Sun Pharma Initiating Coverage Report - AMSEC
Sun Pharma Initiating Coverage Report - AMSEC
Sun Pharma Initiating Coverage Report - AMSEC
Institutional Research With an 8.2% market share in India and leadership in 11 therapies, Sun
Pharmaceutical Industries is the largest domestic pharma player with a presence
BUY across 100 countries. We believe its domestic business can grow at 11% CAGR over
FY21-23E with >30% EBITDA margins. While its US generics business has struggled
over the past four years, the >$1 bn worth of investments in the specialty business is
CMP (Rs) 697
bearing fruit. We expect this business to grow from $429 mn in FY20 to >$700 mn in
Target (Rs) 802
FY23E. We believe Sun Pharma can deliver revenue CAGR of 10% and PAT CAGR of 7%
Upside (%) 15
over FY21-23E. Thus, we initiate coverage with a ‘buy’ rating and a price target of Rs.
Nifty: 14,821; Sensex: 50,354 802.
Refer Disclosures & Disclaimer at the end of the report. Our reports are available on Bloomberg ASNM <GO>, ThomsonReuters, Factset and Capital IQ May 10, 2021
Sun Pharmaceutical Industries- Initiating Coverage
Table of Contents
3 Story In Charts 6
5 Investment Rationale 8
7 US Generics - 21
9 API Business 26
10 Financial Performance 27
13 Valuation 31
14 Risks 32
15 Company Overview 33
16 Financials 36
Expect revenue at $718 mn in FY23E, led by Ilumya ($283 mn in psoriasis) and Cequa ($100 mn). We build in
Global Specialty Business Levulan at $90 mn and Absorica franchise at $66 mn in FY23E. Expect the specialty business (ex-Absorica
franchise and Levulan) to clock 9% EBITDA margins in FY22E and 23% in FY23E.
We build in US generics revenue (Taro US + Sun) at $965 mn in FY23E. Halol is not a major contributor to Sun’s
US Generics
revenue (~3% in FY23E). We expect the generics business to see margins of 19%.
We think Sun’s para IV opportunities are still 3-4 years away from potential commercialization. The near-term
Para IV Products potential opportunities are gAmitiza, gXifaxan, gRevlimid and gIbrance, but these are crowded by many
filers/settlements.
We build 11.5% CAGR in domestic business on expectations that Indian pharmaceutical market (IPM) growth will
India Business bounce back in the next two years, on a low FY21 base. We build 32% EBITDA margins for Sun Pharma’s domestic
business (margins of three key therapies assumed at 43%).
API Business The segment is forecast to grow at 11% CAGR over FY21-23E.
Consolidated EBITDA Margins Built at 26.5% in FY23E vs 21.3% in FY20 and 25.6% in FY21E.
As the company ramps up the global specialty business, we build in ROCE of 13.9%/14.9% in FY22E/FY23E,
ROCE
respectively.
FCF See Rs.57 bn and Rs.67 bn FCF in FY22E and FY23E, respectively.
Source: AMSEC Research
Shipments disrupted due Specialty business declined QoQ, but Revenue reached pre- Travel costs continue to remain
to lockdown, slight did not lose market share. COVID level, gained low. Overall, 40-45% face to
US Specialty stocking up of Ilumya, Dermatology and ophthalmology market share in most face interactions
Business Cequa and Yonsa by the clinics were closed, which impacted products with gradual
customers specialty business opening of doctors’ clinics
Drop in prescriptions as Revenue declined during the quarter US revenue reached pre-
ophthalmologists COVID level
and optometrists
Cequa stopped working during
the first wave of COVID
in the US
Phase III trials delayed Doctors asked patients to not visit US revenue reached pre- Ilumya sales in 9MFY21
clinics for next Ilumya dose as skin COVID level crossed FY20 full-year revenue
Ilumya
clearance would sustain
Sales impacted due to Recorded lower sales as it is an in- Levulan sales are yet to Sales have recovered vs
the pandemic only in the clinic administered product and recover fully 1HFY21 but not fully
Levulan last fortnight of the clinics had temporarily closed normalized. Patient footfalls at
quarter the dermatology clinics not
normalized
No major impact, Gradual shift of patients from Lost valuable time to Conversion of Absorica to LD
launched LD version Absorica to Absorica LD in absence of convert Absorica to LD version to 20% and impacted
Absorica
promotion version due to COVID
R&D expenses declined due to delay Lower R&D expenses due to Lower R&D expenses due to
R&D expenses in the trials slower patient enrollment lower patient enrollments
Exhibit 5: COVID crisis & its impact on the growth rates Exhibit 6: Silver lining - Improved EBITDA margins
(%)
(%)
73.0 74.0 74.9 73.6
71.8
25.6 27.2
22.6 24.3
4QFY20
1QFY21
2QFY21
3QFY21
4QFY20
1QFY21
2QFY21
3QFY21
4QFY20
1QFY21
2QFY21
3QFY21
16.7
Story in Charts
Exhibit 7: Revenue growth - More ups than downs Exhibit 8: End markets’ revenue contribution
(Rs bn) (%) (%)
12.1 11.9 5.4 6.0 6.0 6.3 6.3 6.3
10.1 9.0 11.5 12.1 14.0 14.8 14.3 14.1
2.1 18.7 18.8 17.1 17.7 17.1 16.8
FY18 FY19 FY20 FY21E FY22E FY23E FY18 FY19 FY20 FY21E FY22E FY23E
Revenue Growth (%) India US Specialty US generics (incl Taro) EM ROW API
Exhibit 9: Margins intact – On an uptrend Exhibit 10: Adjusting to the new normal – Profit growth
(Rs bn) (Rs bn) (%)
(%) 54.3
25.6 25.4 26.5
27.4
21.2 21.7 21.3 15.0
3.8 -0.3
-56.3
FY18 FY19 FY20 FY21E FY22E FY23E FY18 FY19 FY20 FY21E FY22E FY23E
PAT PAT growth
EBITDA EBITDA margins
Exhibit 11: In research lies development – R&D spends Exhibit 12: Cash is always king – Sun’s free cash flow trend
(Rs bn) (%) (%)
8.5
7.3 7.5
6.8 6.5
6.0
19 50 31 57 67
-10
22 20 20 22 27 31
FY18 FY19 FY20 FY21E FY22E FY23E FY18 FY19 FY20 FY21E FY22E FY23E
R&D expenditure % of revenue FCF
Exhibit 13: Geared for stronger return ratios Exhibit 14: Valuation watch - 1-year forward P/E multiple
(%) 60.0
14.9 50.0
13.7 13.9 40.0
30.0 27..6
10.9 10.5 13.0 20.0
10.3 13.2 12.2 10.0
0.0
1
9.4
8.9 2
8.0 .
FY18 FY19 FY20 FY21E FY22E FY23E 7
ROCE ROE Fwd P/E Avg (x)
1000
1500
2000
2500
3000
3500
500
200
300
400
500
0
1000
1200
1400
200
400
600
800
Mar-19 Mar-19 Mar-19
Mar-19
XELPROS
ILUMYA
LEVULAN
ODOMZO
May-20 May-20 May-20 May-20
50
0
100
150
200
0
12000
16000
4000
8000
0
10000
15000
20000
25000
30000
35000
5000
0
10000
12000
2000
4000
6000
8000
Mar-19
Feb-19
Mar-19 Sep-19
May-19 Apr-19
May-19
Jul-19
Nov-19
Jul-19
YONSA
CEQUA
Mar-20
BROMSITE
ABSORICA
Apr-20
May-20 Jul-20
May-20
Jun-20
Jul-20
Jul-20
Aug-20 Sep-20
Sep-20
Sep-20
Oct-20
Nov-20 Nov-20
Dec-20 Nov-20
Sun Pharma’s Big Bets – Market Share of Key Specialty Products in the US
Jan-21 Jan-21
Feb-21 Jan-21
7
Sun Pharmaceutical Industries- Initiating Coverage
The share of specialty medicines in the global market has risen from 21% in 2009 to 36% in
2019, and can rise further to 40% by 2024. In the US, specialty drug revenue stood at $162
bn in 2015, which grew to $245 bn in 2019 (11% CAGR). Meanwhile, the traditional drug
market grew by ~2% during this period. The penetration of specialty drugs in the US rose from
38% to 44-48% during the same period, and can cross 50% in the next 4 years.
Against this backdrop, Sun Pharma’s foray in the specialty business looks attractive. Specialty
pharma products offer operating margins of >35%. We like Sun Pharma’s conviction in the
specialty business, which is showing early sings of success. We believe that, when key products
in its specialty business achieve critical market share, the business should generate significant
cash flows, and improve return profile of Sun Pharma.
Exhibit 25: Conviction through calculated steps - Sun Pharma’s journey in the specialty business
Year Event in Specialty segment
2012 • Acquisition of Dusa (Levulan Kerastick) for $230 mn
2014 • In-licensed IIumya from Merck for $80 mn
2016 • Licensing agreement with Almirall for Ilumya in Europe and with Elepsia XR with SPARC
• Acquisition of Odomzo (oncology) from Novartis for $175 mn
• Acquisition of Ocular Technologies (Cequa - Ophthalmology) for $40 mn
• Launch of BromSite in the US and InfuSMART in Europe
2017 • Biofrontera gets USFDA approval for Ameluz (competitive product of Levulan KERASTICK)
2018 • USFDA approval for Yonsa (May-2018, in-licensed from Churchill Pharma), Infugem (July 2018), Cequa (August 2018), Xelpros
(Sept 2018), Elepsia XR (Dec 2019)
• Tildrakizumab received EMA approval and Australia approval in Sept 2018.
• Launch of Kapspargo Sprinkle (August -2018)
• Preliminary Injunction against Biofrontera’s Ameluz (Dec 2018)
The total prescription data as per Bloomberg’s database shows that share of small molecules in
total Rx has been stagnant at 11-13% for two years, while TNA Alfa inhibitors have lost 900 bps
market share, which was grabbed by IL inhibitors.
Eli Lilly’s Mirikizumab, an IL-23 inhibitor biologic (currently in phase III) has PASI90 score of
74.4%/82.4% and PASI100 score of 37.7%/58.8% on 16/52 weeks respectively. UCB’s
Bimekizumab (IL-17 inhibitor agent), which has been submitted with the USFDA and EMA, has
PASI90 score of 86.2% (week 16) and PASI100 score of 60.8% (week 24). These two potential
biologics will be an additional competition in the Psoriasis biologics space.
Exhibit 26: Skin in the game - Ilumya vs. other biologics present in psoriasis treatment
Drug Type Pasi 75 Pasi 90 Pasi 100 Dose Price Approval Global Us revenue Innovator
($) Year revenue ($ ($ mn)
mn)
Skyrizi IL-23 89% 81% 60% 75MG/
17,772 2019 1590 1,385 AbbVie
Risankizumab (16 week) (52 week) (52 week) 0.83ML
Ilumya/Illumetri IL-23 92% 70% 35% 100MG/ Not
15,263 2018 #100-130 Sun Pharma
Tildrakizumab (52 week) (52 week) (52 week) ML disclosed
Siliq IL-17 44% 28% 44% 210MG/ Not
1,372 2017 39 Bausch Health
Brodalumab (16 week) (16 week) (12 week) 1.5ML disclosed
Tremfya IL-23 87.8% 84.5% 58.2% 100MG/
12,473 2017 1347 926 J&J
Guselkumab (48 week) (48 week) (52 week) ML
Taltz Ixekizumab IL-17 71% 60% 51 % 80MG/
6,247 2016 1788 1,289 Lilly
(52 week) (52 week) (52 week) ML
Cosentyx IL-17 89% 69% 45.9% 150MG/
6,200 2015 3995 2,516 Novartis
Secukinumab (52 week) (52 week) (52 week) ML
Stelara IL-12/23 81.9% 60.6% 35.8% 5MG/
1,846 2009 7707 5,240 J&J
Ustekinumab (24 Week) (52 week) (52 week) ML
Humira TNF-Α 79% 54% 32% 40MG/
3,120 2002 19832 16,112 AbbVie
Adalimumab (52 Week) (52-week S) (52 week) 4ML
Enbrel TNF-Α 68% NA 41% 50MG/
6,240 1998 1900 1,236 Amgen + Pfizer
Etanercept (36 week) (36 week) ML
Source: Sun Pharma, AMSEC Research, #our estimate
Exhibit 27: Ilumya maintains efficacy over the long term in psoriasis management
Sun Pharma had announced Phase-III trials of Ilumya in PsA, but it got delayed due to the
difficulty in patient enrollment due to COVID-19. An approval for Ilumya in PsA indication will
lead to a revision in our peak global revenue estimate to $402 mn. Our peak market share
If Ilumya grabs double-digit assumption for Ilumya in the US is 7% in 2024.
market share, there is a high
probability of it becoming a It is important to note that the entry of Humira biosimilars remains an overhang on Ilumya for
global blockbuster drug market share gains after 2024. The company believes patients may be put on Humira biosimilars
even as parameters such as safety, efficacy, and lower dosing frequency of IL-23 biologics will
help them retain market share.
Ilumya is covered in the Medicare part-B plans. We are also seeing some commercial
plans/PBMs covering Ilumya under higher tiers with prior approval requirement. Other IL-23
biologics--Tremfya and Skyrizi are covered in tier-2 and 3 commercial plans. If Ilumya wins
major access to the formulary coverage, it will be very favorable for further market share gains.
If Ilumya grabs double-digit market share, it has high probability of becoming a global
blockbuster drug.
Sun Pharma’s commercial partner in Europe, Almirall, has launched Ilumya in Europe under the
name Ilumetri, as a self-injectable product and has received promising response. Sun Pharma
If Ilumya captures ~10% has also launched Ilumya in Australia and Japan. The Japanese market is worth ~$100 mn,
market share, it can and is growing at >20% YoY rate. This implies it should reach ~$200 mn by 2024. If Ilumya
generate ~$20 mn revenue captures ~10% market share, it can generate ~$20 mn revenue in Japan.
in Japan.
Exhibit 28: Ilumya’s coverage in commercial insurance plans/PBMs, see further scope of improvement
Aetna Anthem- Cigna CVS Express Humana OptumRx United
Blue cross Caremark scripts Healthcare
Ilumya Covered in 2 Not covered Covered in tier Not covered Covered Not covered Covered, PA Not covered
plans in tier 5 3, PA required under tier required
3
Skyrizi Covered in Covered Tier 2 coverage Tier 2 with Preferred Mostly Preferred under Covered
tier 4, some under tier 3, with preference preference under tier covered in tier 2 and not under tier 2
plans required PA required and some plans 2, PA tier 3/4, PA preferred under with
PA require PA required required tier 3, PA required preference, PA
required
Tremfya Covered in Covered Tier 2 coverage Covered Preferred Mostly Preferred under Covered
tier 4, some under tier 3, with preference under Tier under tier covered in tier 2, PA required under tier two
plans required PA required and some plans 2, PA 2, PA tier 3/4, PA with
PA require PA required required required preference, PA
required
Source: Decision Resources Group, AMSEC Research. PA - prior authorization, Ilumya is covered by Medicare under part B with a J code J3245, the list is representative,
Tremfya not covered in Medicare as per GoodRx.
9 9
6
5 5
3
1
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2018 2019 2019 2019 2019 2020 2020 2020 2020
There are two types of dry eye diseases: 1) evaporative dry eye syndrome (tear deficiency) – 85%
of the cases and 2) aqueous dry eye syndrome (dysfunction of gland that secretes lipid/oil on
eye surface) – 10-15% of the cases. (Link1 link2). Two types of drugs are being used in the
treatment of DED: 1) OTCs that only moisten eyes (several drugs in the market) 2) Rx drugs that
offer long term solution (Cequa, Xiidra, Restasis)
Exhibit 33: Potential new drug candidates to treat dry eye disease
Brand Drug Status
Reproxalap ldeyra Therapeutics NDA submitted
ECF843 Novartis Phase II
Tavilermide Mimetogen Pharmaceuticals USA Phase III
ClclASol Novaliq Phase III
NOV03 Novaliq/Bausch Health Phase III
Lacripep TearSolutions Inc. Phase II
RGN-259 Regenerx Phase III
Source: AMSEC Research
Out of the approved therapies, Restasis is the oldest approved drug (close to expiry), while Xiidra
The global dry eye market is
pegged at $4.7 bn in 2019, was approved in 2016. Xiidra is the only indication that improves one sign and one symptom,
and is expected to grow by but has safety concerns. Whereas, Restasis takes effect very slowly. Sun Pharma’s Cequa offers
5.6% CAGR to reach $6.9 bn higher penetration of cyclosporine and shows faster results than Restasis. Unlike Xiidra, Cequa
by 2026 also does not lead to a metallic taste when used by patients. Moreover, being a newer
medication, Cequa is relatively safer and has better onset than Restasis. It is prescribed by
physicians if Restasis and/or Xiidra fail currently. We believe it has a strong potential to gain
market share.
Setting eyes on a big opportunity: The global dry eye market is pegged at $4.2 bn in 2019
and is expected to grow by 6.9% CAGR to reach $7.7 bn by 2026. The North American DED
market, which was pegged at ~$2.4 bn in 2018 can double in size to reach ~$4.3 bn in 2026
(our estimate), indicating a significant growth opportunity for Sun Pharma in the DED market.
Note that DED is an underdiagnosed disease, and it becomes prevalent in the elderly population
(age 40+).
Cequa peak revenue estimate: The increase in prevalence and improving diagnosis of DED
is leading to 1.7x increase in the chronic DED patient population in the US. Based on our
forecast, we think, Cequa can achieve peak sales in the range of $200-220mn.
Bird’s eye view: Dry eye disease is mostly prevalent in the older population (40+) and prominent in women. From the research
papers that we have read, we believe DED is an under-researched disease. Current understanding of the disease is based on research
conducted 10-15 years ago. As per the NCBI research paper, 75% of the research papers were published after 2006 and only one
paper after 2017. The treatment options are also very limited with cyclosporin formulations dominating the therapy. Lifitegrast and
Loteprednol etabonate are the novel options approved in the past five years. New research could improve the understating of this
disease. Note that several drug candidates have failed in Phase III trials. Hence, there are limited treatment options available. The
DED market is growing and in the absence of many treatments, the currently approved drugs are at an advantage. Restasis, pending
for the expiry, has launched a multidose product and we are not seeing major change in market dynamics, as both Restasis and
Restasis multidose maintain average Rx count and their share in CsA formulations. Thus, Sun Pharma can gain market share over its
better bioavailability of CsA compared to other CsAs.
Market for Bromfenac Sodium formulations in the US grew at 7-8% CAGR to ~$215 mn in
2014-2019, but declined to ~$195 mn in 2020, according to our estimate. If the market returns
to normalcy in 2022, we believe BromSite can generate revenue of $55-60 mn in FY23E,
assuming 25% of the value market share in FY23E.
Exhibit 35: Race to the top - Bromfenac market share Exhibit 36: Why BromSite has a better future
Pain-free on Inflammation-free on
70
Day 1 Day 15
60
50 Drug
40 Study 1 Study 2 Study 1 Study 2
30
20
BromSite 76.8% 82.1% 57.1% 38.1%
10
0
Jan-20
Jan-21
Sep-19
Sep-20
May-19
May-20
Mar-19
Mar-20
Jul-19
Jul-20
Nov-19
Nov-20
FDA has approved three hedgehog pathway inhibitors i.e., 1) Erivedge (vismodegib by Roche
for selective laBCC and mBCC patients) 2) Odomzo (Sonidegib by Sun Pharma for selective
laBCC patients) and 3) Daurismo (Glasdegib by Pfizer for acute myeloid leukemia).
The market for hedgehog pathway inhibitors is growing at ~4% CAGR in volumes and ~9%
CAGR in value as per Bloomberg data. Odomzo’s share in the category is 18%; it has gained
~800bps market share in the past three years. We believe the market would be worth ~$250
mn in FY23E and assuming ~25% market share, Odomzo should be able to generate $65 mn
revenue in FY23E in the US.
Exhibit 37: Fighting BCC – What studies say Exhibit 38: Adverse events on Odomzo vs. Erivedge
Complete Partial Total Muscle
Alopecia Dysgeusia Fatigue Nausea
response response ORR spasms
Odomzo 5% 52% 56% Odomzo 54% 53% 46% 41% 39%
Erivedge 20.6% 22.2% 43% Erivedge 72% 64% 55% 40% 30%
Note: PR - 50% reduction diameter of lesions, ORR - objective response rate
Source: Sun Pharma, AMSEC Research
Duloxetine Hydrochloride Different delivery system, Duloxetine Hydrochloride is already off patent, hence not a
Drizalma Sprinkle
capsule/Depression & anxiety drug with sizable potential
Source: Bloomberg, Sun Pharma, AMSEC Research
Even though Sun has Ilumya Even though Sun has Ilumya for moderate-to-severe plaque Psoriasis, it believes there is a
for moderate-to-severe market for relatively safe oral drugs. For example, Otelza is an oral drug for non-biologic
plaque Psoriasis, it believes treatment for moderate-to-severe plaque psoriasis and psoriatic arthritis. Amgen had bought
there is a market for Otelza from Celgene for $13.4 bn. The drug was approved in 2014 and clocked $2.2 bn in
relatively safe oral drugs sales in 2020, which indicates the potential of oral agents in psoriasis.
MM-II - Novel drug candidate for symptomatic knee pain in osteoarthritic patients
In-licensed from Moebius Medical, MM-II is an intra-articular bio-lubricant made of liposomes
suspended in aqueous solution. MM-II lubricates arthritic knee joints to reduce friction and wear
that leads to joint pain reduction. It is a potential novel drug candidate for the treatment of
symptomatic knee pain in osteoarthritic patients. The drug is currently in phase II studies, which
will be completed in November 2021.
Existing treatment options are either surgery or taking pain management medicines such as
duloxetine (Cymbalta), pregabalin (Lyrica), NSAIDs, analgesics, etc. In the clinical studies, MM-
II has shown faster response to long-term pain compared to Durolane (hyaluronic acid) injection
(launched in 2018). This led to lower intake of daily consumption of Acetaminophen in the MM-
II injected population.
It is estimated that globally a total of ~240 mn people are affected by osteoarthritis, and in the
US alone, knee osteoarthritis affects more than 14 million. Symptomatic knee osteoarthritis is
prevalent in ~13% of women and ~10% of men >60 years, and ~40% in above 70 years of
age.
Exhibit 42: Ray of optimism: Despite an 80 bps loss due to restructuring, Sun’s market share has been stable since
2HFY19
10
Ranbaxy Merger Impact of distribution change
9
Market share in %
5
Q4FY14
Q1FY15
Q2FY15
Q3FY15
Q4FY15
Q1FY16
Q2FY16
Q3FY16
Q4FY16
Q1FY17
Q2FY17
Q3FY17
Q4FY17
Q1FY18
Q2FY18
Q3FY18
Q4FY18
Q1FY19
Q2FY19
Q3FY19
Q4FY19
Q1FY20
Q2FY20
Q3FY20
Q4FY20
Q1FY21
Q2FY21
Q3FY21
Source: Sun Pharma, AMSEC Research
Sun Pharma’s domestic revenue has grown at a CAGR of 8.6% over FY15-20 vs. IPM (Indian
pharmaceutical market) growth of 11% during the period. Sun’s market share stood at 9% in
4QFY15 (post Ranbaxy acquisition), but by the end of 9MFY21, it fell to 8.2%. This 80 bps erosion
during FY16-19 in India can be explained in two phases:
Phase I – FY15-18: While integrating Ranbaxy’s (acute/chronic 70/30) business, Sun divested
seven brands, two CNS divisions, and withdrew the discounts/rebates/bonuses offered by
Ranbaxy on its acute products, which impacted its performance. Due to the acquisition of the
major acute portfolio (anti-infectives and gastro enterology), growth also got impacted as the
seasonality factor kicked in.
Phase II – FY18-20: Sun’s domestic business grew by 10%, in line with the IPM growth due to
the restructuring that the company undertook in FY19, where it 1) reduced the inventory with
the supply chain in 2QFY19 to improve working capital efficiency and 2) transitioned domestic
With an 8.2% market share distribution from Aditya Medisales Ltd to Sun Pharma Distributors Ltd, which led to Rs.11 bn
and leading chronic impact on the annual domestic revenue, and also hit its market share.
therapies, Sun Pharma is
the largest pharma player Over the last four to five years, companies such as Torrent Pharma, Alkem, Eris Lifesciences,
in India Lupin, and others, have also ramped up their presence in chronic therapies, making the space
more competitive. That led to Sun Pharma losing 50-150 bps market share each in cardiology,
CNS and Diabetology.
Point to note: After completion of restructuring in 4QFY19, Sun Pharma’s market share settled
at 8.2%. In 4QFY20, it moved up to 8.4%, but returned to 8.2% as COVID-19 disruption
impacted the IPM.
Sun Pharma’s top 10 brands currently contribute 22% to revenue vs. 20% in FY17.
These ten brands have grown at ~12% CAGR over the past four years, vs. 9%
revenue CAGR in Sun’s domestic business. And eight of the 10 large brands are
growing in double digits.
Levipil (Levetiracetam- epilepsy drug), its largest brand, has grown at 16% CAGR (2017-20).
OTC brand Revital H (nutraceutical) and anti-allergic brand Montek-Lc (Levocetirizine +
Montelukast) have grown at >15% CAGR during this period. Even in volume terms, Levipil,
Revital H, Volini, Istamet and Montek-Lc have grown at >8% CAGR.
On the therapeutic level, FY17-19 volumes in CNS, Cardiac, VMN, Gynecology and Respiratory
have grown at >4% CAGR (before pandemic began on MAT basis) but the same was offset by
negative volume growth in GI, anti-infective and pain/analgesics segments.
Sun Pharma recently indicated that it will focus on the smaller towns to drive growth in brands
and its domestic business overall. The company is also likely to de-clutter its branded business.
It expanded the sales force by 10% in FY20 to cover more territories, launch new products and
build mega brands.
Exhibit 43: The not-so-elusive double-digit growth for Sun’s top brands’ sales (MAT basis)
16.4
10.1
7.3 10.7 12.9
11.6 17.8 9.0
16.9
2.0
3.1
2.3
3.1
1.7
2.4
1.9
2.5
2.0
2.4
1.6
2.2
1.3
2.2
1.4
2.0
1.6
2.0
1.0
1.5
Dec-17
Dec-20
Dec-17
Dec-20
Dec-17
Dec-20
Dec-17
Dec-20
Dec-17
Dec-20
Dec-17
Dec-20
Dec-17
Dec-20
Dec-17
Dec-20
Dec-17
Dec-20
Dec-17
Dec-20
Levipil Volini Istamet Gemer Rosuvas Susten Revital H Pantocid-D Pantocid Montek-Lc
Exhibit 44: Second to none - Field force productivity in India Exhibit 45: Sun Pharma’s field force productivity trend
(Rs Mn / Year) (Rs Mn / Year) Ranbaxy impact COVID-19 impact
16
11.1 11
10.1 10.0
10 9.2 8.8 9.3
8 9 9 8.3 8.6
6 6 7.4 7.8
4 7.1
4 4
Cipla
Sun Pharma
Lupin
Reddy
Alkem
Abbott India
JB Chemicals
Healthcare
Alembic
Pharma
Torrent
Cadila
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
E
Source: AMSEC Research
Sun Pharma Labs – Key revenue driver for Sun Pharma’s domestic business
Sun Pharma’s fully-owned subsidiary, Sun Pharma Laboratories Limited (SPLL), drives 2/3rd of
the company’s India business. SPLL is largely responsible for the company’s chronic business.
SPLL’s revenue and EBITDA have grown at a CAGR of 10%/14% over FY16-20. It has delivered
EBITDA margins of >42% over the past 5 years. Due to its superior profitability, the business
has made an incremental contribution to Sun Pharma’s consolidated EBITDA from 26% in FY16
to 51% in FY20. It also generates >Rs.15 bn of free cash flow every year, which is helping Sun
Pharma build its US specialty business.
Exhibit 46: Why SPLL is integral to Sun Pharma Exhibit 47: SPLL's revenue and EBITDA contribution
(Rs Bn) (%)
68.5 50.6
47.8
53.2 52.1
46.7 45.1
41.9 30.6
25.6 25.7
25.3 25.9 24.3
28.2 28.4 28.6 20.0
19.7 20.9
15.3 16.6 17.0 15.5
FY15 FY16 FY17 FY18 FY19 FY20 FY15 FY16 FY17 FY18 FY19 FY20
SPLL Revenue Sun domestic business ex SPLL Revenue contribution EBITDA contribution
Exhibit 48: SPLL's superior margin profile Exhibit 49: SPLL – The real cash cow for Sun Pharma
(Rs Bn) (%) (Rs Bn)
50.7 51.6
44.7 46.7
42.7
37.2
50.1
32.8 33.9
32.7 19.5
20.9
24.8
26.4
19.3
35.3
In the dermatology segment, Sun Pharma has enjoyed ~18% revenue CAGR over FY15-20, and
We estimate Sun Pharma’s gained ~60bps market share (as per our estimates). We believe sustained performance of
domestic revenue at Rs.126
dermatology can also help the company gain market share. The recent move to invest in ABCD
bn by FY23E if the company
Technologies aims to link all the distributors to create a common platform, which will benefit
sustains its 8.2% market
share the company in medium to long term.
Overall, we believe IPM can grow at a CAGR of 8-9% over FY20-23E to reach ~$25 bn.
Assuming sustained 8.2% market share of Sun Pharma, we believe its domestic revenue can
reach levels of Rs.126 bn (~31% of the consolidated business) by FY23E. Assuming 32% EBITDA
margins, Sun’s domestic business can deliver Rs.40 bn in EBITDA (~44% of the consolidated
business) in FY23E.
As per our estimate, Sun’s US generics revenue, which stood at $1.8 bn in FY16 has declined
at 13% CAGR over FY16-20 to ~$1.1 bn. During this period, Sun also had a one-off NBO
opportunity of ~$120 mn that lasted for two quarters (4QFY19 and 1QFY20). The business
likely saw continued erosion of 16-17% (Sun + Taro combined) in FY21 due to Taro’s high
reliance on dermatology products. We believe US generics revenue will drop below $900 mn in
FY21 due to a lack of major product launches and continued erosion of the base business. The
management also remained dovish on the US generics business, which is reflected in their
generic R&D expenditure and slower pace of ANDA filings in the US. Taro Pharma, due to its
higher dependence on the US dermatology business, may remain under pressure.
-5.3
-16.9 -16.4
422
418
422
428
432
441
453
466
472
481
483
483
495
497
-37.4 Q2FY18
Q3FY18
Q4FY18
Q1FY19
Q2FY19
Q3FY19
Q4FY19
Q1FY20
Q2FY20
Q3FY20
Q4FY20
Q1FY21
Q2FY21
Q3FY21
1.7 1.1 1.3 1.1 0.9
Due to consolidation in the channel and higher competition in US generics, Taro’s US revenue
has declined at 13% over FY16-20, while Canada revenue has grown at 15% CAGR. Thus,
Due to sluggish R&D activity contribution from US declined from 91% in FY16 to 77% in FY20. Due to pricing pressure gross
and COVID fallout, Taro’s margins have contracted by 20%. This combined with operating de-leverage has led to
revenue could remain under contraction of EBITDA margins by ~24% over FY16-20. Consequently, Taro’s contribution to
pressure until sizable Sun Pharma’s consolidated revenue has shrunk from 42% in FY16 to 33% in FY20.
product opportunities
emerge Over FY16-20, Taro trimmed its R&D expenditure (in absolute terms), and filed fewer ANDAs
with the USFDA. Currently, Taro has 17 ANDAs awaiting FDA approval vs. 60 ANDAs that were
awaiting approval in FY15. Taro’s biggest revenue contributor-dermatology-was impacted due
to the COVID-19 pandemic. That led to a 15% decline in 9MFY21 revenue, and can continue
to weigh until the next few quarters. Due to overall sluggish R&D activity and COVID fallout, we
believe Taro’s revenue could remain under pressure until sizable product opportunities emerge.
Exhibit 52: Small silver lining for Taro in Canada Exhibit 53: US’ shrinking presence in Taro’s revenue mix
($ mn) (CAGR %) (%)
4
6 3
6 4 7 7 8
7 10 13 15
-13
90 91 89 83 80 77
15 15
865
496
57
98
29
51
FY16 FY20 FY16 FY20 FY16 FY20 FY15 FY16 FY17 FY18 FY19 FY20
Exhibit 54: Taro’s weak margins weigh on generics Exhibit 55: Taro’s declining contribution in Sun’s US
business revenue
(%) (%)
82 41.9
76 40.5
70 67
62 38.4
66 35.2
60 33.3
48 47 30.5
42
In 2018, 19 products were awaiting approval from Halol. The pipeline likely decreased after the
company received some approvals after the warning letter was lifted in the same year.
Revenue contribution from Halol is expected to fall further on the back of erosion of base
business products and as Sun focuses on specialty drugs in the US.
Exhibit 56: Sun Pharma’s Halol facility – Warning letters and FDA audits
Dec -2015 •USFDA issues warning letter with 6 observations to Halol over cGMP violations
•Halol received EIR stating facility clearance (VAI) (Halol contribution down to 3-4% of
June 2018
US sales)
Jan 2020 •USFDA classifies Halol as OAI, 19 products awaiting approval by 4QFY19
We observe that most litigated products already have over four generic aspirants. In this case,
gXifaxan, gNinlaro, gKalydeco, gXeljanz XR, gVraylar and gLenvima are the products that could
have good potential in the future, but for beyond our forecast timeline and FY24E. Overall, we
are building in revenue of $965 mn from the US generics business in FY23E.
Exhibit 58: Sun’s ANDA pipeline indicates shrinking opportunities amid margin
pressure
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 9MFY21
Awaiting ANDAs Approved ANDAs
Source: Sun Pharma, AMSEC Research
Exhibit 59: Potential Para IV opportunities based on filed litigations and DMFs
US sales
Brand Innovator Patent expiry No of filers
($ mn)
Sucampo Pharma
Amitiza 2021 7 ~227
Americas LLC
Revlimid BMS (Celgene) 2022 11, settlements with Natco, Alvogen/Lotus, Cipla, Dr. Reddy’s, Cadila 8291
Ibrance Pfizer Inc Beyond 2023 9 3,634
Xifaxan Salix Beyond 2024 3 ~1000
Sucampo Pharma
Amitiza Beyond 2024 6 400
Americas LLC
Millennium
Ninlaro Beyond 2024 1 600-400
Pharmaceuticals Inc
Kalydeco Vertex Pharma Beyond 2025 1 600-400
Viberzi Allergan Beyond 2025 6 188
Xeljanz XR Pfizer Inc Beyond 2025 4 (two settlements - Zydus, Micro Labs) 1,706
Imbruvica Pharmacyclics Beyond 2026 11 4,305
Glyxambi Boehringer Ingelheim Beyond 2025 10-11 242
Jardiance Boehringer Ingelheim Beyond 2027 10-11 4368
Trijardy XR Boehringer Ingelheim Beyond 2027 NA NA
Vraylar Allergan Beyond 2028 3 951
Lenvima Eisai Inc Beyond 2026 2 ~400
Source: Sun Pharma, USFDA, RPX insight, US Court dockets, AMSEC Research, NA – Not available
In its rest-of-the-world (ROW) business, the company is involved in injectables and hospital
products across Western Europe, Canada, Japan, Australia and New Zealand. In FY19, Sun
Pharma acquired Pola Pharma in Japan, which has topical and injectable products and two local
facilities. Owing to this acquisition, Sun Pharma’s has seen 18% CAGR growth in ROW over
FY16-20. However, we expect 7% CAGR over FY20-23E. Although, now that Sun Pharma has
launched Ilumya in Japan through Pola Pharma, it should improve revenue growth in the region.
23.3 29.4
19.9
11.3 16.8
7.0 7.0 7.0 7.0
6.7
1.9 1.4 1.3 3.1
-10.3 -13.4
548 676 752 766 777 787 842 901 330 385 462 493 638 658 704 753
FY16 FY17 FY18 FY19 FY20 FY21E FY22E FY23E FY16 FY17 FY18 FY19 FY20 FY21E FY22E FY23E
Exhibit 62: Sun Pharma’s pipeline in API business Exhibit 63: Total product filling in the API business
($ bn) (%)
41.5 431 443
422 428 413
396
23.6 305
323 329
298 291 291
14.1 12.0
10.7 8.1 10.0
-12.5
14.0 16.0 14.0 17.3 19.2 20.7 23.2 25.5
FY16 FY17 FY18 FY19 FY20 FY21E FY22E FY23E FY16 FY17 FY18 FY19 FY20 9MFY21
API Business Growth (%) DMFs / CEP filed DMFs / CEP approved
Source: Sun Pharma, AMSEC Research
The analysis of Sun Pharma’s ROE through the DuPont ratio explains its financial performance
over a decade. During FY18-20, its profitability halved (dragged down by US generics), while
asset turnover ratio contracted due to additional investments in specialty. This led to decline in
the capital productivity.
As US base stabilizes between $900 mn and $1 bn, and specialty business grows, we believe
Sun Pharma’s ROE will improve.
Exhibit 65: Banking on steady revenue growth Exhibit 66: India remains key to Sun’s revenue growth plans
(Rs bn) (%) (%)
12.1 11.9
10.1 9.0
5.4 6.0 6.0 6.3 6.3 6.3
11.5 12.1 14.0 14.8 14.3 14.1
2.1 18.7 18.8 17.1 17.7 17.1 16.8
FY18 FY19 FY20 FY21E FY22E FY23E FY18 FY19 FY20 FY21E FY22E FY23E
Revenue Growth (%) India US Specialty US generics (incl Taro) EM ROW API
Exhibit 67: Focus on specialty to invoke higher margin play Exhibit 68: Focus on superior profitability to aid PAT growth
(Rs bn) (%) (Rs bn) (%)
25.6 25.4 26.5 54.6
21.2 21.7 21.3 27.4
14.7
3.8 -1.3
-56.3
561 631 699 858 951 1,079 30 39 40 62 61 70
FY18 FY19 FY20 FY21E FY22E FY23E FY18 FY19 FY20 FY21E FY22E FY23E
Exhibit 69: On the path to redemption - Return ratios Exhibit 70: Eyes set on better cash flow generation
(%)
(%)
14.9
13.7 13.9
We believe the specialty business is equipping Sun Pharma with critical commercial
infrastructure and deeper understanding of commercialization of innovative products in the US.
This platform can be leveraged to launch more branded/patented drugs in future. We also do
not rule out any potential acquisition by Sun Pharma in the global specialty space once it has
gained necessary expertise in the field.
Odomzo
Xelpros
Ilumya
Cequa
50
-50 -19 -40
-80 -175
-150 -48
-250
$mn
-350
-450 -550
-550
-650
Source: AMSEC Research, the data excludes DTC/marketing spend, royalties, and milestone payments, and upfront
payment from Almirall
Opex Matrix
COGs 29.3% 27.9% 27.0% 28.2% 26.0% 25.1% 26.4%
Employee 18.4% 20.0% 19.0% 20.2% 23.2% 19.9% 19.5%
Other Exp 28.4% 30.1% 31.4% 35.0% 26.5% 29.3% 26.9%
EBITDA 23.8% 22.0% 22.6% 16.7% 24.3% 25.6% 27.2%
Revenue mix
India (Rs mn) 23,137 25,148 25,170 23,648 23,884 25,311 27,530
US ($mn) 424 339 350 375 282 335 374
Taro ($mn) 161 161 148 175 118 143 140
Emerging Markets ($mn) 194 201 195 187 173 210 204
ROW ($mn) 167 161 155 155 136 178 173
API (Rs mn) 4,610 4,681 5,030 4,834 5,537 5,104 4,500
Source: Sun Pharma, AMSEC Research
Revenue 57 80 113 161 274 285 316 265 291 328 335 374 407 21.4 3.7 10.2
Growth 42.9 40.0 40.9 42.3 70.3 4.0 10.9 -16.1 9.7 13.0 2.1 11.5 9.0
COGS 15 16 21 28 67 63 81 74 79 92 87 99 106
Staff Costs 8 12 15 21 45 48 49 54 60 64 68 70 75
EBIT 21 34 49 71 72 78 94 49 56 56 74 79 90
PBT 20 34 49 71 66 73 90 44 50 53 73 78 89
Tax 1 3 8 7 9 9 12 9 6 8 7 12 14
Inventory 15 21 26 31 57 64 68 69 79 79 87 92 96
Payables 6 10 11 13 33 36 44 48 41 41 44 47 49
DEBT 4 3 2 25 76 83 81 98 99 76 71 61 55
Shareholder's
95 122 150 185 256 330 366 381 414 453 472 508 549
Equity
Cash & Cash
22 34 41 76 110 132 151 99 73 65 66 71 80
Equivalents
Current
19 16 13 20 21 7 2 41 40 49 50 56 61
Investments
Total assets 119 158 197 282 474 524 589 621 621 651 671 705 753
Key Ratios
Adj EPS 7.6 11.1 14.9 23.6 19.9 21.8 29.0 12.7 16.2 16.8 25.9 25.8 29.7
ROE (%) 19.2 21.7 23.8 30.5 18.6 15.9 19.0 8.0 9.4 8.9 13.2 12.2 13.0
ROCE (%) 21.5 27.1 32.6 34.0 21.7 18.8 21.1 10.3 10.9 10.5 13.7 13.9 14.9
ROIC (%) 34.5 40.9 41.8 56.4 31.3 25.1 28.1 11.9 12.4 11.5 15.6 15.0 16.3
Asset Turnover (x) 0.5 0.5 0.6 0.6 0.6 0.5 0.5 0.4 0.5 0.5 0.5 0.5 0.5
Inventory 95 95 83 71 76 82 79 95 99 88 95 90 86
Payables 41 45 34 30 44 46 51 66 52 46 48 46 44
Other Ratios
P/E 89.5 61.3 45.6 28.8 34.1 31.1 23.4 53.5 42.0 40.5 26.2 26.3 22.9
EV/EBITDA 81.9 49.7 32.4 22.4 20.2 19.3 15.4 28.3 25.6 22.8 18.5 16.4 14.3
P/BV 17.2 13.3 10.9 8.8 6.4 4.9 4.4 4.3 3.9 3.6 3.4 3.2 3.0
Source: Sun Pharma, AMSEC Research
Sun Pharma currently trades at 26.3x/23x FY22E/FY23E EPS, i.e. at 7%/3% discount to its 10-
year average and 19%/16% discount to its 5-year average forward P/E multiple. We value Sun
Pharma at 27x of its FY23E EPS on the back of 1) improving execution in key specialty products,
2) expansion of its ROE and ROCE ratios going forward, 3) strong FCF generation and 4) cushion
from the FCF-generating domestic business. We are thus initiating coverage with a ‘buy’ rating
and price target of Rs.802.
Exhibit 74: 1-year forward P/E - Trading at a discount to its long-term average
60.0
54.7
50.0
40.0
30.0
27.
20.0 .6
25.6
10.0
12.7
0.0
Apr-10
Apr-11
Apr-12
Apr-13
Apr-14
Apr-15
Apr-16
Apr-17
Apr-18
Apr-19
Apr-20
Apr-21
Fwd P/E Min (x) Avg (x) Median (x) Max (x)
(Rs Bn) Revenue PAT FY21E FY22E FY 23E FY21E FY22E FY 23E FY21E FY22E FY 23E FY21E FY22E FY 23E
Sun Pharma 1,629 10.0 7.1 26.2 26.3 22.9 18.5 16.4 14.3 13.2 12.2 13.0 13.7 13.9 14.9
Lupin 542 14.7 58.5 48.0 25.3 19.1 21.1 13.4 10.3 8.5 14.1 16.0 10.1 16.1 17.9
Cipla 711 7.3 7.2 26.1 24.7 22.7 15.0 14.1 12.6 14.7 13.7 13.1 17.5 16.1 15.8
Dr. Reddy's 860 8.2 11.0 33.4 30.9 27.1 21.2 16.8 14.8 11.7 14.6 14.6 13.8 16.2 15.9
Source: Sun Pharma, AMSEC Research
Regulatory negative event – Sun Pharma’s Halol facility has been under OAI for more than
a year. While we believe it is not a key facility anymore due to its low revenue contribution,
prolonged remediation at the facility can attract costs, which can be perceived as negative
developments. Negative outcome of regulatory inspections at other key plants are also a
danger, although it looms over all pharma players. Sun Pharma has also outsourced
manufacturing of its key specialty products to CMOs, and any regulatory negative event with
the CMOs can also impact Sun Pharma’s global specialty sales.
Company Overview
Sun Pharma is the fourth-largest specialty generic pharma company globally. It is the largest
pharma company in India and the 10th-largest generics company in the US. It derives almost
two-third of its business from India and the US, while the rest comes from other markets/APIs.
The company has 43 manufacturing facilities across the globe and is involved in developing,
manufacturing, and marketing of formulations and APIs across 100 markets. It has over 36,000
employees across the world. It has capabilities across dosage forms such as injectables, sprays,
ointments, creams, liquids, tablets and capsules, and it manufactures generics (pure, complex
and branded) as well as specialty drugs including a biologic. The company has a robust history
of acquisitions in both India and global markets, largest being Ranbaxy Laboratories Ltd in
March 2015.
Exhibit 76: World class, worldwide – Sun Pharma’s manufacturing footprint and capabilities
Finished dosage manufacturing API manufacturing
Total sites 29 14
India (14), US (3), Japan (2)
India (9), Australia (2)
Locations Canada, Hungary, Israel, Bangladesh, South Africa, Malaysia,
Romania, Egypt, Nigeria and Russia (1 each) Israel, USA, and Hungary (1 each)
Mr. Israel Makov is the former President & CEO of Teva Pharma. Mr. Makov holds a
B.Sc. in Agriculture and M.Sc. in Economics from Hebrew University, Jerusalem. He
Mr. Israel Makov Chairman
joined Teva in 1995 and led Teva’s global expansion, managing 12 acquisitions. Mr.
Makov joined Sun Pharma in 2012 and is the Chairman of the company.
Mr. Sailesh Desai holds a BSc degree from the University of Calcutta and has more
Mr. Sailesh Desai Executive Director
than 28 years of industrial experience.
Mr Muralidharan joined Sun Pharma in 2017 and is now the Group CFO. He has also
Mr. C. Muralidharan Chief Financial Officer
worked with Teva, Allergan, Mylan, Lupin, Ranbaxy, IOC, etc.
S R B C & CO LLP
Source: Sun Pharma
Financials
Profit & Loss Account Cash Flow Statement
Y/E Mar FY20 FY21E FY22E FY23E Y/E Mar FY20 FY21E FY22E FY23E
Net sales 3,23,252 3,32,024 3,68,425 4,01,687 PBT 50,096 72,886 77,635 88,826
Other operating income 5,123 3,098 5,158 5,624 Non-cash adjustments 19,925 21,649 23,230 24,920
Consumption of materials 92,305 87,117 98,999 1,05,901 Changes in working capital 8,986 (9,669) (7,967) (6,401)
Staff Expenses 63,624 68,496 70,234 75,352 Tax Paid (13,459) (7,411) (12,422) (14,212)
Other operating expenses 1,02,549 93,740 1,09,293 1,18,120 Cashflow from operations 65,548 77,455 80,476 93,133
Total Expenditure 2,58,477 2,49,353 2,78,526 2,99,373 Capital expenditure (15,420) (18,528) (23,867) (26,130)
EBITDA 69,898 85,769 95,057 1,07,937 Change in investments (17,019) (5,808) (8,571) (10,455)
Depreciation 20,528 20,299 22,002 23,869 Other investing cashflow 6,551 (3,407) (5,439) (10,292)
Operating profit 49,370 65,471 73,054 84,068 Cashflow from investing (25,888) (27,744) (37,878) (46,878)
Other income 6,360 8,766 5,808 5,808 Issue of equity (2,125) - - -
EBIT 55,730 74,236 78,863 89,876 Issue/repay debt (33,419) (4,928) (9,874) (6,046)
Interest 3,027 1,350 1,228 1,050 Interest Paid (2,719) (1,350) (1,228) (1,050)
Exceptional items -2,606 -28,013 0 0 Inc. / (Dec.) in Loan Funds 2,189 - - -
Profit before tax 50,096 44,873 77,635 88,826 Dividends paid (13,792) (11,941) (21,679) (24,933)
Tax 8,228 7,411 12,422 14,212 Other financing cashflow (7,085) (2,455) (4,457) (5,126)
Share in profit of associate cos -148 -109 -168 -168 Cashflow from financing (56,950) (20,674) (37,239) (37,155)
Minority interest -4,070 -3,236 -3,105 -3,209 Chng. in cash & cash eq (17,291) 29,037 5,359 9,100
Reported net profit 37,649 34,116 61,940 71,237 Opening cash & cash eq 72,757 64,876 65,900 71,259
EO Items 0 0 0 0 Closing cash & cash eq 64,876 65,900 71,259 80,359
Adjusted net profit 40,256 62,130 61,940 71,237 Free cash flow to firm 50,128 30,913 56,609 67,002
Share O/s mn 2,399 2,399 2,399 2,399
EPS Rs 16.8 25.9 25.8 29.7
Buy: Potential upside of >+15% (absolute returns) Overweight: The sector is expected to outperform relative
Accumulate: >+5 to +15% to the Sensex.
Hold/Reduce: +5 to -5% Underweight: The sector is expected to underperform
Sell: < -5% relative to the Sensex.
Not Rated (NR): No investment opinion on the stock Neutral: The sector is expected to perform in line with
the Sensex.
Disclosures
This Report is published by Asian Markets Securities Private Limited (hereinafter referred to as “AMSEC”) for private circulation. AMSEC
is a registered Stock Broker with National Stock Exchange of India Limited and BSE Limited in cash and derivatives segments. It is also
having registration as a Depository Participant with CDSL and as Portfolio Manager. ‘AMSEC is registered Research Analyst under SEBI
(Research Analyst) Regulations, 2014 having Registration Number as INH000001378.’
AMSEC has other business divisions with independent research teams separated by Chinese walls, and therefore may, at times, have
different or contrary views on stocks and markets.
AMSEC or its associates have not been debarred / suspended by SEBI or any other regulatory authority for accessing / dealing in
securities Market. AMSEC, its associates or analyst or his relatives do not hold any financial interest in the subject company. AMSEC or
its associates or Analyst do not have any conflict or material conflict of interest at the time of publication of the research report with the
subject company. AMSEC or its associates or Analyst or his relatives hold / do not hold beneficial ownership of 1% or more in the subject
company at the end of the month immediately preceding the date of publication of this research report.
AMSEC or its associates / analyst has not received any compensation / managed or co-managed public offering of securities of the
company covered by Analyst during the past twelve months. AMSEC or its associates have not received any compensation or other
benefits from the company covered by Analyst or third party in connection with the research report. Analyst has not served as an officer,
director or employee of subject company and AMSEC / analyst has not been engaged in market making activity of the subject company.
Analyst Certification: I, Shrikant Akolkar, the research analysts and authors of this report, hereby certify that the views expressed in
this research report accurately reflects my personal views about the subject securities, issuers, products, sectors or industries. It is also
certified that no part of the compensation of the analyst(s) was, is, or will be directly or indirectly related to the inclusion of specific
recommendations or views in this research. The analyst(s) principally responsible for the preparation of this research report and
has taken reasonable care to achieve and maintain independence and objectivity in making any recommendations.
Disclaimer
This report is for the personal information of the authorized recipient and does not construe to be any investment, legal or taxation advice to you.
AMSEC is not soliciting any action based upon it. Nothing in this research shall be construed as a solicitation to buy or sell any security or product,
or to engage in or refrain from engaging in any such transaction. In preparing this research, we did not take into account the investment objectives,
financial situation and particular needs of the reader.
This research has been prepared for the general use of the clients of AMSEC and must not be copied, either in whole or in part, or distributed or
redistributed to any other person in any form. If you are not the intended recipient, you must not use or disclose the information in this research
in any way. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. AMSEC will not
treat recipients as customers by virtue of their receiving this report. This report is not directed or intended for distribution to or use by any person
or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation
or which would subject AMSEC & its group companies to registration or licensing requirements within such jurisdictions.
The report is based on the information obtained from sources believed to be reliable, but we do not make any representation or warranty that it
is accurate, complete or up-to-date and it should not be relied upon as such. We accept no obligation to correct or update the information or
opinions in it. AMSEC or any of its affiliates or employees shall not be in any way responsible for any loss or damage that may arise to any person
from any inadvertent error in the information contained in this report. AMSEC or any of its affiliates or employees do not provide, at any time,
any express or implied warranty of any kind, regarding any matter pertaining to this report, including without limitation the implied warranties of
merchantability, fitness for a particular purpose, and non-infringement. The recipients of this report should rely on their own investigations
This information is subject to change without any prior notice. AMSEC reserves its absolute discretion and right to make or refrain from making
modifications and alterations to this statement from time to time. Nevertheless, AMSEC is committed to providing independent and transparent
recommendations to its clients and would be happy to provide information in response to specific client queries.
Before making an investment decision on the basis of this research, the reader needs to consider, with or without the assistance of an adviser,
whether the advice is appropriate in light of their particular investment needs, objectives and financial circumstances. There are risks involved in
securities trading. The price of securities can and does fluctuate, and an individual security may even become valueless. International investors
are reminded of the additional risks inherent in international investments, such as currency fluctuations and international stock market or economic
conditions, which may adversely affect the value of the investment. Opinions expressed are subject to change without any notice. Neither the
company nor the director or the employees of AMSEC accept any liability whatsoever for any direct, indirect, consequential or other loss arising
from any use of this research and/or further communication in relation to this research. Here it may be noted that neither AMSEC, nor its directors,
employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost
revenue or lost profit that may arise from or in connection with the use of the information contained in this report.
For U.S. persons: This research report is not intended to be distributed / marketed to U.S. based persons nor for soliciting business from U.S.
based investors.
The research report is a product of AMSEC, which is the employer of the research analyst who has/have, prepared the research report. The
research analyst(s) preparing the research report is/are resident outside the United States (U.S.) and is/are not associated persons of any U.S.
regulated broker-dealer and therefore the analyst(s) is/are not subject to supervision by a U.S. broker-dealer, and is/are not required to satisfy
the regulatory licensing requirements of FINRA or required to otherwise comply with U.S. rules or regulations regarding, among other things,
communications with a subject company, public appearances and trading securities held by a research analyst account.
Copyright of this document vests exclusively with AMSEC.
Our reports are also available on Thomson Reuters, Fact Set, Capital IQ and Bloomberg ASNM <GO
1 / 2 Athena House, Rajnigandha Complex, Gokuldham, Filmcity Road, Goregaon (East), Mumbai – 400 063. India Tel: +91 22 4343 5000 Fax: +91 22
4343 5043 [email protected], Website: www.amsec.in