.8 21.9 21.2 29.7 20.6 18.8
Indoco Remedies INDREM 272.3 315 Buy 2508.8 9.4 8.9 14.2 18.5 29.0 30.7 19.1 14.7 12.9 9.7 14.9 18.1 14.8 12.6 17.4 19.2
Ipca Laboratories IPCLAB 530 605 Buy 6690.2 10.0 15.1 25.4 33.3 52.9 35.2 20.9 15.9 5.7 9.9 12.6 14.8 5.5 7.8 11.9 13.8
Jubilant Life JUBLIF 709.1 810 Buy 11293.8 26.0 37.4 53.9 67.5 27.3 19.0 13.2 10.5 12.0 14.2 16.2 18.3 14.2 17.3 20.2 20.4
Lupin LUPIN 1478 1,890 Buy 66695.6 50.4 62.2 67.5 83.8 29.3 23.8 21.9 17.6 18.6 20.3 20.8 23.9 20.7 21.1 19.2 19.9
Natco Pharma NATPHA 759 750 Buy 13230.0 8.5 12.8 13.1 15.0 89.3 59.2 58.0 50.5 16.0 19.9 17.5 17.8 11.9 15.6 14.0 14.1
Sun Pharma SUNPHA 659 850 Buy 158155.9 23.4 30.4 32.3 39.1 28.1 21.7 20.4 16.8 18.6 19.8 18.4 19.0 18.0 19.5 17.7 18.2
Syngene Int. SYNINT 519 570 Hold 10374.0 11.1 15.5 16.9 20.5 51.3 36.7 33.7 27.7 13.2 17.8 18.1 20.7 21.0 23.2 20.6 20.4
Torrent Pharma TORPHA 1249 1,475 Buy 21135.1 107.8 55.7 62.2 77.6 11.6 22.4 20.1 16.1 46.7 21.0 23.8 26.5 53.8 23.0 21.5 22.3
Unichem Lab UNILAB 270.3 285 Hold 2455.9 12.3 13.2 17.5 23.7 22.0 20.5 15.4 11.4 13.8 14.5 16.2 18.9 11.7 11.3 13.3 15.6
Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 14

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%/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 pankaj.pandey@icicisecurities.com

ICICIdirect.com Research Desk,

ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai 400 093
research@icicidirect.com

ICICI Securities Ltd | Retail Equity Research Page 15

ANALYST CERTIFICATION
We /I, Siddhant Khandekar CA-INTER, 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.

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The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial
positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. The
value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any loss or damage of any kind
arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before
investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice.

ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in
the past twelve months.

ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in
respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction.

ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned in
the report in the past twelve months.

ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its associates or its analysts did not receive any
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It is confirmed that Siddhant Khandekar CA-INTER, Mitesh Shah MS (Finance) Research Analysts of this report have not received any compensation from the companies mentioned in the report in the
preceding twelve months.

Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.

ICICI Securities or its subsidiaries collectively or Research Analysts or their relatives do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month
preceding the publication of the research report.

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.

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report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial
instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their
receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances.
The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial
positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. The
value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any loss or damage of any kind
arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before
investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to
change without notice.

ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in
the past twelve months.

ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in
respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction.

ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned in
the report in the past twelve months.

ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its analysts 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 ICICI Securities nor Research Analysts have any material
conflict of interest at the time of publication of this report.

It is confirmed that Siddhant Khandekar CA-INTER Mitesh Shah MS (Finance), Research Analysts of this report have not received any compensation from the companies mentioned in the report in the
preceding twelve months.

Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.

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