12 Annual Global Investor Conference
BSE Sensex
28,354
S&P CNX
8,716
th
Alkem Laboratories
TP: INR1,800 (+12%)
Buy
Company update | Sector: Healthcare
CMP: INR1,614
Preferred way to play domestic pharma story
Stock Info
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
M.Cap. (INR b)
M.Cap. (USD b)
Avg Val, INRm
Free float (%)
ALKEM IN
119.6
1670/1175
3/4/-
149.2
2.3
409.0
33.1
2018E
68.5
12.7
10.3
85.8
16.3
418.4
22.3
20.5
15.7
3.2
11.9
2.2
Financial Snapshot (INR b)
Y/E Mar
2016 2017E
Sales
49.9
57.2
EBITDA
8.5
10.0
NP
7.7
8.8
EPS (INR)
64.7
73.8
EPS Gr. (%)
67.4
13.9
BV/Sh. (INR)
293.0 351.9
RoE (%)
23.8
22.9
RoCE (%)
17.6
20.7
Valuations
P/E (x)
20.8
18.3
P/BV (x)
4.6
3.8
EV/EBITDA (x)
18.8
15.8
EV/Sales (x)
3.2
2.8
Shareholding pattern (%)
As on
Promoter
Public
Others
Relative to Index
Despite regulatory headwinds, Alkem Laboratories’ (ALKEM) domestic business is
poised to deliver robust mid-to-high teens growth on the back of its consistent
outperformance in the acute segment and lower base in the chronic segment.
Strong secondary sales growth in July-Aug in the domestic market suggests another
quarter of robust performance (like 1QFY17).
Half of the impact of price control was already factored in for 1Q. FDC ban impact
should get diluted (even if the legal outcome is unfavorable) as the company is already
working on substitute products.
Only one-third of the portfolio in the US has been monetized by now. Many products
are awaiting ANDA approvals and likely to be launched over the next 2-3 years (bigger
products are bunched up toward back-end). This would result in doubling of revenues
in the US over the next 3-4 years.
We argue for a multiple re-rating, given ALKEM’s leadership position in the domestic
market, superior earnings growth profile (>15% EPS CAGR over FY16-18E), improving
return ratios (ROICs expected to improve to ~21% by FY18E, from 17% in FY16) and net
cash balance sheet.
Acute business continues to surprise positively
Jun-16 Mar-16 Dec-15
66.9
33.1
--
66.8
33.2
--
66.6
33.4
--
ALKEM has been the market leader in the acute segment over the past five
years. Despite the high base, Alkem has consistently outperformed India acute
market growth. Domestic acute segment exhibited 10%CAGR over the last five
years, whereas ALKEM acute revenues exhibited low teens growth over the
same period. This growth was primarily driven by its new product launches;
brand loyalty, aggressive pricing strategy and vast distribution reach across
India.
In 1QFY17, ALKEM delivered robust primary sales growth of ~16% YoY in the
domestic market v/s mid-to-high single-digit growth reported by most peers.
This was primarily driven by strong growth in big therapy areas, including anti-
infectives and GI (outperformed industry growth by >600bp in 1Q).
Despite being the market leader (among top-three), we expect ALKEM to deliver
mid-teens growth in the acute segment on the back of its strong brand equity,
rich product pipeline and industry-high sales force productivity.
The chronic segment has grown at a robust pace (>30% CAGR) over the last five
years on the back of lower base, high industry growth, and investments on
infrastructure & marketing fronts.
We believe the chronic segment is yet to show its true potential. Currently, 25%
of its salesforce is dedicated toward the chronic space, whereas revenue
contribution from this segment stood at ~12% in FY16 (despite strong growth
over the last five years).
We expect the chronic business to deliver >20% CAGR over the next three years
on the back of low base effect and its focus on high-growth therapies (cardio,
derma, anti-diabetic, etc.) and specialized sales team (of ~1,500).
ALKEM is working on Phase-3 trials of Evogliptin (in-licensed from Dong-A ST),
which could act as a key growth catalyst from FY18.
Chronic – platform is set, time to reap benefits
Kumar Saurabh
Gaurav Tinani
(Kumar.Saurabh@MotilalOswal.com)
+91 22 6129 1519
(Gaurav.Tinani@motilaloswal.com)
+91 22 6129 1552
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are
2016
9 September
advised to refer through important disclosures made at the last page of the Research Report.
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Alkem Laboratories
12 Annual Global Investor Conference
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Impact of regulatory actions in domestic market
Half of price control impact was already visible in 1Q:
Expanded NLEM list,
WPI-led price cuts and NPPA-led downward price revisions are likely to
adversely impact domestic sales growth by ~4-5%. Half of this impact was
witnessed in 1QFY17, and the remainder will be evident in 2QFY17.
FDC ban – real impact should get diluted:
Currently, the central government’s
ban order has been stayed in court, and the final verdict is pending. If the
decision does not go in favor of ALKEM, it will adversely impact ~3-4% of sales.
Management is already working on substitute products, and thus the real
impact may not be to this extent.
US business has potential to double in next 3-4 years
In the 1QFY17 earnings call, management highlighted that it expects two-thirds
of current pending ANDAs to get approved over the next 2-3 years. This could
potentially double the US revenue base from USD150m at end-FY16 to
~USD300m over the next 3-4 years.
In FY17, ramp-up in sales momentum will be driven by the three recent launches
and another 5-6 that are scheduled for launch over the rest of FY17 (including
gBenicar in 2Q and gCrestor in Nov-16).
Increase in the ANDA filling rate to 12-15/year (v/s high-single-digit till last year)
on the back of higher R&D spend (~30% CAGR over FY16-18E) and capacity
addition (Long Pharma acquisition) will help drive growth in the medium term.
From regulatory standpoint, the company currently has zero pending 483s
across its facilities. The Taloja bio equivalence center was the latest facility to
receive FDA clearance. The Daman facility (accounts for ~30% of US sales) is
scheduled for inspection over the next 1-2 months.
Robust balance sheet + cash flow generation
ALKEM had net cash balance of ~INR7b at end-FY16. The company generated
FCF of INR6.5b in FY16. The company has planned capex of ~INR5.0b for FY17
(v/s INR2.3b in FY16) as it is developing two Greenfield plants in Sikkim, which
will help create capacity and provide tax shield for the next 10 years.
From FY18, capex is expected to come down to normalized levels of ~INR3b,
which, coupled with strong growth in base business, will lead to significant cash
flow generation and improvement in return ratios.
ALKEM remains our most preferred stock to play the domestic pharma story.
We expect re-rating of the stock going forward, given the company’s strong
domestic presence, net cash balance sheet, operating free cash generation and
improving return ratios (ROIC to improve to ~24% by FY18E vs. 19% in FY16).
Our target price of INR1,800 for ALKEM is based on 21x FY18E PER.
Risks:
Successful US FDA inspection (which is already overdue) of the Daman
facility is critical (contributes ~30% to US sales) – clean track record provides
comfort. We have already taken aggressive tax rates (~18.5% for FY18E v/s 9%
for FY16) in our assumptions. However, higher-than-expected negative
movement in below-the-EBITDA-line items could impact PAT. Also, further
regulatory tightening will impact industry growth.
Valuation attractive; sticky profit provides comfort
14 September 2016
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12 Annual Global Investor Conference
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India business to remain the cash cow
ALKEM is one of the fastest growing pharma companies among top-10 domestic
peers. It is the sixth largest pharmaceutical company in India (top 3 acute
players) with a market share of ~3.4%, based on domestic formulations sales
(source: AIOCD).
Although majority of sales are contributed by the domestic business (73% of
sales) currently, we believe exports (28%) would be the key growth driver for
the company.
As the company is among the top-3 players in acute therapy in India (ranks 1st
in anti-infective), we have seen sustainability in its operations. Furthermore, it’s
growing presence in the domestic chronic segment (growing at double the pace
of industry at >35%) and robust US pipeline will help drive growth and
profitability.
Exhibit 2: Revenues to exhibit 17% CAGR over FY16-18E
Revenue (INR b)
Exhibit 1: Business mix to improve over FY16-18E
India acute business (%)
US business (%)
10
3
5
7
6
7
11
7
8
11
13
8
68
8
17
8
67
India chronic business (%)
Ex-US export business (%)
7
20
9
64
8
21
10
62
8
22
12
58
82
80
74
16.9
FY11
FY12
FY13
FY14
FY15
FY16
FY17E FY18E
FY11
20.2
FY12
25.0
FY13
31.3
FY14
37.9
FY15
49.9
FY16
57.2
68.5
FY17E FY18E
Source: MOSL, Company
Source: MOSL, Company
Exhibit 3: Better business mix to drive profitability
EBITDA (INR b)
17.0
18.6
14.5
13.1
14.4
EBITDA margin (%)
17.0
17.5
18.5
Exhibit 4: Expect 15% earnings CAGR owing to lower other
income
EPS (INR/sh)
2.9
FY11
3.8
FY12
3.6
FY13
4.1
FY14
5.4
FY15
8.5
FY16
10.0
12.7
24.7
FY11
34.0
FY12
32.1
FY13
36.4
FY14
38.7
FY15
64.7
FY16
73.8
85.8
FY17E FY18E
FY17E FY18E
Source: MOSL, Company
Source: MOSL, Company
Market leader in key acute therapies
As per AIOCD, ALKEM ranks first in anti-infective therapy, with a 9.7% market share.
Additionally, it ranks third in the gastro-intestinal (GI) and vitamins markets, with a
5% market share in each. The company also has strong presence in the
pain/analgesic market, with more than 3.5% share.
14 September 2016
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12 Annual Global Investor Conference
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Superior performance in chronic therapies
Anti-diabetic, derma and cardiac are the three fastest-growing chronic segments in
India. Over the last 12 months (MAT-July 2016), ALKEM has reported 25% YoY
growth in its anti-diabetic portfolio, as against +17% YoY market growth for the
same period. Similarly, it has outperformed market growth in therapies like derma,
gynecological and cardiac.
Exhibit 5: Superior growth in chronic therapies
Therapy
Neuro / CNS
Derma
Gynecological
Respiratory
Anti diabetic
Cardiac
Domestic
MAT sales (INR m)
1,578
1,164
1,148
953
792
833
Market
share (%)
2.5%
1.9%
2.3%
1.2%
0.9%
0.7%
YoY
Growth (%)
8.2%
18.8%
19.2%
4.0%
24.8%
16.7%
Overall Therapy
MAT sales (INR m)
62,119
59,916
50,723
78,335
84,546
125,427
YoY
Growth (%)
12.3%
12.4%
9.1%
9.4%
17.2%
11.1%
Source: AIOCD, MOSL
Investment in chronic segmentto help drive growth
Superior growth in chronic therapies is result of large number of launches in the
cardiac, derma and anti-diabetic categories, with significant initial investment going
into building specialized salesforce of ~1,500 MRs in these therapies. We believe
chronic therapy growth will not only drive ALKEM’s top-line growth, but will also
drive profitability over the long term.
Exhibit 6: MR productivity
No of MRs
MR Productivity (INR m/MR)
6.9
5.9
2.8
6000
Alkem
4500
Acute
1500
Chronic
Source: Company, MOSL
14 September 2016
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12 Annual Global Investor Conference
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Diversified brand portfolio
ALKEM has a well-diversified portfolio, with no over-dependence on any single
brand (top-10 brands contribute 40% of domestic sales, and top-25 brands
contribute ~58%). According to AIOCD, 8 of ALKEM’s brands were among the top-
selling 100 pharmaceutical brands in India in the 12-month period ended July 2016.
Exhibit 7: Top 25 brands contribute 58% of total domestic sales
Contribution (%)
58.0
39.9
27.6
7.2
Top 1 (%)
Top 5 (%)
Top 10 (%)
Top 25 (%)
Top 50 (%)
Source: AIOCD, MOSL
70.1
Exhibit 8: ALKEM’s top 10 brands contribute ~39.9% of total sales (MAT Jul-16)
MAT Jul 16
Drug
Total
Clavam
Pan
Taxim O
Pan D
Taxim
Xone
Ondem
Gemcal
Sumo
A To Z Ns
Anti-Infective
Gastro Intestinal
Anti-Infective
Gastro Intestinal
Anti-Infective
Anti-Infective
Gastro Intestinal
Vitamins / Minerals / Nutrients
Pain / Analgesics
Vitamins / Minerals / Nutrients
Therapy
Value
(INR m)
34,721
2,507
2,034
1,949
1,654
1,426
936
865
863
820
813
Growth
(%)
9.4
12.6
13.9
8.1
12.6
-23.5
6.8
12.0
1.9
-1.0
11.8
Mkt.
Share (%)
100.0
7.2
5.9
5.6
4.8
4.1
2.7
2.5
2.5
2.4
2.3
Last 3M
11.8
23.4
14.7
11.7
15.1
-15.9
13.3
20.3
8.0
23.6
7.9
Growth (%)
Jul-16
14.9
31.8
18.5
0.3
15.5
0.6
24.7
11.2
2.5
51.5
14.7
Source: AIOCD, MOSL
Strong marketing capability and salesforce productivity to drive growth
ALKEM has a specialized team of over 6,000 sales representatives, which enables it
to market its products to 71.9% of prescribers in India. Its domestic distribution
network includes 40 sales depots, 49 clearing and forwarding agents, and
approximately 7,000 stockists.
Current sales productivity at INR6m/sales representative is at par with industry
average. However, there is still significant scope in the system for ALKEM to increase
productivity in the medium term with growing proportion of chronic portfolio. Of
the 6,000 MRs, around one-fourth are dedicated chronic MRs. Given that the
14 September 2016
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Alkem Laboratories
12 Annual Global Investor Conference
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company is still new in the chronic segment, there is scope for productivity
improvement in this segment.
Exhibit 9: ALKEM covers 72% of total prescribers in India
Uncovered
prescribers (%),
28.1
Covered
prescribers (%),
71.9
Source: Company, MOSL
14 September 2016
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12 Annual Global Investor Conference
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US business – the jewel in the crown
Rich pipeline to support growth
As of 30-June 2016, ALKEM had filed 76 ANDAs in the US, of which 26 have been
approved and 50 are pending with US FDA. These include 32 Para IVs and few FTF
filings. Most of these filings are in the areas of CVS, CNS and antibiotics. With 50
pending filings and 50% of these older than two years, we believe ALKEM can launch
7-8 products annually for the next two years in the US to support 26% CAGR over
FY16-18E.
Exhibit 10: US sales to be driven by new launches
US sales (INR m)
150.6
127.8
56.5
53.2
53.4
18.4
0.5
FY11
1.2
FY12
1.9
FY13
4.2
FY14
6.5
FY15
9.9
FY16
11.7
FY17E
YoY Growth (%)
33.6
15.7
FY18E
Source: Company, MOSL
Exhibit 11: Increasing US sales contribution
% of sales
20.3
17.1
13.5
7.4
20.5
22.5
5.9
2.8
FY11
FY12
FY13
FY14
FY15
FY16
FY17E
FY18E
Source: Company, MOSL
14 September 2016
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12 Annual Global Investor Conference
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Key existing products for ALKEM
Silver sulfadiazine (topical antibacterial)
This was the first product launched by ALKEM in the US as a contract
manufacturer. The partner has an NDA for the topical version, with USD50m
market size. We believe ALKEM has generated USD10-15m sales from this
contract.
Ibuprofen – in-licensed (analgesic)
Ibuprofen is an in-licensed product for ALKEM. Though it is a crowded market, it
is dominated by only few players and ALKEM has acquired a 30% market share.
Current market size for Ibuprofen stands at USD50m/annum.
Mycophenolate mofetil suspension (immunosuppressant)
ALKEM is the only player in the suspension version of mycophenolate mofetil. It
has 60% market share, and is likely generating USD15m annual sales from this
product.
Methadone (analgesic)
Methadone is an important product for ALKEM in the US, with 30% market
share and USD10m annual sales. There are only four other generic players in this
market.
Nimodipine (high blood pressure)
ALKEM launched this product in FY15. Though it is a partnered product, we
believe ALKEM is generating annual sales of USD9-10m from Nimodipine.
14 September 2016
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Alkem Laboratories
12 Annual Global Investor Conference
Exhibit 12: Recently launched products
Molecule
Amlodipine Besylate
Methadone Hydrochloride
(PN product)
Cefuroxime Axetil
Metformin Hydrochloride
Cephalexin
Gabapentin
Hydralazine Hydrochloride
Quetiapine Fumarate
Lamotrigine
Nimodipine (PN product)
Benzonatate (PN product)
Isonazid (PN product)
Mycophenolate Mofetil
Nebivolol Hydrochloride
Olanzapine
Linezolid
Gabapentin
Rizatriptan Benzoate
Riluzole
Indication
Blood pressure
Pain (controlled substance)
Bacterial infections
Diabetes
Anti-biotic
Control seizures (antiepileptic)
Blood pressure
Mood/ mental conditions
Control seizures (antiepileptic)
Treat bleeding (in brain)
Cough
Tuberculosis (TB) infections
Immunosuppressant
Blood pressure
CNS
Anti-biotic
Anti-epileptic
Migraine headache
CNS
Time of approval
5/4/2009
11/25/2009
6/7/2010
11/1/2010
12/20/2010
12/17/2010
12/7/2012
2/12/2013
6/14/2013
4/7/2014
9/24/2014
10/29/2014
11/14/2014
6/24/2015
10/23/2015
12/21/2015
12/23/2015
02/18/2016
03/30/2016
1
No Launch
11
9
12
14
6
Source: USFDA, MOSL
Number of players
36
5
10
30
7
12
10
13
15
5
8
th
Robust ANDA pipeline provides comfort
Of the 50 pending ANDA filings with US FDA, 32 are Para IV opportunities. We have
tracked 11 para IV opportunities for ALKEM, and most of these opportunities are
expected to fructify FY18/FY19 onwards. Some of the key products include Pradaxa,
Benicar, Solodyn and Multaq. Most of these products are still under litigation.
Exhibit 13: Known pending ANDAs
Generic Name
Lanthanum Carbonate
Minocycline
Fesoterodine Fumarate
Dabigatran
Dalfampridine
Dronedarone hydrochloride
Olmesartan Medoxomil
Rosuvastatin Calcium
Tapentadol
Esomeprazole
Aripiprazole
Brand name
Fosrenol
Solodyn
Toviaz
Pradaxa
Ampyra
Multaq
Benicar
Crestor
Nucynta
Nexium
Abilify
Therapy
Renal disease
Acne
GI
CVS
CNS
CVS
Blood Pressure
Cholesterol
Pain/Analgesics
GI
CNS
Patent expiration
26-Oct-18
19-Feb-18
3-Jul-22
18-Feb-18
30-Jul-18
19-Jun-18
25-Oct-16
17-Jun-22
27-Jun-25
Expired
Expired
Market Size (USD m)
125
300
236
800
348
500
700
2900
166
1800
6000
Source: Company, MOSL
14 September 2016
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Alkem Laboratories
12 Annual Global Investor Conference
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Enhanced R&D focus to pay rich dividend
ALKEM intends to increase R&D initiatives to enhance its differentiated product
portfolios in domestic/international markets and to add ANDA filings in the US.
As part of the strategy, it will continue focusing on formulation development
and API research. Further, it has identified biosimilars as a long-term growth
opportunity, and expects to make investments in development of products with
a focus on high-growth therapeutic areas such as oncology, autoimmune
disorders and osteoporosis.
ALKEM is also working on developing capabilities and expertise in niche areas
with high entry barriers, such as modified release products, transdermal
products and osmotic-controlled release oral delivery systems.
Further, it has an integrated clinical research organization facility, where
bioequivalence/bioavailability studies for generic drugs are carried out in
relation to filings in various countries. This unit is audited by DCGI, USFDA, UK-
MHRA and other international regulatory agencies.
Exhibit 14: R&D expenses likely to increase
R&D expense (INR m)
4.3%
5.0%
4.5%
4.3%
As % of sales
5.0%
5.5%
1082
FY13
1570
FY14
1696
FY15
2146
FY16
2860
FY17E
3740
FY18E
Source: Company, MOSL
Adding new capabilities
ALKEM has been manufacturing only oral solids for the US market. However,
through the acquisition of St Louis facility in the US, it has also built capabilities to
manufacture controlled substances, nasals, semi-solids, liquids and ointments for
the US market. These are niche product areas of low competition and high margins.
Launching products in a niche category will help ALKEM to raise its average
sales/ANDA ratio over the medium term.
Manufacturing capabilities
ALKEM has 16 manufacturing facilities in India and the US (14 facilities at five
locations in India, and two in the US). Of these, five facilities are US FDA approved –
three formulation plants (Daman, Baddi and St Louis) and two API units (California
and Ankleshwar).
In June 2015, ALKEM had added another US-approved facility in the US through
inorganic route. Through this acquisition, it gained semi-solid, liquid and nasal
formulation capabilities. This will help it enter the niche control substances market.
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Alkem Laboratories
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The Baddi facility was recently inspected by US FDA and has also received EIR from
the regulatory authority. However, the Daman facility was last inspected in 3QFY14
and is likely to face another US FDA inspection in the near term.
Exhibit 15: Daman, Baddi – the key manufacturing formulations facilities for US
US Business
Daman Facility
Baddi Facility
St. Louis, US
1. Manufactures oral
solids
2. Last inspected in
3QFY14
1. Manufactures oral
solids
2. Last inspected in
2HFY15
1. Manufactures Semi-
solids, Liquid, Nasals
and control substances
Source: Company, MOSL
14 September 2016
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12 Annual Global Investor Conference
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Valuations and Risks
Over the last 10 years, ALKEM has outperformed most of the Indian pharma
companies in the domestic market, driven by consistent launches in acute therapies
(like anti-infective, pain/analgesic and vitamins) and growing its presence in high-
growth chronic therapies (like CNS, cardiac, derma and anti-diabetic). Besides India
segment, ALKEM has launched 20 products in US market and has 50 pending
approvals. On the back of its improved presence in the chronic business and
significant positive leverage from the US segment, we expect ALKEM’s earnings to
exhibit 15% CAGR over the next two years. It will be supported by 17% CAGR in
revenues and 150bp margin expansion over FY16-18E. Our target price of INR1,800
discounts ALKEM’s FY18E EPS at 21x P/E multiple, which is at 10% discount to sector
average.
At CMP, ALKEM is trading at 21.6x FY17E and 18.5x FY18E (20% discount to sector
average), which is unjustified, in our view. We argue for P/E re-rating for ALKEM due
to:
Strong EPS outlook of 15% CAGR, backed by 150bp margin expansion over FY16-
18E.
Improvement in RoCE from 17.6% now to 21% by FY18E.
Medium-term stock price drivers:
Improvement in US profitability (20% of sales) led by niche product launches.
Greater traction in chronic portfolio.
M&A opportunities in domestic and US market.
Risks to our investment assumptions:
Expansion of NLEM list in domestic markets.
Daman formulations facility is due for US FDA inspection in near term (accounts
for ~30% of US revenue).
Incremental competition in existing key products in the US business.
Exhibit 16: Our TP of INR1,800 is based on 21x FY18E PER (10% discount to sector avg.)
FY18E EPS
85.8
Target multiples
21.0
Target Price
1,800
% Upside
13
Source: Company, MOSL
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12 Annual Global Investor Conference
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Story in charts
Exhibit 17: Improving return ratios
RoE (%)
25.0
19.2
17.8
14.3
14.2
18.3
18.4
21.0
14.6
17.6
20.5
RoCE (%)
23.8
23.2
22.2
Exhibit 18: Chronic to drive India growth
India business (INR b)
14.8
FY12
FY13
FY14
FY15
FY16
FY17E
FY18E
FY11
17.5
FY12
20.5
FY13
23.6
FY14
28.3
FY15
35.4
FY16
41.0
FY17E
48.4
FY18E
Source: Company, MOSL
Source: Company, MOSL
Exhibit 19: Overall sales up 21% YoY to INR14.6b in 1Q
Sales (INR b)
Exhibit 20: EBITDA margin improved with better business
mix
EBITDA (INR b)
17.3
14.5
17.1
18.8
EBITDA margin (%)
18.5
13.8
18.6
9.9
9.1
12.1
13.6
12.7
11.4
14.6
1.7
1.3
2.1
2.5
2.4
1.6
2.7
Source: Company, MOSL
Source: Company, MOSL
Exhibit 21: Gross margins to stay at 60% levels
Gross Profit (INR b)
60.7
58.3
57.1
Gross margin (%)
62.6
59.5
60.1
60.3
Exhibit 22: 1Q EPS at INR20/share
EPS (INR/sh)
13.5
5.8
5.2
7.3
8.1
7.7
7.1
8.8
10.9
16.8
20.6
15.8
4.7
20.0
Source: Company, MOSL
Source: Company, MOSL
14 September 2016
13

Alkem Laboratories
12 Annual Global Investor Conference
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Financials and Valuations
Consolidated - Income Statement
Y/E March
Total Income from Operations
Change (%)
EBITDA
Margin (%)
Depreciation
EBIT
Int. and Finance Charges
Other Income
PBT bef. EO Exp.
EO Items
PBT after EO Exp.
Current Tax
Deferred Tax
Tax Rate (%)
Less: Mionrity Interest
Reported PAT
Adjusted PAT
Change (%)
Margin (%)
FY11
16,908
NA
2,866
17.0
274
2,592
412
1,134
3,314
0
3,314
328
28
10.7
2
2,956
2,956
NA
17.5
FY12
20,156
19.2
3,752
18.6
290
3,462
581
1,453
4,334
0
4,334
172
104
6.4
-7
4,065
4,065
37.5
20.2
FY13
24,952
23.8
3,625
14.5
398
3,227
882
1,672
4,016
0
4,016
42
137
4.5
-2
3,838
3,838
-5.6
15.4
FY14
31,260
25.3
4,100
13.1
523
3,578
931
1,653
4,300
0
4,300
25
-79
-1.2
0
4,353
4,353
13.4
13.9
FY15
37,887
21.2
5,445
14.4
703
4,742
811
1,810
5,741
-574
5,167
85
457
10.5
0
4,625
5,139
18.1
13.6
FY16
49,915
31.7
8,482
17.0
1,006
7,477
671
1,645
8,451
0
8,451
1,606
0
19.0
114
6,731
7,741
50.6
15.5
FY17E
57,202
14.6
10,010
17.5
1,075
8,935
294
1,584
10,225
0
10,225
1,278
0
12.5
127
8,819
8,819
13.9
15.4
(INR Million)
FY18E
68,501
19.8
12,700
18.5
1,356
11,344
294
1,583
12,632
0
12,632
2,230
0
17.7
144
10,259
10,259
16.3
15.0
Consolidated - Balance Sheet
Y/E March
Equity Share Capital
Total Reserves
Net Worth
Minority Interest
Deferred Tax Liabilities
Total Loans
Capital Employed
FY11
120
14,217
14,337
18
253
9,094
23,702
4,885
2,042
0
538
21,052
2,509
1,710
9,898
6,935
4,816
1,677
881
2,258
16,237
0
23,702
FY12
120
18,081
18,201
2
362
10,048
28,612
6,741
2,451
0
3,227
22,239
3,849
2,466
5,138
10,785
6,050
2,760
862
2,428
16,189
4
28,612
FY13
120
21,654
21,773
0
506
15,485
37,765
8,964
1,758
0
4,776
27,202
5,540
3,182
9,955
8,526
4,955
2,876
1,173
906
22,247
20
37,765
FY14
120
25,730
25,850
0
781
11,284
37,915
9,797
1,903
0
5,880
25,414
6,203
3,669
2,063
13,478
5,251
3,057
1,267
926
20,163
172
37,915
FY15
239
29,752
29,991
857
1,256
13,059
45,162
11,429
3,421
0
4,808
33,008
7,842
5,271
7,908
11,987
7,796
4,619
1,667
1,510
25,212
292
45,162
FY16
239
34,787
35,027
965
1,027
5,885
42,904
11,517
3,531
1,093
4,220
33,944
9,094
5,645
7,964
11,241
11,482
5,793
3,694
1,995
22,462
82
42,904
FY17E
239
41,830
42,069
965
1,027
5,885
49,947
14,066
3,531
2,969
4,220
39,032
10,602
7,052
8,969
12,409
13,953
5,818
4,234
3,901
25,080
82
49,947
FY18E
239
49,779
50,018
965
1,027
5,885
57,896
16,584
3,531
2,094
4,220
48,633
11,466
7,507
15,439
14,221
17,248
7,338
5,070
4,840
31,385
82
57,896
Net Fixed Assets
Goodwill on Consolidation
Capital WIP
Total Investments
Curr. Assets, Loans&Adv.
Inventory
Account Receivables
Cash and Bank Balance
Loans and Advances
Curr. Liability & Prov.
Account Payables
Other Current Liabilities
Provisions
Net Current Assets
Deferred Tax assets
Appl. of Funds
E: MOSL Estimates
14 September 2016
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Alkem Laboratories
12 Annual Global Investor Conference
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Financials and Valuations
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
BV/Share
DPS
Payout (%)
Valuation (x)
P/E
Cash P/E
P/BV
EV/Sales
EV/EBITDA
Dividend Yield (%)
FCF per share
Return Ratios (%)
RoE
RoCE
RoIC
Working Capital Ratios
Asset Turnover (x)
Inventory (Days)
Debtor (Days)
Creditor (Days)
Leverage Ratio (x)
Debt/Equity
FY11
24.7
27.0
120
1.5
7.1
FY12
34.0
36.4
152
2.0
6.8
FY13
32.1
35.4
182
2.0
7.2
FY14
36.4
40.8
216
2.0
6.4
37.1
33.1
6.2
5.5
41.6
0.1
15.9
18.3
14.2
13.7
0.8
72
41
36
0.4
FY15
38.7
48.9
251
4.0
12.3
34.9
27.6
5.4
4.4
30.6
0.3
16.1
18.4
14.6
13.6
0.8
76
49
45
0.4
FY16
64.7
73.2
293
5.6
11.7
20.8
18.4
4.6
3.2
18.8
0.4
55.0
23.8
17.6
19.5
1.2
67
40
42
0.2
FY17E
73.8
82.8
352
12.5
20.1
18.3
16.3
3.8
2.8
15.8
0.9
13.5
22.9
20.7
24.7
1.1
68
44
37
0.1
FY18E
85.8
97.2
418
16.3
22.5
15.7
13.9
3.2
2.2
11.9
1.2
63.9
22.3
20.5
26.7
1.2
61
39
39
0.1
0.1
2.3
20.6
14.2
17.4
0.7
54
36
36
0.6
0.1
-7.4
25.0
17.8
19.3
0.7
70
43
50
0.6
0.1
-13.0
19.2
14.3
14.2
0.7
81
45
42
0.7
Consolidated - Cash Flow Statement
Y/E March
OP/(Loss) before Tax
Depreciation
Interest & Finance Charges
Direct Taxes Paid
(Inc)/Dec in WC
CF from Operations
Others
CF from Operating incl EO
(Inc)/Dec in FA
Free Cash Flow
(Pur)/Sale of Investments
Others
CF from Investments
Issue of Shares
Inc/(Dec) in Debt
Interest Paid
Dividend Paid
Others
CF from Fin. Activity
Inc/Dec of Cash
Opening Balance
Closing Balance
FY11
3,314
274
-567
-666
-992
1,363
116
1,479
-1,203
276
-323
1,956
430
0
8,201
-412
0
0
7,789
9,698
200
9,898
FY12
4,334
290
-629
-966
-1,448
1,581
10
1,591
-2,481
-890
-2,612
-1,147
-6,240
0
646
-547
-209
-1
-111
-4,760
9,898
5,138
FY13
4,016
398
-730
-1,102
-1,827
754
26
780
-2,335
-1,554
-281
3,095
480
0
4,870
-797
-517
0
3,556
4,816
5,138
9,955
FY14
4,300
523
-555
-1,111
-364
2,793
107
2,900
-1,004
1,897
25
-3,814
-4,792
0
-4,732
-914
-319
-35
-6,000
-7,892
9,955
2,063
FY15
5,142
703
-1,196
-1,056
-963
2,630
652
3,281
-1,354
1,928
1,028
3,406
3,081
0
871
-793
-567
-29
-518
5,845
2,063
7,908
FY16
8,451
1,006
-975
-1,606
1,992
8,868
0
8,868
-2,296
6,572
588
1,645
-63
0
-7,174
-671
-790
-114
-8,748
57
7,908
7,965
(INR Million)
FY17E
10,225
1,075
-1,290
-1,278
-1,613
7,119
0
7,119
-5,500
1,619
0
1,584
-3,916
0
0
-294
-1,777
-127
-2,198
1,005
7,965
8,969
FY18E
12,632
1,356
-1,288
-2,230
165
10,635
0
10,635
-3,000
7,635
0
1,583
-1,417
0
0
-294
-2,310
-144
-2,748
6,470
8,969
15,439
14 September 2016
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