Pharmaceutical Sector - Quinque Pillars of Evolution - 11mar2015 1

March 2015
Bonanza
Analyst
Hemanshu Srivastava
hemanshu.s@bonanzaonline.com
Tel: +91-22-3083778
m a k e m one y. not mi s ta k e s.
PHARMA SECTOR
Quinque pillars of evolution
SUNPHARMA
(Turnaround Specialist)
DR. REDDYS AUROBINDO

(Industry Stalwart)
(The Whiz kid)
LUPIN
CIPLA
(Quality Emperor) (King of Affordability)
Growth Booster
PHARMACEUTICAL SECTOR
CONTENTS
SECTOR
(3-18)
US markets: The biggest chunk of the pie
IPM: Vibrant and stiff
Biosimilars: The next frontier for growth
11
EMs: Boulevard for burgeoning expansion
13
Developed Markets: Penetration the key for success
14
Covered Company Summary
16
COMPANIES
(21-98)
Cipla Ltd. (CIPLA)
21
Sun Pharmaceuticals Industries Ltd. (SUNP)
35
Lupin Ltd. (LPC)
53
Dr Reddys Laboratories (DRRD)
69
Aurobindo Pharma (ARBP)
85
Institutional Research
11 March 2015 | Page 2
India Research
11 March 2015
Thematic
Pharmaceutical Sector
Quinque pillars of evolution

US markets: The biggest chunk of the pie
US, the worlds largest pharmaceutical market is projected to grow at a CAGR of 6% over
FY14-17E period to reach USD 439bn in FY17E. US market presents the most striking
opportunity for generic players due to a large patent cliff lasting till 2016, an ageing
population, a rapid thrust towards specialty drugs targeting complex ailments and an
improved healthcare access reforms (especially PPACA) driving future growthprospects.
IPM is estimated to reach USD 27bn by 2017. A highly competitve marketplace which an
HHI value of 260 portrays the kind of intense competition existing in the IPM. The main
growth drivers on cards are rural penetration, rising household income and higher
incidence of chronic disease.
The global biologics market stands currently at USD 82bn in 2013 from 18 biologics
alone comprising of Humira, Avastin, Remicade, Lantus, etc. All the major biologics are
projected to go off-patent during the next 5 years, opening up a massive ocean of
opportunities for biosimilars. We expect the biosimilars market size to be USD 20bn by
2020 in key markets of US, China, Japan, EU5 and South Korea.
EMs (including China, Brazil and Russia) are expected to be the principal growth driver
of the global pharma industry, enhancing their MS from 39% in 2012 at USD 371bn to
48% in 2017 at USD 558bn growing at a cumulative 8.5% CAGR over 2012 2017.
EU5 markets are subjected towards inferior growth impacted by patent cliff; governments
austerity measures due to economic crisis witnessed in the region and restricted
meaningful innovative launches in the province. JPMs market size was USD 116bn in
2012. Amid recent healthcare reforms embarked by the Japanese government with an
aim to increase generic penetration in the nation and governments biennial price cuts, we
anticipate the JPM to de-grow at (1.4%)CAGR to reach USD 108bn in 2017.
Cipla Ltd.
Current Price:
INR 718
Target Price:
INR 962
Expected Upside (%)
34%
Sun Pharma
Current Price:
INR 1,012
Target Price:
INR 1,196
Expected Upside (%)
18%
Lupin Ltd.
Current Price:
INR 1,867
Target Price:
INR 2,420
Expected Upside (%)
30%
Dr. Reddy Labs

Current Price:
INR 3,477
Target Price:
INR 4,909
Expected Upside (%)
41%
Aurobindo Pharma
Current Price:
INR 1,109
Target Price:
INR 1,707
Expected Upside (%)
54%
We initiate coverage on SUNP, AURO, DRRD, LPC and CIPLA; AURO, CIPLA and
DRRD emerge as our topmost picks.
CIPLA with an array of gears in place to propel its growth over FY14-17E is reliant on its
integration efforts ongoing across various acquired distribution businesses; ramping up of
ANDA pipeline in US as well as executing a well-structured front-end model; elevated
dominance of its tender business and debottlenecking of its API facilities infested with
capacity constraints.
Stock Performance
SUNP possesses a robust US portfolio capable of higher leverage, a sound management

at the helm capable of turning around stressed businesses (RBXY), long-term growth
drivers in form of RBXYs RoW markets in place, a healthy domestic business and
opportunities in form of Mercks in-licensed psoriasiss investigational compound.
LPC with its robust and rich ANDA pipeline, restructuring of US Bx business, turnaround
in its Japanese operations, high return ratios, debt free status and with abundant growth
drivers at place is expected to generate healthy returns going forward. LPC with its
various strategic tie-ups and partnerships in place is bound to witness a substantial
momentum going forward.
DRRD with its rich ANDA pipeline, turnaround in the PSAI segment and vigorous
momentum in RoW markets, is likely to remain on a higher end of its PE band plus
DRRDs key forte lies in its drug discovery pipeline, NCE division and biosimilar
portfolios.
Return (%)
1 Mth
6 Mths
1 Yr
SUNP
11%
27%
75%
LPC
21%
39%
95%
CIPLA
16%
27%
95%
DRRD
12%
17%
29%
AURO
7%
28%
120%
BSEHC
12%
24%
69%
Analyst
Hemanshu Srivastava
Tel: 022-30863778
ARBP with its multiple growth levers in place is set to witness a rampant growth phase
over FY15-FY19E dependent on unfolding of its heavily ramped up ADNA portfolio in US,
foray into US OTC markets, strong footprint in the EU markets, a CS portfolio targeting
addressable market of ~USD 500mn, a germinating injectables pipeline and a broad
spectrum peptides business unfolding in longer run, providing a stark essence to ARBPs
non-institutional business.
For private circulation only. For important information about Bonanzas rating system and other discloser refer to the end of this material.
Exhibit 1: Valuation Summary Table
FY15E
Company
CMP
TP
FY16E
FY17E
FY15E
FY16E
FY17E
FY15E
FY16E
FY17E
Return
EPS
PE Ratio
EV/EBITDA
SUNP
1,012
1,196
18%
30
40
50
34
25
21
27
28
24
LPC
1,867
2,420
30%
56
87
110
34
22
17
23
19
16
DRRD
3,477
4,909
41%
143
170
223
24
20
16
16
15
13
CIPLA
718
962
34%
17
33
46
43
22
16
25
20
14
AURO
1,109
1,707
54%
54
70
95
16
16
12
13
11
Source: Company, Bonanza Research
Exhibit 2: Sensex vs. BSEHC index returns chart

SENSEX
BSEHC
180%
130%
80%
30%
-20%
Feb-15
Dec-14
Oct-14
Aug-14
Jun-14
Apr-14
Feb-14
Dec-13
Oct-13
Aug-13
Jun-13
Apr-13
Feb-13
Dec-12
Oct-12
Aug-12
Jun-12
Apr-12
Feb-12
Dec-11
Oct-11
Aug-11
Jun-11
Apr-11
Feb-11
Dec-10
Oct-10
Aug-10
Jun-10
Apr-10
Exhibit 3: Revenue growth over 10 years for the Indian pharma cos (in INR bn)
180
160
140
120
100
Sun
80
RXBY
60
Lupin
40
DRL
20
Aurobindo
Cipla
0
FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14
Exhibit 4: 10 Year performance of the Indian Pharma cos

35%
32%
30%
25%
25%
21%
20%
19%
19%
Aurobindo
Cipla
15%
9%
10%
5%
0%
Sun
RXBY
Lupin
DRL

Operations Matrix
TOPIC
SUNP
RBXY
LPC
DRRD
CIPLA
AURO
358
135
200
220
90
378
139
55
95
68
40
181
59%
33%
44%
43%
7%
41%
3%
23%
5%
12%
6%
39%
8%
24%
9%
18%
8%
45%
ANDA Story
ANDA Filed
ANDA Pending
Geographic Breakdown
US
EU
India
CIS + Russia
API
JPM
16%
5%
6%
16%
10%
12%
18%
Others
7%
SA
8%
RoW
Financial Health
18%
8%
6%
25%
82.5%
63%
67.7%
73.5%
61.4%
59%
EBITDAM
44%
46%
3.8%
7.5%
25.2%
27.6%
20.5%
25.5%
20%
24%
22.3%
26.6%
PATM
24%
(8.3%)
16.5%
14.6%
14%
14.4%
R&D%
Material Cost
6%
4%
8.6%
9.4%
5.4%
3%
17.5%
37%
32.3%
26.5%
38.6%
41%
Gross Margins
OPM
12%
6%
Capex
INR 9bn
INR 4.6bn
INR 1bn
INR 4bn
INR 3.5bn
BVPS
INR 89.4
8.6%
INR 77.4
24.2%
INR 154.7
6.8%
INR 422.7
18.4%
INR 125.2
12.2%
INR 128.7
7.5%
SG&A%
Debt: Equity
RoE
EPS
Growth Rate (CAGR;
4Yr.)
Product Pipeline
FTF
0.14
2.01
0.01
0.57
0.12
1.01
23%
(29.3%)
30.8%
27.6%
15%
36.7%
INR 15.2
INR (25.4)
INR 41
INR 115.4
INR 17.3
INR 40.2
41.3%
15%
23.4%
17%
17.2%
23%
gCoreg CR
NONE
gRenagel, gRenvela,
gGlumetza
gMozobil
NONE
NONE
gCopaxone, gNexium,
gNamenda, gGleevec,
gLunesta, gTreanda, gPristiq
gAdvair,
gSymbicort,
gNasonex,
gAbilify,
gTamiflu,
gPrezista
gEffient,
gOnglyza,
gNamenda,
gNexium,
gAmpyra
Drugs Awaited
gNamenda,
gCrestor, gNexium,
gAbilify, gGleevec,
gLunesta, gMultaq,
gOnglyza
gNexium, gValcyte,
gOpana ER
gCelebrex,gPrezista,
gWelchol, gPristiq,
gEffient, gAsacol,
gDetrol LA
Investigational
Compounds
IL23 ( Merck
Plaque Psoriasis
Compound)
NONE
NONE
NONE
NONE
NONE
Turnaround of
Taro, URL, DUSA
and Caraco
Marginal growth of US
Bx business &
Successful acq. of
Kyowa in Japan
Unproductive Betapharm
Acquisition of Germany
Strong run-rate
of Medpro
(South Africa,
49% stake acq.)
YES
NO
NO
NO
NO
In Development
NO
YES
YES
YES
YES
YES
YES
YES
YES
NO
NO
NO
NO
NO
NO
NO
NO
YES
Think Tank
Strategic Success Rate
Decision Tree
Controlled
Substance
Biosimilars
NCE
Peptides
M&A Activity
Recent Acquisition
Recent Mergers
Tie-Ups
Pharmalucence,
GSKs Australian
Opiate business
NONE
Grin Labs, Mexico
Habitrol
Ranbaxy Labs
NO
NO
NO
Intrexon, Merck &

Co.
EPIRUS
Biopharmaceuticals for
Infliximab biosimilar in
India, Gilead for Hep C
USD 1.2bn contract with

Merck, Strategic tie-up
with Celon Pharma for
gAdvair and
collaboration with
InspiRX for VHC in US
Bx business
Curis
Cipla Medpro;
Actaviss
Iranian, Sri
Western EU
Lanka etc acq, operations, Natrol
of distributors
Acquistion
NO
NO
Teva, Gilead
(Hep C), MMV,
BioQuiddity,
Vaccine
Serum Institute
development with
of India
Tergene Biotech
(Vaccines) and
Hetero Labs
(Biosimilar)
US Markets: The biggest chunk of the pie

US is the worlds largest pharmaceutical market, with a market size of USD 368bn in
FY14 and it is estimated to grow at a CAGR of 6% over FY14-17E period to reach USD
439bn in FY17E from USD 368bn in FY14.But, USAs contribution to the global spending
pie is expected to decrease from 34% in 2012 to 31% by 2017. Overall growth in US will
continue to be impacted by patent expiries and low cost generics rampant penetration in
the markets. The rate of ANDA approval has been fairly torpid over the past 7 years with
a constant declining trend except in 2012 at the peak of patent cliff when the approvals
touched a high of 490. US FDA is in the process of implementing the Generic Drug
UserFee Amendments of 2012 (GDUFA) program, which is designed specifically to
speed access to safe and effective generic drugs. Indian generic manufacturers only
received ~34% of ADNA approvals (excluding Tentative and other final ANDAs approval)
totalling at 76 out of 222 approvals.
We expect the US markets to

grow at 6% CAGR over FY1417E to reach USD 439bn in
FY17E from USD 368bn in
FY14.
US market is the most striking opportunity for generic players due to a large patent
cliff lasting till 2016, an ageing population, a rapid thrust towards specialty drugs
targeting complex ailments and an improved healthcare access reforms
(especially PPACA or ACA i.e. Patients Protection and Affordable Care Act
extending insurance to ~30mn uninsured US citizens) driving growth prospects
and re-rating outlook in the worlds most attractive pharma landscape.
Exhibit 5: Drug Approvals obtainted over 2003-2014
Exhibit 6: Value of Drugs to go off patent in US (USD bn)
600
460 449
500
400
305 300
40
490
425 433 437
35
35
397 414
30
337
25
300
20
199
19
19
22
20
19
16
17
15
15
200
10
100
0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
2008 2009 2010 2011
Source: Bloomberg, Bonanza Research
2012 2013 2014
2015 2016
.
Exhibit 7: ANDA approvals by Global, US, EU and Indian generic cos over 2003-2014
160
138
140
118
111
120
80
115
97
114
105
108
103
94
107
Global Majors
88
76
66
US Generics
European Generics
56
60
40
133
124
111
101
95
100
131
Indian Generics
37
27
25
20
0
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Exhibit 8: Grouping of therapies in the pharma landscape according to their sales
Angiotensin II Antagonists
Antibiotics
Anti-Coagulation
Anti-Convulsants
Anti-Depressants
2% 3%
Antinauseants
3%
26%
4%
Antipsychotics
2%
5%
Anti-TNF Agents
DPP-4 Inhibitors
5%
ESAs
5%
HCV: Direct Acting Antivirals (DAA)

6%
HIV
4%
5%
2%
2%
8%
7%
2%
2%
2%
2%
2% 3%
Hypercholesterolaemia
Inhaled Bronchodilators/Steroids
Insulin Analogs
MS: Immunomodulators
Neurostimulants
Opioids
Proton Pump Inhibitors
Targeted Immunosuppresants
WBC Stimulants
Others
SUNP obtains 59% of its revenues from US markets, making it most attractive firm
amongst its peer on the basis of revenues attainable and its presence in the complex to
manufacture derma space, but LPC on the other hand, has a roubst Bx and Gx business
coupled with a strong field force dominating 5.3% MS in US genericspace. Hence in our
view, LPC and SUNP remain an attractive buy in contemplation to their US revenues.
Exhibit 9: High value disease classes in terms of USD bn
Diabetes is one of the largest

therapeutic categories in the
world, with USD 41bn in market
size in CY2013 followed by
Asthma/COPD market with USD
28bn in market size
Exhibit 10: Percentage of contribution from US by Indian cos.

70%
60%
13%
12%
59%
50%
44%
31%
43%
41%
40%
44%
30%
20%
7%
10%
Asthma/COPD
Diabetes
Hepatitis C
Multiple Sclerosis
0%
SUNP
LPC
DRRD
CIPLA
AURO
Exhibit 11: Medicinal categories and market size for CY2013
Medicinal Categories
ACE Inhibitors
Alpha Blockers
Alzhemiers
ALK- Positive Lungs
Anabolic Hormones
Androgen Receptor Agonists
Angiotensin II Antagonists
Anthracyclines
Anti-Androgens
Antibiotics
Anti-Coagulation
Anti-Convulsants
Anti-Depressants
Anti-Fungal
Anti-Hemophilic Factors
Antihistamines
Antihyperlipidemics
Anti-IgE
Antinauseants
Antineoplastics
Anti-Parkinson: Dopamine Agents
Antipsychotics
Anti-Resorptives
Anti-TNF Agents
Aromatase Inhibitors
Benzodiazepines
BPH Agents
BTK-protein-inhibitors
Calcimimetics
Calcium Channel Blockers
COX-2 Inhibitors
DPP-4 Inhibitors
EGFR Inhibitor
ESAs
Folic Acid Analogs
Glaucoma Miotics
Glitazones
GLP-1 Analogs
Glutarimide Agent
GRH Analogs
HCV: Direct Acting Antivirals (DAA)
Hedgehog Cell Signalling Inhibitor
HER2 Agents
HIV
Human Insulins
Hypercholesterolaemia
Influenza Antivirals
Inhaled Bronchodilators/Steroids
Insulin Analogs
Interferons
Intra-Occular Anti-Proliferatives
I.V. Irons
JAK Inhibitors
Leukotrine Agents
Lupus: Immunomodulators
Melanoma Targeted Therapy
MS: Anti-Spasmodics
MS: Immunomodulators
MTOR Inhibitors
Neurostimulants
Opioids
PDE5 Inhibitors
Phosphate Binders
Proteasome Inhibitor
Proton Pump Inhibitors
Pulmonary Artery Vasodilators
Pyrimidine Agents
SGLT-2 Inhibitors
Subcutaneous Neuromodulators
Synthetic Amylin Analogs
Systemic Enzymes
Systemic Immunosuppressants
Targeted Anti-Proliferatives
Targeted Immunosuppresants
Taxoids
Thrombopoietin Receptor Agonists
Urinary Tract Anti-Spasmodics
VEGF Inhibitors
WBC Stimulants
Total
in USD mns
4,145
2,330
3,512
167
1,066
2,299
7,973
52
1,153
9,015
9,349
13,005
16,163
1,267
847
1,172
2,205
838
5,581
1,305
1,263
16,317
3,972
14,820
1,151
1,709
2,697
11
802
3,644
2,438
5,504
1,562
5,060
1,345
2,072
1,270
2,095
1,859
2,347
6,959
74
2,798
13,843
1,648
26,792
602
24,445
14,839
586
1,904
546
145
2,619
223
726
318
8,456
827
6,820
6,536
3,078
1,178
1,049
18,153
534
1,837
400
357
96
408
1,825
2,212
6,017
1,491
415
2,179
3,766
6,166
328,246

The IPM (Indian Pharma Market) is estimated to reach USD 27bn by 2017 compared to
USD 15bn in 2012 growing at 12% CAGR over 2012-17 period, establishing India as the
11th largest pharma market by 2017, compared to its 13th position in 2012. Exports from
India during FY13 IPM is the 4th largest pharma market amongst the pharmerging nations
in terms of market size and is one of the foremost exporters to US having the highest
number of US FDA approved manufacturing facilities outside USA. Indian pharma
companies received 108 approvals in 2014 accounting for ~34% of the ANDA approvals
received in 2014. IPM till date has received a cumulative FDI inflow worth ~USD11.6bn
over Apr-00 to Feb-14. The IPM market is a highly competitive market with a market size
of INR 830bn in FY14.
Exhibit 12: IPM therapeutic market share
Anti-neoplastics
2%
Vaccines
1%
Hormones
2% Ophthal
2%
Gynaecology
5%
Derma
6%
CNS
6%
Anti-malarials
Sex
1%
Stimulants
1%
Others
1%
Blood Urology
related 1%
1%
Pain
7%
AntiRespiratory diabetic
8%
8%
HHI of Indian Pharma Market

(IPM) is at 260 in FY14
demonstrating the extensive
competition present in the IPM.
Abbott labs occupys the
largest share of 6.2% followed
by SUNP with 5.5%.
Stomatologicals
0%
CVS
12%
Anti-infectives
16%
GI
11%
Vitamins/Minerals
9%
Demand drivers
A. Rising spend on healthcare: Total annual healthcare spending is expected to more
than double to USD 201.4bn, growing at an average annual rate of 15.8% during
2012-2017. Healthcare spending is estimated to be around 0.5% of GDP in 2013.
B. Growing health insurance coverage: The Indian government plans to bring 80% of
Indias population under health insurance cover under its Health Insurance Vision
2020. This will lead to higher volumes for the pharmaceuticals industry.
C. Growing incidence of chronic diseases: Chronic therapies have grown at a faster
pace than that of traditional acute therapies over the past four years. Their
contribution in the Indian pharmaceutical market escalated from 27% in 2010 to 30%
in 2013. Lifestyle changes, rapid urbanization which are expected to drive it further
D. Rapid urbanisation: An increase in urban population from 31% to 40% or more by
2030 will see better accessibility, with which will come with rapid urbanization and the
growth of the pharmaceutical industry.
Industry concerns:
A. Regulatory challenges: The IPM has its own set of regulatory challenges in the form
of:
Government-mandated price controls
Delay in new product approvals
Delay in clinical trial approvals
Uncertainties over FDI policy

These concerns act as a deterrent to the growth of the industry.
B. Manufacturing quality: India is attracting greater scrutiny from the US FDA in relation
to cGMP compliance, owing to the fact that it is the largest drugs supplier to the US.
Indian companies will have to conform to standards at par with the global
benchmarks. This will involve continuous improvement in systems and processes
and training of the workforce to ensure compliance to such standards.
Market size of IPM according to

AIOCD AWACS is INR 830bn in
CY2014.
Exhibit 13: IPM Segmentation
Exhibit 14: IPM Therapy distribution from 2010-2014
OTC
Medicines
19%
31%
Patented
Drugs
9%
Generic
Drugs
72%
27%
73%
Acute
69%
Chronic
Exhibit 15: Indian Pharma export and import data

14
11.6
12
10
9
10
7
Exports
5
6
4
Imports
4
3
2
0.7
1.1
1.2
1.8
0.6
0.9
1.7
0.4
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
2.1
0
FY14
SUNP obtains 24% of its revenues from IPM having 5.5% MS, CIPLA 39% through IPM
having 5% MS, LPC 23% through IPM having 3.3% MS and DRRD obtains 12% through
IPM having 2.1% MS. Amongst the 4 giants, DRRD is more vulnerable towards NLEM
price control whereas SUNP is the least vulnerable due to DRRDs high dependence on
acute segment.
Exhibit 16: IPM trajectory (in INR bn)
80
75
70
CY12
65
CY13
60
CY14
55
CY15
50
45
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Source:AIOCD AWACS, Bonanza Research
Exhibit 17: Percentage of revenues obtained from IPM

45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
39%
24%
23%
12%
SUNP
LPC
DRRD
CIPLA

11 March 2015 | Page 10

The global biologics market stands currently at USD 85bn in 2013 from 20 biologics
alone comprising of Humira, Avastin, Remicade, Lantus, etc. All the major biologics are
projected to go off-patent during the next 5 years, opening up a massive ocean of
opportunities for biosimilars. We expect the biosimilars market size to be USD 20bn by
2020 in key markets of US, China, Japan, EU5 and South Korea. On the whole we
anticipate the biosimilars market to evolve with time, and entry of biosimilars will be at
significantly truncated pricing discounts in tune of 20% - 30% due to considerable
manufacturing expense and expertise coupled with difficulties in reverse engineering
process constraints.
Other factors curbing the growth prospects for the biosimilars are the high manufacturing
complexities and costs; stringent regulatory environment in the U.S. and Europe;
innovative strategies used by biologic drug manufacturers to protect their intellectual
property and costly purification process; arrival of biobetters, and the presence of low
priced biogenerics that compete with biosimilars in the market.
20 biologics encompass a
market size of USD 85bn in
2013, which are about to go off
-patent over the next 5 years.
The biosimilars market is segment into 3 main divisions of recombinant non-glycosylated

proteins, recombinant glycosylated proteins, and recombinant peptides.Of all these
segments, the key traction segment that is estimated to grow at a faster rate of 25%
CAGR over 2013 2018 is the recombinant glycosylated proteins segment. This
progression is mainly attributable to the investments made to develop biosimilar versions
of mAbs (more than 50 biosimilars in the pipeline); the introduction of the new biosimilar
drug Ovaleap (follitropin) to treat infertility and the budding demand for erythropoietin and
mAbs to treat cancer.
Exhibit 18: Biosimilars market segmentation
Biosimilars
Recombinant non glycosylated

proteints (rNGP)
Recombinant
glycosylated
proteins (rGP)
Recombinant
peptides (RP)
Insulin
Erythropoietin
Calcitonin
Human growth
hormone (HGH)
Monoclonal
antibodies (mAbs)
Glucagon
Interferons
Follitropin
Granuloctye colony
stimulating factor
(G-CSF)
11 March 2015 | Page 11
mAbs is the most lucrative markets for drug manufacturers and is estimated to be the
fastest growing market at 42% CAGR from 2013 to 2018. mAbs such as Rituxan,
Remicade, Herceptin, Humira, Avastin, Synagis, Erbitux, and Lucentis are expected to
become off-patent products from 2013 to 2018.
Following mAbs, insulin is expected to be the steadiest emergent segment growing at
36% CAGR from 2013 to 2018. The growth is attributed to the rise in incidences of
diabetes; on-going patent expirations of biologic drugs such as Lantus, Humalog, and
Novorapid; and the cost effectiveness of the biosimilars of insulin.
Exhibit 19: Foremost biologic drugs (according to their market size)
Biologics Originator
US Patent Expiry UK Patent Expiry FY14 Sales (in USD bn) Launched in US
Launched in UK
Avastin
Roche
219
2022
7.3
No
No
Enbrel
Pfizer, Amgen
2029
Feb-15
8.5
No
No
Herceptin Roche
2018/19
2015
6.8
No
No
Humira
AbbVie
Dec-16
Apr-18
12
No
No
Lantus
Sanofi
Feb-15
May-15
8.7
No
Substitutable product launched by Sanofi (Toujeo)
Rituxan
Roche
2018
Jul-05
7.9
No
No
Remicade J&J, Merck & Co.
2018
Feb-18
No
Yes; Celltrion/Hospira
With the latest updates flowing through from the US and EU regulators following the most
anticipated launch of the 1st highly awaited biosimilars into these markets, guidelines and
market response remains to be observed. Remsima (biosimilar of Remicade of J&J) from
Celltrion launched in EU and Zarxio (biosimilar of Amgens Neupogen) from Sandoz
launched in US are the only biosimilars launches in developed markets of US and EU till
date. This paves the way for more biosimilar launches in the foreseeable future.
Exhibit 20: Overall Biologics (Sales in USD mn)
Biologics
FY14 Sales
Avastin
7,300
Enbrel
8,500
Herceptin
6,800
Humira
12,000
Lantus
8,700
Rituxan
7,900
Remicade
9,000
Avonex
1,955
Stelara
1,800
Neulasta
5,000
Lucentis
1,900
Novolog
4,000
Synagis
500
Erbitux
Humalog
700
2,700
Novorapid
500
Interferons
586
Pegasys
477
Tysabri
770
Others
Total
3,620
84,708
11 March 2015 | Page 12

EMs (including China, Brazil and Russia) are expected to be the principal growth driver
of the global pharma industry, enhancing their market share from 39% in 2012 of USD
371bn to 48% in 2017 to USD 558bn growing at a cumulative 8.5% CAGR over 2012
2017. Chinese pharma market is estimated to grow at 15% CAGR over 2012-2017
period from USD 87bn in 2012 to USD 175bn in 2017, Brazilian pharma market is
anticipated to grow at 12% CAGR from USD 24bn in 2012 to USD 43bn in 2017 and the
Russian pharma market is likely to grow at ~9% CAGR from USD 18bn in 2012 to USD
28bn in 2017. RoW pharma markets are projected to grow at 5.3% CAGR over 20122017 from USD 241bn in 2012 to USD 312bn in 2017. Rampant economic growth in the
region on back of rising household income, escalating incidence of chronic ailments and
various governments healthcare reforms seeking increased access towards affordable
medicines are the chief growth drivers for the EMs whose spending on generics is
projected to enhance from 58% in 2012 to 63% in 2017 of the overall pharma market
spend.
BRICS pharma market stood at

USD 148bn in 2012 poised to
grow at 13.5% CAGR over
2012-2017 to reach USD 279bn
in 2017.
Exhibit 21: Key therapeutic segments in the Pharmerging economies
Antipsychotics
Antidepressants
Immunosuppres
Anti-Epileptics
Cholesterol
Derma
Hypertension
Antibiotics
Pain
0
10
15
20
25
Exhibit 22: Market size of the BRIC and other pharmerging nations
15%
16%
Market Size (USD bns)

CAGR
12%
12%
14%
12%
9%
10%
7%
175
8%
6%
115
43
28
4%
2%
27
Other
India
Brazil
Russi
a
0%
China
200
180
160
140
120
100
80
60
40
20
0
Exhibit 23: Market Segments of the BRICS economies

Branded
2017
26%
2012
31%
Generic
Others
63%
58%
11%
11%

11 March 2015 | Page 13

JPM:
JPMs market size was USD 116bn in 2012 contributing 12% to the global pharma pie.
With the recent healthcare reforms embarked by the Japanese government with an aim
to increase generic penetration in the nation and governments biennial price cuts, we
anticipate the JPM to de-grow at (1.4%) CAGR over 2012 2017 to reach USD 108bn in
2017, contributing 9% to the global pharma pie.
We anticipate the JPM markets
to de-grow at (1.4%) CAGR over
2012-2017 to reach USD 108bn
in 2017.
On the contrary the worlds 2nd largest pharma landscape (excluding EU5) provides
bounteous opportunity to the global generic players looking to capitalize the opportunity
at hand by targeting the relatively higher ageing Japanese population (~24.2% of the
overall population accounting 49% of the medical costs amongst the whole healthcare
costs which is ~9.5% of the Japans GDP), governments austerity measures (biennial
price cuts averaging 5.64% on a drug price from 2014) and a relatively lower generics
penetration in the JPM. Increasing generic substitution and biennial pricing reviews
restrict the quantum of growth of the JPM market but provides a cloaked opportunity for
many generics players.
Exhibit 24: Market segments in the Developed economies
Branded
2017
Generic
Others
67%
2012
21%
72%
12%
16%
12%
EU Markets:
The EU5 members market size comprising of France, Germany, Italy, Spain and UK in
2012 was USD 145bn with estimates anticipating its contribution to the global spending
pie to come down from 15% in 2012 to 13% in 2017 with its market growing at 1.5%
CAGR over 2012 2017 period to USD 156bn in 2017. EU5 markets are subjected
towards inferior growth impacted by patent cliff; governments austerity measures due to
economic crisis witnessed in the region and restricted meaningful innovative launches in
the province.
We expect the EU5 markets to

grow at 1.5% CAGR over 20122017 to reach USD 156bn in
2017.
Exhibit 25: Market size of the EU5 markets
UK
17%
Spain
12%
France
23%
Italy
18%
Germany
30%
Exhibit 26: Therapeutic segments prevalent in Developed markets

ADHD
Anitulcerants
Anti-Epileptics
Derma
Hypertension
Pain
Oncology
0
10
20
30
40
50
60
70
80
90

11 March 2015 | Page 14
API & Other opportunities

API:
The global API market stood at USD 113bn in 2012as against USD 91bn in 2008. It is
expected to grow at 8% CAGR over 2012-2017 reaching USD 166bn in 2017 owing to
extensive patent expiries, increase in outsourcing and demand for potent and biogeneric
APIs. With the stiff competition in the global API markets, a significant portion of the API
production is outsourced to China and India (two of the largest API markets inthe world),
providing ample opportunities for vertically integrated generic firms and specialty API
manufacturers. AURO derives 45% of its overall revenues through API, SSP, NBL and
Cephs; thereby in a position to gain heavily from the patent expiries (in-tune of USD 60bn
till 2019), followed by DRRD (which obtains 18% from its PSAI segment).
Patent cliff of USD 39-50bn

over FY15-17E offers the Indian
pharma cos with an ample
opportunity to enhance their
API supply.
Exhibit 27: Percentage of API contribution to revenues of the top Indian cos.
50%
45%
40%
30%
18%
20%
10%
10%
8%
5%
0%
SUNP
LPC
DRRD
CIPLA
AURO
Other opportunities:
Increased USFDA vigilance in China may benefit Indian generic players, as Chinas
DMF filings indicate stricter US FDA vigilance thereby increasing shortages of
antibiotics, chemo and CVS drugs. India and USare two largest buyers of Chinese
pharmaceutical raw materials, amounting to USD 6bn annually. LPC and AURO
have strong manufacturing capabilities in China, which can benefit from the
supply vacuum created through enhanced vigilance on Chinese pharma firms
as Indian generic firms rely on many APIs from China.
Argentina has fully unbolted its USD 6bn pharma market to the Indian generic
players, whose scope was earlier limited to only APIs. According to estimates,
Argentina's pharma market is expected to cross USD 15bn by 2020. More clarity will
emerge with the Latam nation coming out with its regulations which could throw light
on the amount of time required for product registrations.
Southeast Asia to grow at twice the global average, driven by population growth,
rising incomes and improved access to healthcare.
The global population aged 65 and over will grow faster than any other age segment,
and will account for almost 30% of overall population growth in the next five years
Oncology Patent Expiries over 2018/2019 as over USD17bn drugs including

Herceptin, Alimta and Velcade will be at risk due to loss of their patent or exclusivity
protection.
Global asthma market to touch USD 18bn by 2018 dependent on two key marketed
drugs, Advair (GlaxoSmithKline) and Symbicort (AstraZeneca), which will also face
erosion due to the arrival of Breo from GlaxoSmithKline, Boehringer Ingelheims
Spiriva and generics emerging from the pipeline.
Key downside risks:
A significant downside risk to our estimates is the uneven economic recovery in

Europe, political tension in Russia and recent political events in Africa and the Middle
East.
Lack of proper guidelines from US FDA can negatively affect the biosimilars market
and condense its magnetism going forward.
Stern vigilance towards many Indian generic manufactures and import alerts
encompassing firms such as Wockhardt, Sun, Lupin, IPCA, etc can hurt the growth
sentiment going ahead and dampen the bright prospects at hand of the Indian
manufactures.
Opening up of Argentinas USD

6bn pharma market to Indian
generic manufactures provides
plentiful opportunity to tap
early into the market.
Stern vigilance from US FDA

towards Indian generic cos
manufacturing process raises
the concerns of an import alert.
11 March 2015 | Page 15
Covered Company Summary

Cipla Ltd. (CIPLA)
At the tipping point of acceleration
CIPLA with an array of gears in place to propel its growth over FY14-17E is reliant on its integration
efforts ongoing across various acquired distribution businesses including South Africa, Iran,
Yemen, Sri Lanka, Myanmar, etc; ramping up of ANDA pipeline in US as well as constructing a
well structured frontend model; elevated dominance of its tender business (~25% of Ciplas total
Export business); an imminent respiratory portfolio in EU market and debottlenecking of its API
facilities infested with capacity constraints. CIPLA has multiple levers in place to accelerate growth
over FY14-17E plus multiple in-licensing deals and partnership agreements to boost its growth
trajectory further.
Investment Rationale
US markets: The golden goose
Domestic front presenting stimulus for sustainability
South African markets to demonstrate superior growth
International markets glistening with prospects
Strategic & Tie-up: Inorganic expansion drive
We expect CIPLA to demonstrate a whopping growth progression of 21.6% CAGR over FY14-17E
from INR 101bn in FY14 to INR 182bn in FY17E with EBITDA margins enhancing by 390bps from
~21% in FY15E to ~25% in FY17E as in our opinion improvement in margins will take place
steadily as effects of integration and expansion drive will be inlayed from FY16E onwards.
We assign a BUY rating to CIPLA valuing its base business at a 21x FY17E EPS of INR 45.8
(including base EPS of INR 36.4 and key ANDA opportunities at INR 9.4) to arrive at a TP of INR
962 with a potential upside of 34%.
Initiate with BUY; TP- INR 962
Sun Pharmaceuticals Industries Ltd. (SUNP)

Amalgamation: Key to limitless opportunities
SUNP possesses a robust US portfolio capable of higher leverage, a sound management at the
helm capable of turning around stressed businesses, long-term growth drivers in form of RBXYs
RoW markets in place, a healthy domestic business and opportunities in form of Mercks inlicensed psoriasiss investigational compound. SUNP has structured growth drivers in place to
propel its growth from FY16E onwards spanning enhanced presence in the RoW markets of
Russia, Brazil, Africa, and developed markets of Europe and Japan; access to an investigational
drug (in-licensing from Merck) and a solid NCE pipeline (SPARC NCE pipeline plus Synriam from
RBXY for malaria).
US: Dynamic growth engine
Domestic markets on the cusp of escalation
RBXY assimilation a key to unlock potential
Other Segment complement growth
Strategic Alliances and Tie-Ups: Engineering a promising future
We expect SUNP to post a revenue growth of 15% CAGR over FY14-17E from INR 160bn in FY14
to INR 244bn in FY17E on account of stronger US operations and enhanced focus on RoW
markets and post a PAT growth of 29% CAGR over FY14-17E from INR 39bn in FY14 to INR 83bn
in FY17E. Post-merger, we believe the combined entity to post revenue of INR 392bn and a PAT of
INR 102bn in FY17E.
We assign a BUY rating to the stock valuing it at 9% premium to its peers at 24x FY17E EPS of
INR 49.8 (post-merger base business EPS at INR 41.9, ANDA opportunities at INR 6.9 and GSK
opiates business to add INR 1) to arrive at a TP of INR 1,196 with a potential upside of 18%.
Initiate with BUY; TP- INR 1,196
11 March 2015 | Page 16
Lupin Ltd. (LPC)

Invigorating ascent
LPC has a rich ANDA pipeline comprising of niche launches such as gCelebrex, gRenagel,
gRenvela, gGlumetza, g Namenda, gSeroquel XR etc; a strong branded portfolio in US;
improvement in Japan business; strong domestic operations; pulsating RoW markets comprising of
South Africa, Australia, Philippines etc.; Latam markets access through commencement of
Mexican operations and multiple strategic alliances in place to propel the stock towards a
sustained growth trajectory.
US: The impetus of evolution
Domestic front presenting ample of opportunities
Turnaround to decide the fortune in JPM
International markets shimmering with optimism
We expect LPC to register a revenue growth of 18.7% CAGR over FY14 17E from INR 112bn in
FY14 to INR 187bn in FY17E posting a growth of 23.2% CAGR in PAT over the period from INR
18.6bn in FY14 to INR 34.9bn in FY17E.
We assign a BUY rating to LPC valuing its base business at a 22x FY17E EPS of INR 110 (base
EPS at INR 78, key ANDAs at INR 29.5 and strategic acquisitions to add INR 2.5) to arrive at a
TP of INR 2,420 with a potential upside of 30%.
Dr. Reddys Laboratories (DRRD)

Ripe for gains
DRRD with its robust and rich ANDA pipeline and abundant growth drivers at place such as
traction in US markets sustained by newer launches, turnaround in the PSAI segment and vigorous
momentum in RoW markets, is likely to remain on a higher end of its PE band as we remain
convinced of its execution competence and new catalysts in place to drive further earning
upgrades and re-rating. DRRDs key forte lies in its drug discovery pipeline, NCE division and its
robustUS operations.
US roadmap a baseline for progress
Russia & CIS markets amidst hurdles
PSAI segment to gradually turnaround
We expect DRRD to register a growth of 14.6% CAGR over FY14 FY17E from INR 132bn in
FY14 to INR 198bn in FY17E posting a PAT growth of ~16% CAGR over the period from INR
19.6bn in FY14 to INR 30.4bn in FY17E with a consistent EBITDA margins of ~25% in FY17E.
We assign a BUY rating to DRRD valuing its base business at a 22x FY17E EPS of INR 223.1
(Base business at INR 178.7, Habitrol acquisition to add INR 6.6 and key ANDA opportunities at
INR 37.8) to arrive at a TP of INR 4,909 with a potential upside of 41%.
11 March 2015 | Page 17

Inorganic methodology to fuel growth engine
ARBP with its multiple growth levers in place will witness a rampant growth phase over FY15FY19E dependent on unfolding of its heavily ramped up ADNA portfolio in US, foray into US OTC
markets, strong footprint in the EU markets, a CS portfolio targeting addressable market of ~USD
500mn, a germinating injectables pipeline and a broad spectrum peptides business unfolding in
longer run, providing a stark essence to ARBPs non-institutional business.
With a large chunk of the ANDA pie still to unfold coupled with a stronger base business,
improvement in injectables sales and strong growth in Aurolife (largely dependent on CS releases
and non-institutional business portfolio)as ARBPs presence in these high margins segment of CS,
injectables, penems and peptides will boost its next growth phase since ~60% of the pipeline in
these segments is still yet to unfold.
US Operations: Unlocking potential

Enhancing growth in EU: Actavis Deal
Natrol Acquisition: A sublime match
Other segments geared up for progression
We expect ARBP to post a staggering revenue growth of 28.1% CAGR over FY14-17E from INR
81bn in FY14 to INR 170bn in FY17E and a whopping 33.1% CAGR growth in PAT from INR
11.7bn in FY14 to INR 27.5bn in FY17E enhancing its EBITDA margins by 330bps from 22.6% in
FY15E to 25.9% in FY17E as in our opinion, improvement in margins will be witnessed gradually
as effects of integration will kick in from FY16E onwards.
We assign a BUY rating to ARBP valuing its base business at a 18x FY17E EPS of INR 94.8 (base
EPS at INR 88.8, key ANDAs at INR 3.5 and Natrol acquisition at INR 2.5) to arrive at a TP of INR
1,707 with a potential upside of 54%.
11 March 2015 | Page 18
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11 March 2015 | Page 19
COMPANIES
11 March 2015 | Page 20
India Research
11 March 2015
Cipla Ltd.| BUY

INITIATING COVERAGE
Bloomberg Code: CIPLA:IN | Reuters Code: CIPL.NS
At the tipping point of acceleration

Pharmaceuticals
Current Price:
INR 718
Target Price:
INR 962
Expected Upside (%)
34%
Stock Details
Bloomberg Code
CIPLA: IN
Reuters Code
CIPL.NS
Shares O/S (mn)
802.9
M Cap (INR mn)
576,482
52 week H/L (INR)
753 / 368
Shareholding Pattern (%)

Promoter Group
36.8%
FII
23.93%
DII
11.38%
Others
27.89%
Stock Performance Chart

CIPLA
100%
BSEHC
80%
60%
40%
20%
0%
-20%
Mar-15
Jan-15
Nov-14
Sep-14
Jul-14
May-14
Mar-14
Jan-14
Nov-13
Cipla Limited (CIPLA)

integration efforts ongoing across various acquired distribution businesses; ramping up of
ANDA pipeline in US as well as constructing a well structured front-end model and an
imminent respiratory portfolio in EU market. CIPLA has multiple levers in place to accelerate
growth over FY14-17E plus multiple in-licensing deals and partnership agreements to boost its
growth trajectory further.We expect CIPLA to demonstrate a whopping growth progression of
21.6% CAGR over FY14-17E from INR 101bn in FY14 to INR 182bn in FY17E. We assign a
BUY rating to CIPLA valuing its base business at a 21x FY17E EPS of INR 45.8 (including key
ANDA opportunities and acquisitions churn out) to arrive at a TP of INR 962 with a potential
upside of 34%.
CIPLA intends to mark its presence in the US markets initially through plain vanilla products
such as Meloxicam, Topiramate, Valaciclovir and Doxycycline, with plans to commercialize it
owns ANDAs targeting only vanilla products within a span of 12-18 months in an attempt to
establish structured presence in US markets. CIPLA intends to focus on oncology, respiratory,
injectables and anti-infective therapies in US markets. We believe US markets to be the key
constituency towards CIPLAs growth agenda, as with the commencement of a front-end
model in US; existing partnerships with Teva (for gNexium and gViread), Roxane (for
gLotronex) and other such partnerships and Dymistas constant broad based penetration in
the markets of EU and US (contributing ~USD 123mn in FY17Ein revenues to CIPLA)
CIPLAs domestic revenues contribute ~39% to its overall revenues with a sturdy foundation in
respiratory portfolio. We expect CIPLA to enhance its domestic operations base and
demonstrate a significant growth of ~15% CAGR over FY14-17E from ~INR 39.7bn in FY14 to
~INR 60.6bn in FY17E on back of a healthy demand trajectory, numerous launches such as
gOnbrez (expected in FY16E) etc., enrichment of biosimilars portfolio and an enhanced field
force productivity catering a wider market.
CIPLA has established a front-end model in its 2nd home market of South Africa, which
contributed 14.4% in overall export revenues at INR 7.7bn in FY14 showcasing a sturdy
growth of ~27% on YoY basis from INR 6.1bn in FY13. We expect CIPLA to post a massive
growth of ~31% CAGR over FY14-17E on constant currency basis from ZAR 2.8bn in FY14 to
ZAR 6.3bn in FY17E on back of recent ARV tender approvals gradual pickup in institutional
business, distribution agreements with Teva and stronger product offering in the SA markets.
CIPLA has been restructuring its EU operations, creating a massive sales force to promote
and drive its respiratory portfolio products comprising of gAdvair/gSeretide MDI in the EU
markets which could act as a catalyst for growth. CIPLA is also gearing up for a gSymbicort
(USD 1.3bn in EU) launch post patent-expiry in EU markets in FY16E. We expect CIPLA to
launch gAdvair pMDI in UK (~USD 400mn market) in Q1FY16E becoming the first entrants in
UK, triggering a revenue realization in-tune of USD 64mn in FY16E. CIPLA has a strong
global footprint encompassing various geographies which CIPLA is now integrating into
constructing a frontend operational base in a bid to rationalize distribution channels, leverage
its superior capabilities and drive growth through finer field force efficiency and ramp-up in
products launches.
Stock Performance
1 Mth
6 Mths
1 Yr
Absolute
16%
27%
95%
Strategic Alliances & Tie Ups: Inorganic expansion drive
Relative*
4%
3%
28%
Key Financials
(Note: * - w.r.t BSE Healthcare Index)
Year
FY14A
FY15E
FY16E
FY17E
CAGR (%)
Net Sales(INR bn)
101
111
141
181
21.6
PAT (INR bn)
14
13
19
29
27
PATM%
14
12
13
16
NA
RoE %
14.9
13.5
17.7
22.7
NA
EPS (INR)
17.3
16.6
23.5
36.4
28
BV (INR)
125
122
143
177
12
P/E (x)
42
43
31
20
NA
Return (%)
Analyst
Hemanshu Srivastava
Tel: 022-30863778
Source: Bonanza Research, Company data
Cipla Ltd.
Cipla Ltd. (CIPLA)

integration efforts ongoing across various acquired distribution businesses including
South Africa, Iran, Yemen, Sri Lanka, Myanmar, etc; ramping up of ANDA pipeline in US
as well as constructing a well structured frontend model; elevated dominance of its
tender business (~25% of Ciplas total Export business); an imminent respiratory portfolio
in EU markets and debottlenecking of its API facilities infested with capacity constraints.
CIPLA has multiple levers in place to accelerate growth over FY14-17E plus multiple inlicensing deals and partnership agreements to boost its growth trajectory further.
Strategic & Tie-up: Inorganic expansion drive
We expect CIPLA to demonstrate a whopping growth progression of 21.6% CAGR over

FY14-17E from INR 101bn in FY14 to INR 182bn in FY17E with EBITDA margins
enhancing by 390bps from ~21% in FY15E to ~25% in FY17E as in our opinion
improvement in margins will take place steadily as effects of integration and expansion
drive will be inlayed from FY16E onwards.
We assign a BUY rating to CIPLA valuing its base business at a 21x FY17E EPS of INR
45.8 (including base EPS of INR 36.4 and key ANDA opportunities at INR 9.4) to arrive
at a TP of INR 962 with a potential upside of 34%.
Initiate with BUY; TP- INR 962
11 March 2015 | Page 22
Cipla Ltd.
Business Mix
CIPLA derives its revenues from 3 major markets, Indian, South Africa and RoW.
CIPLA has grown at a 17% CAGR over FY04-14 from USD 463mn in FY04 to USD 2,203mn in
FY14 on back of sturdy US operations coupled with rampant launches in the US markets, strategic
prominence towards Russian and RoW markets coupled with valuable launches in the Indian
markets encompassing biosimilars.
Exhibit 1: Dosage form wise breakup
Injections
10%
Aerosols
10%
Exhibit 2: Overall geographic revenue spread for FY14
Creams Liquids
2%
6%
Others
1%
API Others
8% 7%
India
39%
NA EU
7% 6%
Tablets
60%
RoW
25%
SA
8%
Bulk Drugs
11%
Exhibit 3: Annual domestic revenue trend (INR bn)
Exhibit 4: Annual export revenue trend (INR bn)

60
50.0
40
40.0
28
25
30.0
37
34
32
54
50
40
30
20.0
20
10.0
10
38
34
29
43
42
FY10
FY11
FY12
FY13
FY14
FY10
9MFY15
FY11
FY12
FY13
Exhibit 5: Ciplas revenue mix
Exhibit 6: FY13 and FY14 revenue mix
Formulations
45
40
35
30
25
20
15
10
5
0
API
96%
95%
94%
93%
92%
91%
90%
89%
88%
87%
12%
10%
8%
6%
4%
2%
Q1FY
13
Q2FY
13
Q3FY
13
Q4FY
13
Q1FY
14
Q2FY
14
Q3FY
14
Q4FY
14
Q1FY
15
Q2FY
15
Q3FY
15
0%
9MFY15
40
41%
34
30%
29%
25
27%
19
19%
6 8
6 7
4 6
17%
6 8
6 6
1%
EU
NA
RoW
API
FY13(INR bn)
FY14
Dom
FY14(INR bn)
SA
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Other
Y-o-Y %
Exhibit 7: Sales vs. PAT (INR bn)
26%
18%
21%
15
6%
3
Q3FY14
Q3FY13
Q2FY13
40%
27%
-16%
-27%
4
Q2FY14
4
Q1FY13
1%
80%
60%
22%
14%
-5%
10
5
25%
18%
28
26
-5%
3
15%20%
2% 0%
7%
-16%
-38%
-20%
3
Q3FY15
22%
26
24
Q2FY15
20
19
Y-o-Y %
26
25
Q4FY14
58% 21
22
20
Y-o-Y%
25
Q1FY15
PAT
Q1FY14
25
Sales (All)
58%
Q4FY13
30
-40%
-60%
11 March 2015 | Page 23
Cipla Ltd.

CIPLAs revenues from US markets have been a minor contributor to its overall sales, as
a consequence of lack of front-end model in US and inferior ANDA filings as compared to
its peers, resulting in laggard US revenues, contributing ~7% to overall sales in FY14 and
growing at a pace of ~19% YoY from INR 6.2bn in FY13 to INR 7.4bn in FY14.
CIPLA has around 90 product approvals in US, of which 45 were commercialized with
the help of its partners. CIPLA has gone live i.e. operational through its front-end model
in US in Q3FY15 focusing on its niche core strengths of respiratory, oncology and ARV
and establishing its presence in the US markets. CIPLA intends to mark its presence in
the US markets initially through plain vanilla products such as Meloxicam, Topiramate,
Valaciclovir and Doxycycline, with plans to commercialize it owns ANDAs targeting only
vanilla products within a span of 12-18 months in an attempt to establish structured
presence in US markets. CIPLA intends to focus on oncology, respiratory, injectables
and anti-infective therapies in US markets.
CIPLA is the solo partner for Meda for development and manufacturing of Dymista. The
potential market for Dymista in the US and Europe is estimated to be ~USD 6bn. Patents
for the Dymista drug expires in between 2023-2026. Meda launched Dymista in the US
market in Sept-12 and10 countries in the EU market in Q1FY14. We expect CIPLA to
register sales of USD 55mn in FY15E, USD 82mn in FY16E and USD 123mn in FY17E
based on our assumption of 20% Meda sales contributing to CIPLAs revenues (For
FY14 Dymista sales were in tune of USD 182.35mn).
Exhibit 8: CIPLAs API Tie-Ups and Partners
Partners
Product
Teva
Viread
Roxane
Lotronex
Teva
Nexium
Teva
Celebrex
Details
The patent of the drug will expire in 2018. Teva will be launching the generic drug on December 15, 2017 as per
settlement with Gilead.
The patents of Lotronex expire in January 2013 and October 2018. Till date, Roxane has not received approval from
USFDA for the drug.
The patent of the drug will expire in 2015. However, as per patent settlement with innovator, Teva can launch generic
after May 2014.
CIPLAs Country-wise Partners

US
Teva, Sandoz, Actavis, Roxane, Bedford, Watson, Eon Labs, Pentech Pharma, Three River, Edenbridge Pharma, Arkon,
EU
Teva, Stada, Neolabs, Hexal
Africa
Medpro
Australia
Sigma, Aspen
We believe US markets to be the key constituency towards CIPLAs growth

agenda, as with the commencement of establishing a front-end model in US;
existing partnerships with Teva (for gNexium and gViread), Roxane (for gLotronex)
and other such partnerships; Dymistas constant broad based penetration in the
markets of EU and US (contributing ~USD 123mn in FY17Ein revenues to CIPLA)
and potential high value ANDA launches going forward, CIPLA can grow at a runrate of ~25% CAGR over FY14-17E from INR 7.4bn in FY14 to INR 14.4bn in FY17E.
CIPLAs possesses worlds 3rd largest inhalers portfolio under the respiratory segment.
CIPLA intends to leverage its superior capabilities in the respiratory domain to launch
DPI and pMDI devices under its inhalers program in the lucrative US markets. We expect
CIPLA to launch its DPI device (targeting ~USD 4.5bn market opportunity, with limited
competition) in the US markets within a span of ~4-5 years (FY19E/ FY20E) given the
low extent of substitutability and the extent of pharmacokinetic and pharmacodynamic
studies required for interchangeability in the US markets. pMDI launch in US (~USD 1bn
market) to be a possibility within a span of ~2-3 years. We expect Mylan, Actavis,
Sandoz and Teva to be the only competitors in near future for CIPLAs US combination
inhalers portfolio, even though they may enter the market earlier than CIPLA. gAdvair
and gSymbicort remains a long-term opportunity for capitalization.
CIPLAs previous business model in US is of low-risk export partnership model insulating
it from regular fluctuations in the market and forex impacts but at the same time, it has
road blocked CIPLAs growth potential in the market, where its peers have capitalized on
the opportunities presented by the patent cliff. CIPLA, with its renewed strategic plans for
the US markets, has filed significant ANDAs and has established its own frontend
business model in US.
CIPLA with commencement of

its front-end model in US
intends to launch plain vanilla
drugs in the market initially and
will
target
complex
to
manufacture
and
low
competition products later on.
11 March 2015 | Page 24
Cipla Ltd.
We expect CIPLA to obtain a total of USD 331mn over FY15-17E through high value
ANDA launchesby its partners in US of gAbilify (USD 4.4bn), gCelebrex (USD
3.3bn), gTamiflu (USD 975mn), gReyataz (USD 892mn), gPrezista (USD 1.1bn),
gBaraclude (USD 352mn), gEvista (USD 900mn), etc coupled with potential
respiratory portfolio launch encompassing of gAdvair (USD 4bn), gSymbicort (USD
2.8bn; USD 1.5bn in US), gNasonex (USD 1.6bn), etc over FY15-17E.
CIPLA has a strong respiratory

pipeline in place to target US
and EU markets.
Exhibit 9: CIPLAs global product and ANDA pipeline

Drugs
Market Size (in USD mn)
Release Date
FTF
Advair pMDI (Rest of EU)
400
Sep-14
NO
Advair UK pMDI
400
FY16
NO
Advair DPI EU
2,000
Advair US
4,500
FY18/19
NO
Symbicort US
1,500
FY18/22
NO
Nasonex
1,600
Nexium
4,000
FY16
Celebrex
3,220
FY16
NO
Viramune
128
FY15
YES
Avelox
44
FY16
NO
Baraclude
352
FY16
NO
Abilify
4,430
FY16
NO
Evista
900
FY16
NO
Tamiflu
975
FY17
NO
Reyataz
892
FY17
NO
Viread
706
FY17
NO
Lotronex
96
H2FY18
NO
Ranexa
726
FY19
NO
Sancuso
38
FY24
NO
Optinate/ Atelvia
103
FY16
NO
Plumicort
900
FY18/FY19
NO
Xopenex HFA
98
FY24
NO
Foradil HFA
139
FY19/20
NO
Brovana
140
FY21
NO
Prezista
1,090
Jan-16
NO
Symbicort EU
1,300
Unknown
NO
185
Unknown
NO
Sustiva
NO
NO
NO
11 March 2015 | Page 25
Cipla Ltd.

CIPLAs respiratory therapy accounts for ~20% of its revenues, where it is the market leader in this
therapy coupled with leadership positions in gynaecology, anti-infectives and gastrointestinal.
CIPLAhascarved out a niche space in the respiratory segment offering a wideproduct basket and
commanding ~70% market share in the inhaler space.CIPLAs key brands in the IPM include
Asthalin, Foracort and Serroflo.
Exhibit 10: India therapy wise segmentation
Pain Others
1%
3%
Vitamins
Anti-Neoplastics
Derma
2%
2%
Anti-Diabetic 1%
1%
Ophthalmologic CNS
3%
3%
GI
8%
Respiratory
29%
Gynaecological
10%
Cardiac
12%
Anti-Infective
25%
CIPLAs new offerings include biosimilars, targeting the oncology, respiratory and anti-arthritis
therapeutic space. CIPLA has invested ~USD 165mn in India and China to acquire facilities. CIPLA
launched its first biosimilar product under the brand name of Etacept for the treatment of rheumatic
disorders, which is manufactured by Shanghai CP Guojian Pharmaceutical Co. Ltd and marketed
by CIPLA in IPM.CIPLA enjoys a ~5% market share in the INR 830bn Indian Pharma market,
growing at ~12% CAGR over FY10-14 period from INR 25.1bn in FY10 to INR 39.7bn in FY14 on
back of a strong domestic business model, deeper market penetration across both the rural and
urban backdrop and a strong field force efficiency; enabling CIPLA to attain the 3rd rank in the IPM.
Exhibit 11: Annual domestic revenue trend (INR bn)
50
40
30
20
10
0
25
28
FY10
FY11
32
34
FY12
FY13
40
37
FY14
9MFY15
We expect CIPLA to enhance its domestic operations base and demonstrate a significant
growth of ~15% CAGR over FY14-17E from ~INR 39.7bn in FY14 to ~INR 60.6bn in FY17E on
back of a healthy demand trajectory, numerous launches such as gOnbrez (expected in
Q1FY16E) etc., enrichment of biosimilars portfolio and an enhanced field force productivity
catering a wider market. With more thrust towards magnification ofglobal revenues, we
believe CIPLA to trim down it dependence from domestic operations towards overall
revenues from 39% in FY14 to 32% in FY17E.
Exhibit 12: Domestic QoQ revenue trend (INR bn)
India
10
Y-o-Y %
30%
9
13
11
10
13
12
10
9
20%
19%
17%
14%
13%
11%
10%
7%
35%
30%
25%
20%
15%15%
10%
5%
0%
Q3FY15
Q2FY15
Q1FY15
Q4FY14
Q3FY14
Q2FY14
Q1FY14
Q4FY13
Q3FY13
Q2FY13
1%
Q1FY13
14
12
10
8
6
4
2
0

11 March 2015 | Page 26
Cipla Ltd.

CIPLA has witnessed a strong traction in the South African markets through its channel
partner Cipla Medpro (CM) which it acquired in H1FY15 for ZAR 4.5bn (USD 512mn) to
establish its own front end operations in the South African markets. CM is the 2 nd fastest
growing company in the SA market with a product basket comprising of anti-infectives,
ARV, oncology and respiratory products coupled with a mix of OTC products ranging
from allergy, asthma, etc. CM has grown by ~17% CAGR over FY09-14 period from ZAR
1.3bn in FY09 to ZAR 2.8bn in FY14 on back of strengthened product pipeline, staunch
focus on triple combination ARV products and entrance into high margin Oncology
products.
Exhibit 13: Cipla Medpro breakup in forms
Others OTC
7%
18%
Gx
75%
SA market contributed 14.4% in overall export revenues to CIPLA at INR 7.7bn in FY14
showcasing a sturdy growth of ~27% on YoY basis from INR 6.1bn in FY13. CIPLA has
signed an exclusive agreement with Teva for sales and distribution of the latters broad
product portfolio encompassing oncology, ophthalmologic, CNS, CVS, womens health
and specialty products enabling a complementary partnership giving access to ~70
molecules to over 200 over time enhancing its overall presence in SA markets and
facilitating CIPLAs ascension to the 2nd largest pharma company in SA.
We expect CIPLA to post a massive growth of ~31% CAGR over FY14-17E on
constant currency basis from ZAR 2.8bn in FY14 to ZAR 6.3bn in FY17E on back of
recent ARV tender approvals (1 amounting to ZAR 2bn for 3 years starting from
Apr-15 coupled with 2 other tenders from SA government in-tune of ZAR 345mn
and ZAR 280mn for 2.75 years and 2 years respectively), gradual pickup in
institutional business, distribution agreements with Teva and stronger product
offering in the SA markets.
CIPLA to post colossal growth

of 31% CAGR over FY14-17E
on constant currency basis
from ZAR 2.8bn in FY14 to ZAR
6.3bn in FY17E on back of
recent ARV tender approvals.
Exhibit 14: Cipla Medpros South African annual revenue (ZAR mns)
3,000
30%
27%
35%
30%
25%
20%
15%
10%
5%
0%
-5%
-10%
28%
22%
2,500
2,000
15%
1,500
FY11
2,297
-6%
2,164
2,778
FY14
1,768
FY13
1,447
FY12
1,262
FY10
500
FY09
1,000
Source:Company, Bonanza Research
Exhibit 15: Ciplas South African revenue annual trend (INR mn)
40,000
Revenue
134.7%
YoY%
30,000
20,000
150%
78.5%
26.9%
14.7%
22.2%
30.0%
28.3%
-5.8%
50%
10.0%
FY17E
FY16E
FY15E
FY14
FY13
FY12
FY11
FY10
0%
FY09
10,000
0
100%
-50%
11 March 2015 | Page 27
Cipla Ltd.

EU Markets on a brink of acceleration
CIPLA has been restructuring its EU operations, creating a massive sales force to
promote and drive its respiratory portfolio products comprising of gAdvair/gSeretide MDI
in the EU markets (USD 800mn opportunity with limited competition) with 10 more EU
countries to follow, which could act as a catalyst for growth. CIPLA has launched it
gAdvair pMDI at a ~50% discounted rate to the originator product in Germany (USD
40mn market), Sweden (USD 25mn market), Croatia, Czech and Slovakia, with
anticipation of a possible UK launch (~USD 400mn market) in Q1FY16. We expect
CIPLA to obtain revenues in tune USD 20mn/ USD 40mn from EU markets (excluding
UK) in H2FY15E/FY16E.
Exhibit 16: MDI inhalars market in EU
Exhibit 17: EU inhalers market (USD mn)

1600
Italy
4%
Spain
7%
Others
22%
1450
1400
Germany
7%
1200
1000
France
9%
800
800
600
400
UK
51%
200
180
230
140
100
0
Plumicort Ventolin
Servent
Advair
pMDI
Qvar
Total
CIPLA is also gearing up for a gSymbicort (USD 1.3bn in EU) launch post patent-expiry
in EU markets in FY16E. CIPLA intends to launch gSeretide (Serroflo) across all EU
markets by the end of FY16E, where currently uptake of Serroflo has been slower in
markets of Germany and Sweden. CIPLA won its first tender in German markets of
gSeretide (~50% discounted) and expects to win all major tenders in Germany (~12-18
months is the tender cycle) thereby capturing probably the entire pMDI market in
Germany.
We expect CIPLA to launch gAdvair pMDI in UK (~USD 400mn market) in Q1FY16E
becoming the first entrants in UK, triggering a revenue realization in-tune of ~USD 64mn
in FY16E on account of superior market share opportunity present in this untapped
therapeutic segment. The global market size of respiratory therapy is USD 35bn in CY13,
of this inhalers hold around ~50% (USD 17bn). The US and EU account for more than
80% of the total market size.
gAdvair pickup has not been

substantial in German and
Swedish markets, but we
expect the pick-up in sales to
kick start in FY16E with uptake
in tender business.
Exhibit 18: Global Inhalers market (USD mn)

12000
11100
10000
8000
6000
3500
4000
2000
2000
1000
800
1300
1500
Symbicort
(EU)
Symbicort
(US)
1000
0
Advair pMDI
(EU)
Advair DPI
(EU)
Advair pMDI
(US)
Advair DPI
(US)
Others
Total
We anticipate CIPLA to realize

revenues in tune of USD 64mn
through gAdvair pMDI launch
in UK in Q1FY16E on being the
first generic entrant in the UK
market.
Source:Bloomberg, Bonanza Research

11 March 2015 | Page 28
Cipla Ltd.
We expect CIPLA to grow at ~22% CAGR over FY14-17E period from INR 5.8bn in
FY14 to INR 10.5bn in FY17E, on back of a superior respiratory portfolio coupled
with gAdvair/gSeretide and gSymbicort launches, rationalization of distribution
model in EU, superior field force productivity and ramp-up of product pipeline
along EU region encompassing biosimilars, vaccines and oncology product
launches over FY14-17E.
Exhibit 19: Asthma/COPD global market
Other
SAMA+SABA
Asthma/COPD
2%
SAMA
7%
2%
SABA
13%
ICS
27%
LAMA
14%
LABA+ICS
33%
LABA
2%
LABA+LAMA
0%
Exhibit 20: ICS Market segmentation

Alvesco
(Dainippon/Su
novion)
1%
Exhibit 21: LABA + ICS market segmentation
Aerobid
Asmanex
(Forest)
(Merck)
0%
4%
Beclovent
0%
Flovent (GSK)
18%
Generics
60%
Symbicort
(AstraZenec
a)
28%
Pulmicort
(AstraZeneca)
6%
Advair (GSK)
64%
Qvar (Teva)
11%
Dulera
(Merck/Sche
ring-Plough)
8%
RoW Markets
CIPLA has grown at ~30% YoY from INR 19.3bn in FY13 to INR 25bn in FY14 enhancing
its contribution towards overall revenues from 23% in FY13 to 25% in FY14 on back of
strong traction witnessed in the RoW markets. The overall export formulations sales have
grown by ~17% CAGR over FY10-14 period from INR 29bn in FY10 to INR 54bn in
FY14.
CIPLA has presence in ~170 countries globally, with no front end models initially. The
management has guided towards increasing CIPLAs presence in ~35-40 markets,
increasing its pace of acquisition, establishing front-end models across major
geographies in a bid to rationalize distribution channels, leverage its superior capabilities
and drive growth through finer field force efficiency and ramp-up in products across all
the geographies. CIPLA holds strong position in Sri Lanka, Yemen, Iran, Myanmar,
South Africa, and Uganda creating front-end models in these regions, in order to capture
a superior market share infused with its philosophy of affordable healthcare and
medication to all.
We expect the RoW markets to

showcase a staggering run-rate
of ~24% CAGR over FY14-17E
from INR 25bn in FY14 to INR
47.5bn in FY17E.
On the African front, CIPLA remains optimistic given the positive trend witnessed in the
Institutional Business i.e. the generics tender business of HIV, malaria, reproductive
health coupled with an enticing opportunity present in the TB segment, where we believe
with the innate capabilities with CIPLA at hand can be capitalized efficiently creating
growth.
11 March 2015 | Page 29
Cipla Ltd.
CIPLA has formed a JV in Morocco with Cooper Pharma, holding 60% stake for an
investment of USD 15mn in the JV, in order to establish a front-end model in the
Northern African country of Morocco focusing exclusively on respiratory and neurology
products initially and couple of years down the line intends to institute a manufacturing
facility. CIPLAs Indore facility contributes 10%-15% of its overall export.
We expect the RoW markets to showcase a staggering run-rate of ~24% CAGR
over FY14-17E from INR 25bn in FY14 to INR 47.5bn in FY17E on back of
aggressive expansion into RoW markets through front-end models, ramp-up in
product portfolio across various therapeutic segments and finer field force
efficiency.
API segment to gradually turnaround

CIPLA has seen a temperate growth in API of ~7% over FY10-14 period from INR 5.8bn
in FY10 to INR 7.7bn in FY14 on account of higher internal captive consumption,
capacity constraints across API plants, notably reduced 3 rd party API business and lower
growth trajectory observed in the industry due to subdued demand. API segment of
CIPLA witness a massive traction demonstrating a YoY growth rate of ~29% from INR
6bn in FY13 to INR 7.7 in FY14, riding on the massive API supplies to its various channel
partners like Teva, Meda etc in US and other markets on account of the Patent Cliff.
Exhibit 22: API annual trend (INR bn)
9
8
7
6
5
4
3
2
1
0
FY10
FY11
FY12
FY13
FY14
API capacity constraints still hamper CIPLAs growth prospects along all geographies on
account of lagging capacity issues, migration of systems to SAP due to challenges faced
by their previous legacy systems and transition from a B2B to a frontend model. We
expect CIPLA to take a couple of quarters (~2-3 Quarters) to resolve these taxing issues
on account of extensive business transformation.
We expect CIPLA to exhibit a rugged API growth of ~11% CAGR over FY14-17E
from INE 7.7bn in FY14 to INR 10.5bn in FY17E on back of de-bottlenecking of its
API plants, multiple orders flowing in and aligning processes for integration in
order to condense complexity and eliminate capacity constraints.
Exhibit 23: Ciplas QoQ API trend
3
Export API
Y-o-Y %
36.6%
17.2%
2
2
9.4%
14.6%
-1.8%
-4.1%
-10.4%
-13.1%
-16.5%
-23.9%
-33.3%
Q3FY15
Q2FY15
Q1FY15
Q4FY14
Q3FY14
Q2FY14
Q1FY14
Q4FY13
Q3FY13
Q2FY13
Q1FY13
50%
40%
30%
20%
10%
0%
-10%
-20%
-30%
-40%
We expect CIPLA to exhibit a

rugged API growth of ~11%
CAGR over FY14-17E from INE
7.7bn in FY14 to INR 10.5bn in
FY17E.
11 March 2015 | Page 30
Cipla Ltd.
Strategic Alliances& Tie Ups: Inorganic expansion

drive
As part of its in-licensing strategy for EU markets, CIPLA has an agreement with USbased BioQuiddity to market the latters regional anaesthesia products in EU. The first
product OneDoseReadyfusOR (ropivacaine) for post-surgical pain is expected to be
launched in FY16E into the German market.
CIPLA has ventured into the vaccines segment though an alliance with Serum Institute of
India (SII) to market paediatric vaccines in Europe. While SII will manufacture paediatric
vaccines, CIPLA will seek approvals and market the products in European Medicines
Agencys (EMA) approval and market the products in Europe. The vaccines will be
manufactured in SIIs production facilities approved by WHO.
CIPLA has partnered with Hetero Labs to launch biosimilar drug under the Actorise brand
for treatment of anaemia caused due to chronic kidney disease.The collaboration stands
as a multi-partner co-marketing deal which offers CIPLA a license to make the drug
accessible to a wide number of patients in India. Actorise is a biosimilar of Darbepoetin
alfa (Biologic of Amgen) and is available in the pre-filled syringes (PFS) in the strengths
of 25 mcg and 40 mcg priced at Rs 1,500 and Rs 2,200 respectively, with a patients pool
totalling 100,000 patients per year.
CIPLA has entered into collaboration with Medicines for Malaria Venture (MMV) for the
development of rectal artesunate for pre-referral treatment of children with severe
malaria. The collaborations, established under the MMV-led "Improving Severe Malaria
Outcomes" project funded by UNITAID, aims to develop a rectal artesunate product for
submission to WHO prequalification. CIPLA will develop the product building on the
clinical studies led by TDR (Research and Training in Tropical Diseases), with an aim to
achieve pre-qualification by 2016.
CIPLA has signed an agreement with Salix Pharmaceuticals Inc granting Salix exclusive
worldwide rights excluding Asia (excluding Japan) and Africa under certain patent
applications in the Rifaximin Complexes patent family controlled by CIPLA. Salix is
required to make an upfront payment and additional regulatory milestone payments to
CIPLA in respect of the new license agreement regarding the Rifaximin Complexes
patent rights plus a royalty on net sales of products covered by the Rifaximin Complexes
patents licensed to Salix.
CIPLA has entered into a licensing agreement with Gilead (8 companies given this
license including RBXY, Hetero Labs, Strides Acrolab etc.) to amplify access to Hepatitis
C treatment through manufacturing and distribution of the fixed dose combination of
Ledipasvir/Sofosbuvir in 91 emerging countries including South Africa, India and Egypt
(with high incidence of Hepatitis C).
CIPLA has an extensive

assortment of strategic tie-ups
and partnerships like with
Meda (for Dymista), Salix
Pharma and Hep C licensing
with Gilead to propel its
growth going forward.
Exhibit 24: R&D as a % of sales

6.0%
5.1%
5.0%
4.5%
4.5%
FY09
FY10
4.1%
5.4%
5.0%
4.4%
4.0%
3.0%
2.0%
1.0%
0.0%
FY11
FY12
FY13
FY14
9MFY15
11 March 2015 | Page 31
Cipla Ltd.
Valuation and Outlook

Conscious de-focus on low margin business and rationalization of product portfolio,
CIPLA is de-risking its business model, acquiring distributors in markets with sound
presence and enhancing margins, focusing on the business growth and leveraging
capabilities across all verticals of geographies. CIPLA has also entered into multiple inlicensing deals and partnership agreements to boost its growth trajectory.
CIPLA with an array of gears in place to propel its growth over FY14-17E, is reliant on its
integration efforts ongoing across various acquired distribution businesss, ramping up of
ANDA pipeline in US, elevated dominance of its tender business (~25% of CIPLAs total
Export business) and debottlenecking of its API facilities flooded with capacity
constraints. We assign a BUY rating to CIPLA valuing its base business at a 21x
FY17E EPS of INR 45.8 (including base EPS of INR 36.4 and key ANDA
opportunities at INR 9.4) to arrive at a TP of INR 962 with a potential upside of 34%.
We expect CIPLA to demonstrate a whopping growth progression of 21.6% CAGR
over FY14-17E from INR 101bn in FY14 to INR 182bn in FY17E with EBITDA
margins enhancing by 390bps from ~21% in FY15E to ~25% in FY17E as in our
opinion improvement in margins will take place steadily as effects of integration
and expansion drive will be inlayed from FY16E onwards.
Exhibit 25: PE band of CIPLA
1400
1200
1000
800
600
Price
18x
20x
22x
24x
26x
400
200
Jan-16
Oct-15
Jul-15
Apr-15
Jan-15
Oct-14
Jul-14
Apr-14
Oct-13
Jan-14
Jul-13
Apr-13
Jan-13
Jul-12
Oct-12
Apr-12
Jan-12
Oct-11
Jul-11
Apr-11
Jan-11
Oct-10
Jul-10
Apr-10
Key Catalysts:
Earlier than expected traction in the US markets on back of unfolding of ANDAs

filings and a successful frontend model
Earlier than expected gAdvair/ gSeretide in US markets.
Earlier than expected turnaround of the API section and robust traction in the IPM.
Holdup in gAdvair launch in UK

and other prominent EU markets
can cause a downside to our
estimates.
Key Concerns:
Adverse foreign exchange fluctuation, especially the depreciation of ZAR, can cause
immense downside to our estimates.
Sluggish growth in the IPM and slow uptick in gAdvair in EU markets of Germany
and Sweden can upset our estimates.
A potential holdup in the launch of gAdvair/ gSeretide due to interchangeability
issues in the EU and US markets could hamper CIPLAs growth prospects.
11 March 2015 | Page 32
Cipla Ltd.
Financials
P&L
P&L
Ratio Analysis
FY14
FY15E
FY16E
FY17E
Gross Sales
102,175
112,707
142,757
183,865
Net Sales
101,004
111,324
141,004
181,608
Expenditure
79,673
90,842
112,995
139,532
Operating Profit (including OI)
21,331
20,481
28,009
42,076
OI
2,654
2,723
2,793
2,866
EBIDTA
23,984
23,204
30,803
44,942
Interest
1,457
1,479
1,501
1,524
Depreciation
3,727
3,950
4,187
4,438
18,800
17,775
25,114
38,980
PBT
Tax
4,634
4,444
6,279
9,745
PAT
14,167
13,331
18,836
29,235
17.3
16.6
23.5
36.4
EPS
Balance Sheet
Balance Sheet (in INR mn.)
RATIOS
FY14
Shares
802.9
EPS (in INR.)
17.3
Adj. EPS (in INR.)
17.3
DPS (in INR.)
2
CEPS ((in INR.)
22.3
Book Value (in INR.)
125.2
Adj. BV (in INR.)
125.2
Effective Tax Rate (in%)
24.6%
Cash Flow/Share (in INR.)
19.5
PATM%
13.9%
ROE%
14.9%
EBIDTAM%
23.7%
ROA%
11.3%
OPM%
19.8%
Total Debt (in INR. mn)
12,479
P/E Ratio
42.
P/BV Ratio
5.8
PEG Ratio
1.9
FY14
FY15E
FY16E
FY17E
Gross Block
86,763
95,706
121,222
156,130
Adjustments
Net block
64,965
73,472
92,763
120,841
Net Profit
3,971
4,381
5,549
7,147
15,524
17,124
21,690
27,936
3,114
3,435
4,351
5,604
28,953
31,937
40,452
52,100
1,752
2,556
3,175
4,145
355
1,928
2,127
2,694
Long Term Loans and Advances

Current Investment
Inventories
Cash and Bank
Other Current Assets
Short Term loan and advances
5,951
6,565
8,315
10,709
18,078
22,898
29,492
3,536
3,901
4,941
6,364
145,392
164,350
207,493
268,618
1,606
1,606
1,606
1,606
Total Reserves
98,681
111,548
128,778
156,407
Long Term Borrowing
20,281
22,371
34,835
51,367
Trade Payable
9,795
10,805
13,686
17,627
Other Current Liabilities
4,087
4,508
6,974
10,273
Short Term Borrowing
9,105
10,043
17,221
25,680
Short Term provisions
2,649
2,922
3,701
4,767
Capital Work in Progress

Total Assets
LIABILITIES
Share Capital
Minority Interest
496
547
693
892
146,699
164,350
207,493
268,618
Total Liabilities
Cash Flow Tables

PBT
16,389
Sundry Debtors
FY16E
FY17E
802.9
16.6
16.6
2
21.5
140.9
140.9
25.0%
14.9
11.8%
12.5%
20.8%
9.3%
17.1%
13,550
43.0
5.3
4.3
802.9
23.5
23.5
2
28.7
162.4
162.4
25.0%
19.9
13.2%
15.5%
21.8%
10.7%
18.6%
28,162
30.7
4.2
1.2
802.9
36.4
36.4
2
41.9
196.8
196.8
25.0%
30.1
15.9%
20.3%
24.7%
12.8%
22.0%
46,272
20.0
3.2
0.7
FY14
FY15E
FY16E
FY17E
18,800
17,775
25,114
38,980
5,528
4,849
4,954
5,016
Cash Flow
ASSETS
Long term investment
FY15E
24,328
Changes in WC
(5,619)
Cash Flow after changes in
WC
18,710
Cash from Operating
Activities
15,627
Cash Flow from Investing
Activities
(12,499)
Cash from Financing
Activities
(2,656)
Net Cash Inflow/Outflow
472
Opening Cash & Cash
Equivalents
1,430
Closing Cash & Cash
Equivalent
1,752
22,624
30,068
43,996
(6,198)
(7,850)
(10,111)
16,426
22,218
33,885
11,983
15,939
24,140
(13,787)
(17,463)
(22,491)
(1,847)
10,402
15,121
(3,652)
8,878
16,770
1,752
(1,900)
6,978
(1,900)
6,978
23,748
11 March 2015 | Page 33
Cipla Ltd.
Company Profile
Cipla is a global pharmaceutical company which uses cutting edge technology and
innovation to meet the everyday needs of all patients. For more than 70 years, Cipla has
emerged as one of the most respected pharmaceutical names in India as well as across
more than 150 countries. Ciplas portfolio includes over 1500 products in various
therapeutic categories with one quality standard globally. Whilst delivering a long-term
sustainable business, Cipla recognizes its duty to provide affordable medicines. Ciplas
emphasis on access for patients was recognized globally for the pioneering role played in
HIV/AIDS treatment as the first pharmaceutical company to provide a triple combination
anti-retroviral (ARV) in Africa at less than one dollar a day and thereby treating many
millions of patients since 2001. Ciplas research and development focuses on developing
innovative products and drug delivery systems and has given India and the world many
firsts for instance Triomune. In a tightly regulated environment, the companys
manufacturing facilities have approvals from all the main regulators including US FDA,
UKMHRA, WHO, MCC, ANVISA, and PMDA which means the company provides one
universal standard both domestically and internationally.
11 March 2015 | Page 34
India Research
11 March 2015
Sun Pharmaceutical Industries Ltd|

INITIATING COVERAGE
BUY
Bloomberg Code: SUNP:IN | Reuters Code: SUN.BO
Amalgamation: Key to limitless opportunities
Pharmaceuticals
Sun Pharma (SUNP)

SUNP has structured growth drivers in place to propel its growth from FY16E onwards
spanning enhanced presence in the RoW markets of Russia, Brazil, Africa, and developed
markets of Europe and Japan; access to an investigational drug (in-licensing from Merck) and
a solid NCE pipeline (SPARC NCE pipeline plus Synriam from RBXY for malaria). We expect
SUNP to post a revenue growth of 15% CAGR over FY14-17E from INR 160bn in FY14 to INR
244bn in FY17E. We assign a BUY rating to the stock valuing it at 9% premium to its peers at
24x FY17E EPS of INR 49.8 (post-merger base business EPS at INR 41.9 and ANDA
opportunities at INR 7.9) to arrive at a TP of INR 1,196 with a potential upside of 18%.
SUNP enjoys a predominantly strong position in the US derma market through superior
margins and sales from its subsidiary Taro. SUNP has 139 pending ANDAs with FDA
including high value launches such as gNamenda, gNexium, gAbilify, gCrestor, gLunesta,
gGlumetza, gLexapro, gCoreg CR, gOnglyza etc. Post-merger with RBXY, Sun will have a
total pending ANDAs at 183 including launches for gOpana, gPrecedex, gVimpat, gXyrem
etc. We expect SUNP to generate revenues in tune of USD 2.4bn in FY17E from USD 1.6bn
in FY14 on a constant currency basis showcasing a strong growth of 14% CAGR over FY1417E period translating to INR 144bn in FY17E from INR 97.8bn in FY14. Post-merger with
RBXY we expect the integrated US business to post sales of INR 161bn in FY16E and INR
185bn in FY17E.
Current Price:
INR 1,012
Target Price:
INR 1,196
Expected Upside (%)
18%
Stock Details
Bloomberg Code
SUNP: IN
Reuters Code
SUN.BO
Shares O/S (mn)
2071.2
M Cap (INR bn)
2,096
52 week H/L (INR)
1056 / 553

Promoter Group
63.65%
FII
22.76%

DII
SUNP currently occupies the 2nd position in the IPM. We expect SUNPs IPM market to grow
at 19.3% CAGR over FY14-17E from INR 36.9bn in FY14 to INR 62.6bn in FY17E on back of Others
strong demand witnessed in the IPM, deeper presentation in the rural markets and a wider
product basket offering to increase and sustain the market share. Post-merger with RBXY, we
believe, SUNP to become the largest generics player in the IPM towering at 9.2% market
share in the INR 830bn IPM market (FY14 estimate), with revenues of the amalgamated entity Stock Performance Chart
soaring towards INR 84bn in FY16E and INR 98bn in FY17E.
FY16E
FY17E
CAGR (%)
160
183
342
392
NA
35
39
83
101
NA
30%
24%
24%
26%
NA
RoE %
23.2%
30.2%
28.5%
28.2%
NA
28.8
15.2
34.6
42
NA
BV (INR)
89
110
129
154
NA
P/E (x)
67
34
30
25
NA
Mar-15
FY15E
Jan-15
Stock Performance
Return (%)
1 Mth
6 Mths
1 Yr
Absolute
11%
27%
75%
Relative*
(2)%
2%
6%
Analyst
FY14A
PATM%
EPS (INR)
-20%
Nov-14
PAT (INR bn)
0%
Sep-14
Net Sales(INR bn)
20%
Jul-14
Year
40%
May-14
Key Financials
BSEHC
60%
Mar-14

SUNP has in place an assortment of strategic partnerships jacketing, radiopharmaceuticals,
ophthalmic gene-controlled therapeutic agreements plus an innovator in-licensing agreement
for plaque psoriasis which can fortify SUNPs grip globally in a long haul.
8.98%
80%
Jan-14

SPARC has an arsenal of products lined up for the US markets developed indigenously with
SPARCs own technology platform capable of generating peak sales potential in range of USD
255-450mn. We see a moderate growth in the API segment on account of integration of RBXY
units and temporary bottleneck at its certain facilities. With the integration of SUNP and RBXY,
the combined entity will have 10 API plants at its behest and we expect the combined entity to
post a massive API turnover amounting to INR 16.3bn in FY17E.
SUNP
100%
Nov-13

RXBY acquisition provides SUNP with a long term growth platform as it provides SUNP with
increased presence in RoW markets leveraging their portfolios dependence to RoW markets
from a large US base cushioning SUNP from any adverse impacts it may face in the US
genericspace. We believe with the EBITA dilutive acquisition of RXBY, SUNPs EBITDA
margins would come down to 30% in FY16E. We believe the main focus for acquisition is the
potential entry into the emerging nations such as Latam, Africa and Asia Pacific, as RBXYs
network gives SUNP access to derma markets of Brazil and entry into EU and Japanese
markets henceforth constructing a balanced operational portfolio for SUNP. We expect SUNP
to clock revenues in range of INR 81bn in FY16E and INR 93bn in FY17E post-merger with
RBXY from RoW markets
4.61%
Hemanshu Srivastava
Tel: 022-30863778
Sun Pharmaceutical Industries Ltd.
Sun Pharmaceuticals Industries Ltd.(SUNP)

SUNP possesses a robust US portfolio capable of higher leverage, a sound management at the
helm capable of turning around stressed businesses, long-term growth drivers in form of RBXYs
RoW markets in place, a healthy domestic business and opportunities in form of Mercks inlicensed psoriasiss investigational compound. SUNP has structured growth drivers in place to
propel its growth from FY16E onwards spanning enhanced presence in the RoW markets of
Russia, Brazil, Africa, and developed markets of Europe and Japan; access to an investigational
drug (in-licensing from Merck) and a solid NCE pipeline (SPARC NCE pipeline plus Synriam from
RBXY for malaria).
We expect SUNP to post a revenue growth of 15% CAGR over FY14-17E from INR
160bn in FY14 to INR 244bn in FY17E on account of stronger US operations and
enhanced focus on RoW markets and post a PAT growth of 29% CAGR over FY14-17E
from INR 39bn in FY14 to INR 83bn in FY17E. Post-merger, we believe the combined
entity to post revenue of INR 392bn and a PAT of INR 102bn in FY17E.
We assign a BUY rating to the stock valuing it at 9% premium to its peers at 24x FY17E
EPS of INR 49.8 (post-merger base business EPS at INR 41.9, ANDA opportunities at
INR 6.9 and GSKs opiates business to add INR 1) to arrive at a TP of INR 1,196 with a
potential upside of 18%.
11 March 2015 | Page 36
Business Mix
SUNP derives its revenues from 3 major markets, US, Indian and RoW. SUNP has
grown at a whopping 42% CAGR over FY10-14 from INR 39.7bn in FY10 to INR 162bn
in FY14 on back of a splendidly robust US operations which grew at a colossal 72.5%
CAGR over FY10-14 period coupled with rampant launches and strategic acquisitions in
the US markets; structurally sound IPM operations and diversified RoW base in Mexico,
Russia, Brazil etc. SUNP has produced astonishing EBITDA margins of 40%+ over
FY10-14 period.
Exhibit 1: Annual geographic trend of SUNP
Exhibit 2: Revenue growth trajectory of SUNP
70%
46%
180,000
60%
60%
59%
54%
50%
50%
42%
39%
40%
43%
26%
24%
23%
20%
160,000
40%
140,000
30%
20%
100,000
India
30%
50%
42%
40%
120,000
US
36%
30%
40%
10%
80,000
RoW
60,000
API
0%
-9%
40,000
10%
-10%
-20%
-20%
20,000
0%
FY10
FY11
FY12
FY13
FY14
9MFY15
-30%
FY10
FY11
FY12
FY13
FY14
9MFY15
Exhibit 3: Quarterly revenue segmentation of SUNP

900
800
700
600
500
400
300
200
100
0
API
RoW
Indian
Q3FY15
Q2FY15
Q1FY15
Q4FY14
Q3FY14
Q2FY14
Q1FY14
Q4FY13
Q3FY13
Q2FY13
Q1FY13
US
Exhibit 4: Geographic spread of FY14 Sales of SUNP
12000
API FY14
5%
7%
6.8%
8000
7%
6000
4000
6%
6.4%
6%
6.2%
6%
9MFY15
FY14
FY13
5.8%
FY12
0
FY11
6.0%
R&D Exp.
6.6%
6%
2000
FY10
US
60%
7.2%
7.0%
10000
RoW
12%
India
23%
Exhibit 5: Annau R&D Exp. trend Of SUNP
%R&D to Sales
11 March 2015 | Page 37

SUNP enjoys a predominantly strong position in the US derma market through superior
margins and sales from its subsidiary Taro. 9MFY15 sales from Taro stand at USD
619mn with consistent price hikes taken on its derma portfolio on account of absence of
competition and has witnessed continuous shortfall in volumes for the past couple of
quarters.
SUNP has filed 493 ANDAs with 354 ANDAs approved as of H1FY15 with US FDA and
has ~139 pending ANDAs with US FDA including high value launches such as
gNamenda, gNexium, gAbilify, gCrestor, gLunesta, gGlumetza, gLexapro, gCoreg CR,
gOnglyza etc. Post-merger with RBXY, Sun will have a total pending ANDAs at 184
including launches for gOpana, gPrecedex, gVimpat, gXyrem etc.
Exhibit 6: Drug Filing and Approvals obtainted in FY14
600
Filed
500
Approved
377
400
300
200
449
489
Taro
21%
397
207
177
478
Exhibit 7: Percentage of Pending ANDAs
311
225
344
358
250
100
Sun
65%
9MFY15
FY14
FY13
FY12
FY11
84
FY10
FY09
69
0
Caraco &
URL
14%
SUNP has enhanced its revenue contribution from US operations from 28% in FY10 to
60% in FY14 overall revenues showcasing a colossal growth of 72.5% CAGR over FY1014 from INR 11bn in FY14 to INR 97.8bn in FY14 on back of a superb turnaround of Taro
Pharma in US whose derma portfolio has been a foremost growth driver for SUNP
(growing at 18% CAGR over FY10-14 period from USD 356mn in FY10 to USD 758mn in
FY14) and superior growth in SUNPs own US portfolio on back of extensive launches of
high value high margin generics with low competition and deeper penetration. SUNPs
acquisitions of DUSA, URL and Caraco have also panned out accordingly aiding into the
robust growth it has witnessed in the US markets.
Exhibit 8: US Therapywise ANDA approvals till FY14
Urology
Cough/Cold
Metabolism
Oncology
Allergy
Other
Pain
CVS
CNS
Skin
0
20
40
60
80
100
11 March 2015 | Page 38

Exhibit 9: Quaterly ANDA data
Exhibit 10: SUNPs annual US reveneus (INR mn)
16
120,000
14
14
ANDA Filed
12
10
6
4
2
99
10
9
9
10
Approved
80,000
61,357
6
4
60,000
4 44
22,538
20,000
Q3FY15
Q2FY15
Q1FY15
Q4FY14
Q3FY14
Q2FY14
Q1FY14
Q4FY13
Q3FY13
Q2FY13
34,716
40,000
0
Q1FY13
97,844
100,000
11,062
0
FY10
FY11
FY12
FY13
FY14
SUNP has signed an agreement with Novartis for Gleevec (USD 2bn in brand sales),
according to which SUNP will launch its gGleevec in Feb 1, 2016. We expect gGleevec
to generate a potential revenue of USD 145-150mn in 14 months period (from Q4FY14
FY17E) on account of limited competition. We believe SUNP has an FTF for Coreg CR
(USD 300mn in brand sales) for Apr-16, which can potentially generate revenues in tune
of USD 48mn in FY17E. SUNP has a rich ANDA pipeline comprising of gMultaq (USD
450mn in brand sales), gOpana (USD 400mn in brand sales), gVimpat (USD 640mn in
brand sales), gOnglyza (USD 733mn in brand sales), gAbilify (USD 4.5bn in brand
sales), gCrestor (USD 7.50bn in brand sales), gNamenda (USD 2.2bn in brand sales)
and gLunesta (USD 600mn in brand sales). We expect gNexium (USD 4.4bn market)
opportunity to arrive in H2FY16E for SUNP which can amass only USD 21-25mn in
revenues in FY16E capturing only 10% market share.The innovator derma market is
highly competitive with branded sales at ~USD 800mn in FY14.
Exhibit 11: Taro QoQ revenues (in USD mn)
300
250
200
150
100
50
0
Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15
QoQ Sales (in $mn)
Profit
We expect SUNP to generate revenues in tune of USD 2.4bn in FY17E from USD
1.6bn in FY14 on a constant currency basis showcasing a strong growth of 14%
CAGR over FY14-17E period translating to INR 144bn in FY17E from INR 97.8bn in
FY14. Post-merger with RBXY we expect the integrated US business to post sales
of INR 161bn in FY16E and INR 185bn in FY17E.
SUNP has high value and niche

product launches in form of
gGleevec, gNamenda, gCrestor,
gOnglyza, gAbilify etc targeted
for the US margets.
11 March 2015 | Page 39

Exhibit 12: ANDA pipeline (Market size in USD mn)
Drugs
Market Size
Release Date
FTF
Nexium
4,200
FY16
No
Crestor
7,560
FY16E
No
Abilify
4,430
Unknown
No
246
Unknown
No
2,500
FY16
No
Taxotere
10
Unknown
No
Valcyte
440
Unknown
No
Prandin
Cymbalta
Namenda
2,200
Unknown
No
Gleevec
2,000
Feb 1 2016
No
Lunesta
600
Unknown
No
Eloxatin
Unknown
No
Lexapro
5,124
Unknown
No
Glumetza
100
Aug-16
No
Coreg CR
300
Apr-16
YES
Alimta
15
Jan-16
No
Multaq
450
Jul-16
No
Onglyza
733
Oct-16
No
Opana ER
402
Apr-16
No
Opana ER CRF
152
Nov-15
No
Precedex
151
Jul-16
No
Vimpat
643
26-Nov-15
No
Xyrem
Dec-16
No
11 March 2015 | Page 40

SUNP domestic operations contributed ~23% in FY14 down from ~46% contribution in
overall revenues in FY10 growing at 19.2% CAGR over FY10-14 period on back of
sturdy domestic operations focussing mainly on chronic segment rather than the acute
segment. SUNP has increased its market share in the IPM from 3.7% in FY10 to 5.4% in
FY14 and currently occupies the 2nd position in the IPM. With more leveraging towards a
well-diversified business model encompassing wider basket of markets and reducing the
risks arising from specific markets, SUNP has been predominantly focussing on RoW
markets.
Top 10 brand of SUNP; contribute ~20% to its IPM revenues. SUNP unlike its peers does
not possess a biosimilars portfolio.
Exhibit 13: IPM market share over FY10-9MFY15
Exhibit 14: SUNP Indian annual revenues (in INR mn)

36,918
40,000
6.0%
35,000
5.0%
30,000
4.0%
20,000
29,657
FY12
FY13
23,800
25,000
3.0%
29,154
18,301
15,000
2.0%
10,000
1.0%
5,000
0.0%
0
FY10
FY11
FY12
FY13
FY14
9MFY15
FY10
FY11
FY14
Exhibit 15: IPM therapeutic breakup
5%
India Formulations - Therapeutic Brkup

Neuro-Psychiatry
Cardiology
Gastroentrology
Diabetology
Gynecology & Urology
Musculo-Skeleton & Pain
Opthalmology
Antiasthamatic
Others
4% 7% 0%
5%
27%
8%
11%
19%
14%
We expect SUNPs IPM market to grow at 19.3% CAGR over FY14-17E from INR
36.9bn in FY14 to INR 62.6bn in FY17E on back of strong demand in the IPM,
deeper presentation in the rural markets and a wider product basket offering to
increase and sustain the market share. Post-merger with RBXY, we believe, SUNP
to become the largest generics player in the IPM towering a 9.2% market share in
the INR 830bn IPM market (FY14 estimate), with revenues of the amalgamated
entity soaring towards INR 84bn in FY16E and INR 98bn in FY17E.
Post-merger with RBXY, we

believe, SUNP to become the
largest generics player in the
IPM towering a 9.2% market
share.
Exhibit 16: Indian QoQ sales (in INR crs)

1,400
1,152
1,200
949
1,000
811
789
800
783
947
947
1,150
992
849
590
600
400
200
0
Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15

11 March 2015 | Page 41
RBXY Amalgamation a key to unlock potential

RXBY acquisition provides SUNP with a long term growth platform as it provides SUNP
with increased presence in RoW markets leveraging their portfolios dependence to RoW
markets from a large US base cushioning SUNP from any adverse impacts it may face in
the US genericspace. Although RXBY acquisition is EBITDA margin dilutive in nature
where SUNP can extract short term benefits in terms of cost synergies (in tune of USD
250mn over 3 years as per the managements guidance). Our valuation does not fully
capture the benefits which will fully amass from FY18E/FY19E onwards.
Exhibit 17: RBXYs RoW sales (in USD mn)
Exhibit 18: RBXYs annual RoW sales (in INR mn)
100
90
80
70
81
68
68
72
79
82
72
71
25,000
89
84
72
19,084
20,000
15,271
60
50
15,000
40
30
20
10,000
10
0
5,000
11,124
6,444
Q3FY15
Q2FY15
Q1FY15
Q4FY14
Q3FY14
Q2FY14
Q1FY14
Q4FY13
Q3FY13
Q2FY13
Q1FY13
4,883
0
FY10
FY11
FY12
FY13
FY14
RBXY has faced regulatory qualms around its US business (30% of overall revenue).
Furthermore RBXY has beenout of the market for numerous products for ~ 5 years due
to its manufacturing issues. Henceforth, we witness a low traction in its US portfolio as
visibility remains overshadowed.
We believe that an enriched concentration on RoW markets could present an immediate
opportunity for SUNP, with enhanced focus on RBXYs predominant anti-infective
portfolio over the next 2-3 years.
Following the acquisition of RBXY, SUNP will occupy the leadership position in the IPM
markets having ~9.2% market share and sales in tune of INR 84bn in FY16E and INR
98bn in FY17E. RBXYs IPM portfolio includes a hefty chunk of acute therapies and OTC
segment (encompassing brands such as Revital and Volini grossing INR 2.8bn and INR
2bn in sales in FY14 respectively) as compared to SUNPs massive chronic portfolio,
having minimal correlation and overlaps. RBXYs acquisition provides SUNP with a
diversified strong base complementing SUNPs IPM markets forte and providing leverage
to SUNP to brace RXBYs robust rural presence, institute a stronger OTC and hospital
segment and enable SUNP to seize the leadership spot in 13 specialty segments in the
IPM.
Exhibit 19: RBXYs IPM therapeutic segments
Respiratory
3%
Anti-Diabetes
2%
CNS
4%
GI
7%
Anti- infective
Others
8%
Anti- infective
29%
Derma
9%
Vitamin/Mineral
11%
Pain
SUNPs EBITDA margins would

come down to 29.5% in FY16E
from 42% in FY15E and 31% in
FY17E as RBXYs margins will
enhance to 11.3% in FY16E from
7% in FY15E.
CVD
Vitamin/Mineral
Pain
14%
CVD
13%
Derma
GI
CNS
Respiratory
Anti-Diabetes
Others

11 March 2015 | Page 42

SUNP will solidify its US derma portfolio upon acquisition through creating an enhanced
coverage in acne, anti-fungal and actinic keratosis segments as well as will sharpen
SUNPs overall ANDA pipeline providing other high value FTF opportunities.
We believe with the EBITA dilutive acquisition of RXBY, SUNPs EBITDA margins
would come down to 29.5% in FY16E from 42% in FY15E and 31% in FY17E as
RBXYs margins will enhance to 11.3% in FY16E from 7% in FY15E.
RoW markets of RBXY encapsulate markets of Latam (2% of overall revenue in FY14),
AMEA (10% of overall revenue in FY14), Eastern Europe (16% of overall revenues in
FY14), APAC (6% of overall revenues in FY14) and Western Europe (9% of overall
revenues in FY14), whereas SUNPs RoW markets are spread over Mexico, Brazil,
China, South Africa and CIS region. SUNP has showcased a tremendous growth in its
RoW markets at ~41% CAGR over FY10-14 from INR 4.8bn in FY10 to INR 19bn in
FY14 and RBXY on the contrary has showcased a minimal growth of ~14% from INR
34bn in FY13 to INR 39bn in FY14 (excluding Western EU operations).
Exhibit 20: Eastern EU revenue spread of RBXY in FY14
Other CIS
1%
Poland
8%
Exhibit 21: Western EU revenue spread of RBXY in FY14

Others (incl
Spain,
Belgium,
Finland,
Netherlands,
Sweden)
19%
Ukraine
14%
Germany
21%
Romania
44%
Italy
21%
France
26%
Russia
33%
UK
13%
Exhibit 22: APAC revenue spread of RBXY in FY14
Exhibit 23: AMEA revenue spread of RBXY in FY14
Malaysia
19%
Others
42%
Australia
25%
Others
50%
Myanmar
14%
Nigeria
11%
CCI clearance for SUNP and RBXYs merger comes with the criterion of divestment of 6
brands aimed to check monopoly. The combined value of the brands identified to be
divested is INR 1,380mn as on Oct MAT 2014 where SUNP has to divest brands valued
at INR 830mn and RBXY to divest brands valued at INR 550mn.
South Africa
39%
The combined entity has to

divest 7 brands worth INR 1.4bn
in
compliance
with
CCIs
request.
11 March 2015 | Page 43

Exhibit 24: Quarterly geographic revenue spread of RBXY (INR bn)
25.0
US
India
Western EU
Russia, CIS & EE
RoW
API
20.0
15.0
10.0
5.0
0.0
Q1FY13Q2FY13Q3FY13Q4FY13Q1FY14Q2FY14Q3FY14Q4FY14Q5FY14Q1FY15Q2FY15Q3FY15
Exhibit 25: Brands divestment for SUNP-RBXY Merger

Brands
Company to divest
Tamsulosin + Tolterodine
SUNP
Rosuvastatin + Ezetimibe
RBXY
Leuprorelin
SUNP
Terlipressin
RBXY
Olanzapine + Fluoxetine
RBXY
Levosulpiride + Esomeprazole
RBXY
Olmesartan + Amlodipine + HCTZ
RBXY
Source: AIOCD AWACS, Bonanza Research
Our assessment of the merger:
SUNP can channelize its US operations through its Halol and Taro facilities and
streamlining operations effectively to reduce the impact of RXBYs extremely
stressed assets of Taonsa, Paonta Sahib and Dewas facility, by structurally utilizing
them for exports into the semi-regulated and non-regulated markets of Latam,
African nations etc.
Overlapping R&D activities can be subjectively capitalized through discontinuation,
withdrawal etc.
Retention of top management still remains an issue with many executives exiting the
company.
Collateral damage borne by RXBY on its Goodwill remains afresh and can still cause
a massive blow to SUNPs operations.
SUNP opens doorway into Australasian markets and Western European markets
where RXBY has a strong retail chain presence through constant supply chain
agreements.
Establishes entry into ARV segment and anti-malarial portfolio through RXBYs
strong footprint and NCE segment (Synriam NCE-anti-malarial drug). Synriam with
its sturdy 1st year results in the Indian Markets is poised to be launched in the African
markets.
SUNP with minimum overlaps

and correlation amongst its
portfolio and RBXYs will benefit
~USD 250mn in synergies over a
period of 3 years.
11 March 2015 | Page 44

Exhibit 26: Market share of SUNP (post-merger) in FY17E
RoW
24%
API
4%
US
47%
US
India
India
25%
RoW
API
Exhibit 27: Market share of SUNP (post-merger) in FY17E

SUNP & RXBY Merged
FY16E
FY17E
Sales
342,515
392,378
Expenditure
246,418
275,170
5,000
5,000
Net Expenditure
241,418
270,170
OP
Synergies
101,097
122,208
EBITDA M
29.5%
31.1%
Depreciation
10,302
11,118
Other Income
8,479
9,146
Interest
3,945
4,048
EBT
95,329
116,187
Tax
11,846
15,165
Tax Rate
12.4%
13.1%
PAT
83,482
101,022
No. of Shares
2,410
2,410
EPS
34.6
41.9
24.4%
25.7%
PATM%
SUNP-RBXY post-merger entity

will post an enormous RoW
turnover amounting to INR 81bn
in FY16E and INR 93bn in
FY17E.
We believe the main focus for acquisition is the potential entry into the emerging
nations such as Latam, Africa and Asia Pacific, as RBXYs network gives SUNP
access to derma markets of Brazil and entry into EU and Japanese markets
henceforth constructing a balanced operational portfolio for SUNP. We expect
SUNP to clock revenues in range of INR 81bn in FY16E and INR 93bn in FY17E
post-merger with RBXY from RoW markets with SUNPs RoW markets growing at
17.5% CAGR and RBXYs RoW markets growing at 10.1% CAGR over FY14-17E.
11 March 2015 | Page 45
Other Segment to complement growth

SPARCling Sensation
SPARC, SUNPs R&D arm focuses primarily on ophthalmology, oncology, CNS and
respiratory therapies. SPARC has an astounding portfolio comprising of NDDS (GRS,
WMC, NTP, SMM, DPI, GFR and biodegradable injections/implants) and NCE (oncology
and anti-inflammatory) molecules. SPARC has an arsenal of products lined up for the US
markets developed indigenously with SPARCs own technology platform comprising of
products such as Latanoprost BAK Free Ophthalmic solution (USD 25-50mn sales
potential), Levetiracetam ER (USD 30-50mn sales potential), Baclofen GRS (USD
100mn sales potential) and PICN (USD 100-250mn sales potential) with a clubbed peak
sales potential in range of USD 255-450mn from all of the above.
Exhibit 28: SPARC Product pipeline
Exhibit 29: US Glaucoma market
Exhibit 30: US Prostaglandin market
Miotics
1%
Combinations
14%
Alfa agonists
16%
Tafluprost
1%
Prostaglandins
55%
Travoprost
18%
Bimatoprost
18%
Latanoprost
63%
Carbonic
anhydrase
inhibitors
7%
Beta Blockers
7%


11 March 2015 | Page 46
Moderate growth seen in the API segment

SUNP has suffered some supply constraints at its API facilities on account of integration
of RBXY units and temporary bottleneck at its certain facilities. With the integration of
SUNP and RBXY, the combined entity will have 10 API plants at its behest. We expect
API sales from SUNP to clock a growth of 5.7% CAGR over FY14-FY17E from INR
81.bn in FY14 to INR 9.6bn in FY17E and RXBYs API facility to witness a growth
6% CAGR over FY14-FY17E from INR 5.7bn in FY14 to INR 6.7bn in FY17E. The
combined entity will post a massive API turnover amounting to INR 15.3bn in FY16E and
INR 16.3bn in FY17E on account of superior operational efficiencies from the 10 API
plants and a superlative growth platform.
Exhibit 31: Quarterly API sales (in Crs)
Exhibit 32: Annual API sales
250
200
200
176
222
212
209
174
9,000
210
193
170
SUNP-RBXY post-merger entity

will post a massive API turnover
amounting to INR 15.3bn in
FY16E and INR 16.3bn in FY17E.
181
174
8,148
7,549
8,000
7,000
150
6,000
6,147
5,491
5,212
FY10
FY11
5,000
100
4,000
50
3,000
2,000
Q3FY15
Q2FY15
Q1FY15
Q4FY14
Q3FY14
Q2FY14
Q1FY14
Q4FY13
Q3FY13
Q2FY13
Q1FY13
1,000
0
FY12
FY13
FY14
11 March 2015 | Page 47
Strategic Alliances and Tie-Ups: Engineering a promising

future
In-licensing agreement with Merck
SUNP has shown its intention to move away from a generic dependent platform in US
with the licensing agreement for Tildrakizumab. Sun Pharma and Merck & Co. Inc.
entered into an exclusive worldwide licensing agreement for Mercks investigational
therapeutic antibody candidate, tildrakizumab, (MK-3222), which is currently being
evaluated in Phase 3 registration trials for the treatment of chronic plaque psoriasis.
Under terms of the agreement, Sun Pharma will acquire worldwide rights to tildrakizumab
for use in all human indications from Merck in exchange for an upfront payment of USD
80mn, milestone payments and tiered royalties. Merck will continue all clinical
development and regulatory activities, which will be funded by Sun Pharma at an amount
of USD 250mn over a period of 5 years and will be expensed through P&L. Upon final
approval for the product, Sun Pharma will be responsible for all subsequent activities.
SUNP has highlighted the market for psoriasis indication to be USD 6-7bn. Pharma
major globally have also constructed a strong psoriasis investigational compounds
pipeline with Novartis, Amgen and Eli Lillys product targeting the IL-17 pathway whereas
SUNP Merck compound targeting the IL -23 pathway. With most of the competitors
already ahead by 1-2 year from SUNPs investigational compound, presenting strong
clinical data against Janssens Stelara (USD 1.4bn); we expect the psoriasis indication
market to become a heatedly competitive marketplace in the near future.
Pharmalucence acquisition
In order to fortify SUNPs presence in the US markets, SUNP has acquired
Pharmalucence Inc. which has a sterile injectable facility supported by strong R&D
capabilities. Pharmalucence is a leading manufacturer of radiopharmaceuticals and in
permutation with SUNP can leverage its parenteral production capabilities and nuclear
medicine product line on a global scale.
JV with Intrexon
SUNP formed a JV with Intrexon, which is a leader in synthetic biology to collaborate and
develop controlled gene-base therapies for ocular diseases such as glaucoma, AMD and
pigmentosa on Intrexon RTS platform, targeting an untapped market of ocular diseases.
The overall ophthalmic market is estimated to be ~USD 8.8bn in FY14, dominated by
with AMD drugs such as Lucentis (USD 2.4bn in brand sales) and Eylea (USD 1.7bn).
SUNP to acquire GSKs opiates business in Australia
SUNP to acquire GlaxoSmithKlines opiates business in Australia, encompassing 2
manufacturing sites in Victoria and Tasmania consisting of poppy-derived opiate raw
materials used for manufacturing analgesics with reported sales of USD 70mn in
CY2013. This acquisition strengthens SUNPs presence in CS and analgesic segments
and is expected to close in August 2015. Australia's poppy industry is the world's largest
legal supplier of pharmaceutical grade opiates for painkillers, and GSK is one of three
firms that control the crop and production in Tasmania. We expect SUNP to clock 8%
CAGR growth over FY14-17E from GSKs Australian opiates operations from USD
70mn in FY15 to USD 81mn in FY17E.
We expect SUNP to clock 8%

CAGR growth over FY14-17E
from GSKs Australian opiates
operations from USD 70mn in
FY15 to USD 81mn in FY17E.
11 March 2015 | Page 48

SUNP possesses a robust US portfolio capable of higher leverage, a sound management
at the helm capable of turning around stressed businesses, long-term growth drivers in
form of RBXYs RoW markets in place, a healthy domestic business and opportunities in
form of Mercks in-licensed psoriasiss investigational compound.
SUNP has structured growth drivers to propel its growth from FY16E onwards spanning
enhanced presence in the RoW markets of Russia, Brazil, Africa, Australia, and
developed markets of Europe and Japan; clinching up of a ripeningbiosimilars portfolio
(RBXYs acquisition provides SUNP with access to a developed biosimilars network);
access to an investigational drug (in-licensing from Merck) and a NCE pipeline (Synriam
from RBXY for malaria).
We assign a BUY rating to the stock valuing it at 9% premium to its peers at 24x
FY17E EPS of INR 49.8 (post-merger base business EPS at INR 41.9, ANDA
opportunities at INR 6.9 and GSKs opiates business to add INR 1) to arrive at a TP
of INR 1,196 with a potential upside of 18%.
We expect SUNP to post a revenue growth of 15% CAGR over FY14-17E from INR
160bn in FY14 to INR 244bn in FY17E on account of stronger US operations and
enhanced focus on RoW markets and post a PAT growth of 29% CAGR over FY1417E from INR 39bn in FY14 to INR 83bn in FY17E. Post-merger, we believe the
combined entity to post revenue of INR 392bn in FY17Eand a PAT of INR 102bn.
Exhibit 33: PE band of SUNP
1400
1200
Price
18x
20x
22x
24x
26x
1000
800
28x
600
400
200
Oct-15
Jan-16
Jul-15
Apr-15
Oct-14
Jan-15
Jul-14
Apr-14
Jan-14
Oct-13
Jul-13
Apr-13
Jan-13
Jul-12
Oct-12
Apr-12
Jan-12
Jul-11
Oct-11
Apr-11
Oct-10
Jan-11
Jul-10
Apr-10
Source: ACE Equity, Bonanza Research
Key Upsides:
Earlier than expected turnaround of RBXYs business operations.
Longer than expected pricing benefits in Taro assisting margins and maintaining a
continuous growth trajectory.
Stronger ramp-up in DUSA sales and continuous pressure on INR currency.

Key Risks:
Taros ability to increase prices on its derma portfolio on account of limited

competition (with top 5 players occupying ~80% market share) and high requirement
for dedicated manufacturing facilities has been the key driver for SUNP, but with
continuous decline in the volume, we expect the market to grow in low to mid-single
digits with price increases being the only source of short-term revenue growth driver.
US FDA issues with Halol facility which the major site for SUNPs US revenue base
in India has still not been resolved.
Sluggish rate of FDA approval and higher expected competition from gDoxorubicin
by J&J can cause definite downside to our estimates.
Lower than expected RBXYs synergy can cause a high downside risk to our
estimates.
Sluggish rate of FDA approval

and lower than anticipated
synergy benefits from RBXY can
cause a downside risk to our
estimates.
11 March 2015 | Page 49
Financials
P&L
P&L
Ratio Analysis
FY14
FY15E
FY16E
FY17E
Gross Sales
162,755
183,293
213,586
247,459
Net Sales
160,804
180,551
210,392
243,758
Expenditure
91,190
110,892
131,142
150,455
69,613
69,659
79,250
93,303
5,926
6,142
6,400
6,675
75,539
75,801
85,649
99,978
OI
EBIDTA
Interest
442
443
445
448
4,092
4,502
4,952
5,447
PBT
45,831
70,856
80,252
94,082
Tax
7,022
8,503
9,630
11,290
PAT
38,809
62,353
70,622
82,792
EPS
15.2
30.1
34.1
40.0
162,755
183,293
213,586
247,459
Depreciation
Adj EPS
Balance Sheet
ASSETS
Gross Block
Net block
Current Investment
Inventories
Cash and Bank
Sundry Debtors
Total Assets
FY14
FY15E
FY16E
FY17E
2,071.2
15.2
15.2
20.7
89.4
89.4
15%
25.5
23.8%
23.2%
47.0%
16.4%
43.9%
25,609
67.6
13.2
1.6
2,071.2
30.1
30.1
32.3
110.0
110.0
12%
30.9
34.0%
30.2%
41.4%
20.3%
38.9%
28,031
34.0
11.6
2.8
2,409.9
34.1
34.1
31.4
108.8
126.6
12%
32.3
33.1%
28.8%
40.1%
19.6%
37.8%
32,664
30.1
11.6
1.8
2,409.9
40.0
40.0
36.6
128.2
149.1
12%
35.0
33.5%
29.0%
40.4%
19.7%
38.2%
37,844
25.6
10.0
1.6
Cash Flow
FY14
FY15E
FY16E
FY17E
104,851
68,173
7,876
10,170
19,985
31,230
75,902
26,807
10,937
22,004
8,415
281,498
135,795
97,282
8,869
11,453
22,506
35,171
85,479
29,209
12,318
24,781
9,477
336,546
162,985
114,845
10,335
13,346
26,226
40,984
94,953
34,036
14,353
28,877
11,044
388,998
202,051
141,876
11,974
15,463
30,385
47,483
106,250
39,434
16,630
33,456
12,795
455,746
Cash Flow Tables

PBT
LIABILITIES
Share Capital
2,071
Total Reserves
183,178
Long Term Borrowing
17,484
Trade Payable
13,283
2,604
24,403
19,606
Minority Interest
19,212
Total Liabilities
281,841
RATIOS
Shares
EPS (in INR.)
Adj. EPS (in INR.)
CEPS ((in INR.)
Adj. BV (in INR.)
PATM%
ROE%
EBIDTAM%
ROA%
OPM%
P/E Ratio
P/BV Ratio
PEG Ratio
2,071
225,694
19,690
14,959
2,933
27,483
22,080
21,636
336,546
2,071
260,168
22,945
17,431
3,417
32,025
25,729
25,212
388,998
2,071
306,813
26,584
20,195
3,959
37,104
29,809
29,210
455,746
Adjustments
Net Profit
Changes in WC
FY14
FY15E
FY16E
FY17E
45,831
70,856
80,252
94,082
-402
-614
-1,080
-1,609
45,429
70,242
79,172
92,473
2,071
2,332
2,718
3,149
Cash Flow after changes in WC
47,500
72,575
81,890
95,622
Cash from Operating Activities

Activities
Cash from Financing Activities
39,611
64,072
72,260
84,332
-23,668
-45,140
-52,601
-60,943
5,066
5,705
6,648
7,702
21,009
24,637
26,307
31,092
21,122
44,037
68,673
94,980
44,037
68,673
94,980
126,072

Opening Cash & Cash
Equivalents
Closing Cash & Cash Equivalent
11 March 2015 | Page 50
Company Profile
SUNP
Established in 1983, listed since 1994 and headquartered in India, Sun Pharmaceutical
Industries Ltd.is an internationalspecialty pharmaceutical company with over 75% sales
from global markets. It manufactures andmarkets a large basket of pharmaceutical
formulations as branded generics as well as generics in US,India and several other
markets across the world. For the year ending March 2014, overall revenueswere at
US$2.7 billion, of which US contributed US$1.6 billion. In India, the company is a leader
inniche therapy areas of psychiatry, neurology, cardiology, nephrology, gastroenterology,
orthopedicsand ophthalmology. The company has strong skills in product development,
process chemistry, andmanufacturing of complex dosage forms.
RBXY
Ranbaxy Limited is an integrated, research based, international pharmaceutical company
producing a wide range of quality, affordable generic medicines, trusted by healthcare
professionals and patients across geographies. Ranbaxys continued focus on R&D has
resulted in several approvals in developed and emerging markets, many of which
incorporate proprietary Novel Drug Delivery Systems and technologies developed at its
own labs. The company has further strengthened its focus on generics research and is
increasingly working on more complex and specialty areas. Ranbaxy serves its
customers in over 150 countries and has an expanding international portfolio of affiliates,
joint ventures and alliances, ground operations in 43 countries and manufacturing
operations in 8 countries.
Post-merged entity
On merger of SUNP and RBXY, the merged entity will become the worlds 5 th largest
global specialty pharma having CY2013 pro forma revenues at USD 4.3bn and attaining
a dominating presence in US (No.1 Indian pharma company in US with over 184 ANDAs
pipeline and over USD 2bn in sales), India (No.1 pharma company in India with USD 1bn
in sales from IPM and inhabiting No.1 spot in 13 specialties) and robust subsistence in
the RoW markets (~USD 1bn in sales).
11 March 2015 | Page 51
11 March 2015 | Page 52
India Research
11 March 2015
Lupin Ltd.| BUY

INITIATING COVERAGE
Bloomberg Code: LPC:IN | Reuters Code: LUPIN.BO
Invigorating ascent
Pharmaceuticals
Lupin Ltd. (LPC)

LPC with its robust and rich ANDA pipeline, high return ratios, debt free status and with
abundant growth drivers at place is expected to generate healthy returns going forward. We
remain convinced of LPCs execution proficiency and new catalysts in place to drive further
earning upgrades and re-rating. We expect LPC to register a growth of 18.7% CAGR over
FY1417E from INR 112bn in FY14 to INR 187bn in FY17E posting a growth of 23.2% CAGR
in PAT over the period from INR 18.6bn in FY14 to INR 34.9bn in FY17E. We assign a BUY
rating to LPC valuing at a TP of INR 2,420 with a potential upside of 27%.
Current Price:
INR 1,867
Target Price:
INR 2,420
Expected Upside (%)
30%
Stock Details
Bloomberg Code

LPC enjoys a 5.3% market share in the US Generics market being the 5th largest generics
player and the fastest growing generics player in the US markets. LPC has an addressable
opportunity of USD 80bn with its 95 pending ANDAs in niche segments such as OCs (Oral
contraceptive), Ophthalmology and Oncology. We expect LPCs US Bx business to grow at
11.6% CAGR over FY1417E from USD 80mn in FY14 to USD 111mn in FY17E on account
of rebranding initiatives and LPCs Gx to witness a robust traction cataloguing a stark growth
of 24% CAGR over FY14 17E period from USD 723mn in FY14 to USD 1.4bn in FY17E on
account of a plush ANDA pipeline comprising of launches such as gCelebrex, gPrezista,
gAsacol, gRenagel, gNamenda, gGlumetza, gRenvela, gSeroquel XR etc.
LPC: IN
Reuters Code
LUPIN.BO
Shares O/S (mn)
449.1
M Cap (INR mn)
838,488
52 week H/L (INR)
1917 / 903

Promoter Group
46.69%
FII
31.75%

LPC has steadily enhanced its market share in the IPM from 2.75% in FY10 to 3.26% in DII
H1FY15E on back of cavernous market penetration, rampant product launches in the IPM and
Others
sharp focus ( ~64% in FY14 from ~31% in FY07) on Chronic segment. With an enlargement in
MRs, price increases taken in limited products and heavier penetration into the untapped rural
markets, we forecast LPC to post a growth of 16% CAGR over FY14 17E period from INR
25.1bn in FY14 to INR 39.2bn in FY17E.
10.96%
10.60%

LPC
100%
BSEHC
80%
60%
40%
20%
0%
-20%
Net Sales(INR bn)

PAT (INR bn)
FY14A
FY15E
FY16E
FY17E
CAGR (%)
113
134
160
187
19
19
24
29
35
23
PATM%
16.6
17.7
17.9
18.7
NA
RoE %
30.8
31.4
30.8
29.7
NA
EPS (INR)
41
53
64
78
24
BV (INR)
155
182
231
294
24
P/E (x)
46
35
29
24
NA
Mar-15
6 Mths
1 Yr
39%
95%
17%
27%
9%
Key Financials
Year
Jan-15

LPC has in place an assortment of strategic partnerships and agreements encompassing,
biosimilars space, marketing distribution and product supply proposals, which can fortify LPCs
grip globally in a long haul.
Relative*
Nov-14

Leisure uptick in EU markets of Germany, UK and France will enable LPC to clock 8% CAGR
growth to INR 3.7bn in FY17E. Foray into the Latam markets through acquisition of Mexicos
Grin Laboratories (which is the 4th largest ophthalmic player in Mexicos ophthalmic market Stock Performance
valued at ~USD 275mn with sales of USD 28mn in CY13) and stronger traction observed in
Return (%)
1 Mth
geographies of South Africa, Australia and Philippines will enable LPC to propel its revenue
Absolute
21%
growth at 19.6% CAGR over FY14-17E period to INR 10.9bn in FY17E.
Sep-14
Jul-14
May-14
Mar-14
Jan-14
Nov-13

LPCs JPM has grown at 20% CAGR from JPY 10.4bn in FY10 to JPY 21.4bn in FY14 on
back of strong traction observed by Kyowa in JPM coupled with an efficient product mix.
Acquisition of Irom Pharma has added colour to the JPM markets for LPC enabling LPCs
entry into the USD 9bn injectables marketplace within the DPC hospital segment in JPM. With
an expectation of full turnaround of Irom in 2 years, LPC can post a growth of 12% CAGR
over FY1417E period from JPY 21.4bn in FY14 to JPY 30bn in FY17E on a constant
currency basis coupled with the Japanese governments latest targets to achieve 60% generic
penetration by FY17E providing an opportunity of ~30-35% additional volume of genericized
products within a span of 3 4 years.
Analyst
Hemanshu Srivastava
Tel: 022-30863778
Lupin Ltd.
Lupin Ltd.(LPC)
LPC has a rich ANDA pipeline comprising of niche launches such as gCelebrex,
gRenage, gRenvela, gGlumetza, g Namenda, gSeroquel XR etc; a strong branded
portfolio in US; improvement in Japan business; strong domestic operations; pulsating
RoW markets comprising of South Africa, Australia, Philippines etc.; Latam markets
access through commencement of Mexican operations and multiple strategic alliances in
place to propel the stock towards a sustained growth trajectory.
We expect LPC to register a revenue growth of 18.7% CAGR over FY14 17E from INR
112bn in FY14 to INR 187bn in FY17E posting a growth of 23.2% CAGR in PAT over the
period from INR 18.6bn in FY14 to INR 34.9bn in FY17E.
We assign a BUY rating to LPC valuing its base business at a 22x FY17E EPS of INR
110 (base EPS at INR 78, key ANDAs at INR 29.5 and strategic acquisitions to add INR
2.5) to arrive at a TP of INR 2,420 with a potential upside of 30%.
11 March 2015 | Page 54
Lupin Ltd.
Business Mix
LPCderives its revenues from 4 major markets, US; Indian, JPM and RoW. LPChas
grown at a 17% CAGR over FY10-14 from INR 46.6bn in FY10 to INR 111bn in FY14 on
back of sturdy US operations coupled with rampant launches in the US markets, strategic
acquisitions across Japanese markets and RoW markets coupled with valuable launches
and penetration in the IPM.
Exhibit 1: FY14 revenue breakup
Exhibit 2: Business Mix
120
111
11
3
API
100%
25
80
60
80%
49
30%
Formulations
19%
16%
15%
12%
10%
10%
10%
10%
81%
84%
85%
88%
90%
90%
90%
90%
FY11
13
FY10
100
60%
40
40%
20
70%
Exhibit 3: LPC Geographic spread
Exhibit 4: Debt: Equity Ratio and Capex (INR bn)
Q1FY15
API
Q4FY14
South Africa
Q3FY14
RoW
22%
3%
H1FY
15
Debt: Equity Ratio
Q1FY14
Japan
Q4FY13
Europe
Q3FY13
44%
12%
Q2FY13
10%
Capex
Q1FY13
6%
2.5
2.0
1.5
1.0
0.5
0.0
India
Q2FY14
US
3%
Q3FY15
0%
Total
FY15
API
Q2FY15
RoW
FY14
EU
FY13
Japan South
Africa
FY12
India
FY09
US
FY08
20%
33
31
31
Q3FY15
Q2FY14
31
Q2FY15
Q1FY14
30
Q1FY15
26
Q4FY14
24
Q3FY14
25
Q4FY13
22
25
Q3FY13
22
Q2FY13
35
30
25
20
15
10
5
0
Q1FY13
Exhibit 5: Quarterly revenue (in INR bn)
Exhibit 6: LPCs annual revenue chart

60,000
US Revenues
50,000
RoW
API
FY12
FY13
IPM
40,000
30,000
20,000
10,000
0
FY07
FY08
FY09
FY10
FY11
FY14
11 March 2015 | Page 55
Lupin Ltd.

LPC enjoys a 5.3% market share in the US Generics market being the 5th largest
generics player and the fastest growing generics player in the US markets in terms of
prescriptions showcasing a sturdy growth rate of ~23% CAGR from USD 348mn in FY10
to USD 803mn in FY14. LPC is a market leader in 31products marketed in the US
generics marketplace.
Exhibit 7: Drug Filing and Approvals obtainted till 9MFY15
Exhibit 8: Annual US sales (USD mn)

CAGR
23%
Cumulative Filed
250
Pending
200
192
176
173
900
203
148
150
100
693
700
127
600
90
507
441
500
86
50
803
800
100
109
98
93
348
400
95
300
58
200
100
9MFY15
FY14
FY13
FY12
FY11
FY10
FY09
0
FY10
FY11
FY12
FY13
FY14
LPC has an addressable opportunity of USD 80bn with its 95 pending ANDAs in niche
segments such as OCs (Oral contraceptive), Ophthalmology, Oncology plus low
competition products such as Renagel, Welchol, Asacol etc offering a rich potential for
growth. With over 30 ANDAs filed in the first-to-file category addressing a market size of
over USD 13.7bn. LPC has 15 exclusive first-to-files addressing a market of USD 1.5bn.
Another driver, the OC segment has a potential to generate ~USD 100mn to the top-line
over 2-3 years.
Exhibit 9: Quaterly ANDA Approvals
ANDA Filed
Approved
25
22
21
20
18
19
15
11
8
10
3
2
9MFY15
Q3FY15
Q2FY15
Q1FY15
FY14
Q4FY14
Q3FY14
Q2FY14
Q1FY14
FY13
Q4FY13
Q3FY13
Q2FY13
Q1FY13
LPC expects to launch 10 products in H2FY15E like Valsartan and couple of OCs while
Renagel (LPC has FTF status) will be FY16E opportunity. LPC has received approval for
Vigamox but doesnt have FTF status (Teva has FTF Status). LPC plans to launch 15+
products every year, filing 5-6 Dermatology products in FY15E and launching the same
by the end of FY17E in US market while its inhalation products are expected to hit the
markets by FY18E. De-growth in the US operations in Q2FY15 was as a result of higher
competition in gNiaspan & gCymbalta plus seasonality as well as price drops due to
channel consolidation in the US markets.
11 March 2015 | Page 56
Lupin Ltd.
Exhibit 10: Breakup of the US Bx and Gx business
% Gx
Exhibit 11: Annual Bx and Gx US business of LPC (USD mn)

1600
% Bx
1378
1400
100%
1143
1200
907
1000
723
800
79%
90%
548
600
361
308
187 217
127 133 146
74
400
200
FY12
97
111
21%
10%
FY13
FY14
FY17E
FY11
85
FY16E
FY10
80
FY14
FY09
29%
145
FY13
28%
10%
0%
30%
FY09
37%
FY12
71%
FY11
40%
30%
20%
70%
FY10
63%
72%
60%
50%
FY15
90%
80%
70%
LPCs US Branded business (Bx) has been facing headwinds due to stronger
competition in the Bx sector in its Suprax and Antara brand. Bx had registered a polite
growth of 14% CAGR from USD 74mn in FY07 to USD 145mn in FY13, suffering a
massive hit during FY14 tanking revenues from Bx towards USD 80mn (de-growth of
45%) whereas the Gx segment has registered a strapping growth of 31% CAGR from
USD 187mn in FY07 to USD 723mn in FY14 on account of elevated ANDA filing and
staunch field force productivity enabling LPC to clock a market share of ~5.3% in FY14 in
the US Gx space in terms of prescriptions. With the recent addition of Alinia and Locoid
Lotion into the LPCs US Bx portfolio, we expect the Bx business to grow at 11.6%
CAGR over FY1417E from USD 80mn in FY14 to USD 111mn in FY17E on account
of rebranding initiatives.
LPC has a rich and sundry ANDA pipeline with launches in high opportunity segments
such as Namenda (USD 2.2bn brand sales), Detrol LA (USD 590mn brand sales), Pristiq
(USD 500mn brand sales), Seroquel XR (USD 1.2bn brand sales), Vigamox (USD
280mn brand sales), Prezista (USD 1.2bn brand sales), Asacol (USD 600mn brand
sales), Lunesta (USD600mn brand sales) etc. LPC possess FTF status for Renagel
(USD 600mn brand sales) with a potential to generate USD 84mn in FY17E, Renvela
(USD 900mn brand sales) with a potential to generate USD 113mn in FY17E and
Glumetza (USD 300mn brand sales) with a potential to generate USD 42mn in FY17E.
LPCs
Bx
business faced
headwinds due to stronger
competition but with rebranding
initiative at place, we expect a
moderate growth of 11.6%
CAGR over FY14-17E.
Exhibit 12: LPC 's US Q-o-Q Revenue (INR bn)

US
68%
63%
33%
US Y-o-Y %
80%
57%
70%
60%
28%
32%
50%
31%
40%
30%
28%
31%
23%
20%
10%
4%
Q3FY15
Q2FY15
Q1FY15
Q4FY14
Q3FY14
Q2FY14
Q1FY14
Q4FY13
Q3FY13
Q2FY13
0%
Q1FY13
18
16
14
12
10
8
6
4
2
0
LPC launched generic Celebrex (USD 3.2bn in brand sales) in the US as an authorized
generic, in the first wave of generic entrants (with 3 competitors). We expect LPC to
amass revenues in tune of USD 65-73mn in the first year gaining a strong market share
of ~1520% in light of staggered and limited competition enabling LPC to obtain net profit
of USD 18 - 21mn with this lucrative opportunity.
11 March 2015 | Page 57
Lupin Ltd.
LPC will start filing for nasal sprays in the US markets in FY15E and expects approvals
to come byFY18Eonwards.Management continued to stress on building a nichepipeline
for US markets. The key focus areas remain complex injectables, controlled substance,
Dermatology and Respiratory.
The key catalyst for driving momentum remains the niche launches and stronger traction
in the US markets with a basket of products ranging from injectable, derma, controlled
substances, nasal and respiratory products over the next 2 3 yrs. We expect LPC to
steadily enhance its margins by ~100bps/ year from 26.4% in FY15E to 28.4% in
FY17E. We expect to witness a robust traction in LPCs US Gx business
cataloguing a stark growth of 24% CAGR over FY14 17E period from USD 723mn
in FY14 to USD 1.4bn in FY17E on account of a plush ANDA pipeline.
Exhibit 13: LPC 's ANDA pipeline

Drugs
Market Size
Release Date
FTF
Lamivudine (150+300 mg)

Celebrex
250
Dec-14
NO
3,220
Dec-14
NO
Epivir
40
Dec-14
NO
Prezista
1,090
Dec-14
NO
Asacol
650
FY16
Renagel
600
FY17
NO
YES
Valsartan
2,000
Jan-15
NO
Welchol
350
Unknown
NO
Namenda
2,200
Jul-15
Yes
Detrol LA
680
Jul-15
NO
Renvela
922
FY17
YES
Lunesta
600
Unknown
Discontinued
Nexium
4,000
Jul-15
NO
Mesalamine ER
80
2015
NO
Coreg CR
300
FY17
NO
Pristiq
900
FY16
NO
Nuvigil
320
Unknown
NO
Effient
609
FY17
NO
Glumetza
300
FY17
Yes
Apristo
80
FY16
NO
Yaz
360
Launched
Exforge HCT
270
FY16
Seroquel XR
We expect to witness a robust

traction in LPCs US Gx
business cataloguing a stark
growth of 24% CAGR over FY14
17E period from USD 723mn in
FY14 to USD 1.4bn in FY17E on
account of a plush ANDA
pipeline.
NO
1,200
FY17
NO
Tykerb
115
FY17
(Tie-up with Natco who has FTF)
Viread
706
FY17
NO
Lyrica
1,800
FY18
NO
Vigamox
273
FY16
NO
Vancocin
164
Feb-15
NO
Lumigan
684
Jan-15
NO
Etanercept
575
FY18/FY19
NO
Prezista 2
1,090
Unknown
NO
Truvada
2,570
16-Feb
NO
Vimovo
292
23-Apr-16
NO
11 March 2015 | Page 58
Lupin Ltd.

LPC has grown its domestic operations rampantly through an enhanced product mix,
higher market penetration and attractive launches. LPC enjoys a healthy 3.26% market
share in the IPM markets growing at ~17% CAGR from INR 13.5bn in FY10 to INR 25bn
in FY14. LPC has steadily enhanced its market share in the IPM from 2.75% in FY10 to
3.26% in H1FY15E on back of cavernous market penetration, rampant product launches
in the IPM and sharp focus ( ~64% in FY14 from ~31% in FY07) on Chronic segment.
Domestic revenues grew by a timid 5.5% in FY14 due to DPCO impact and trade
disturbances in the IPM.
Exhibit 14: IPM Market Share Trend
Exhibit 15: Annual Indian formulation trend (INR mn)
3.4%
30000
3.19%
3.2%
3.0%
2.82%
2.75%
2.80%
2.80%
19374
20000
2.70%
2.8%
25,141
23,840
25000
15734
15000
13502
2.6%
10000
2.4%
5000
2.2%
2.0%
0
FY10
FY11
FY12
FY13
FY14
9MFY15
FY10
FY11
FY12
FY13
FY14
Exhibit 16: Therapeutic Segments of LPC
Pain/
Analgesic
Gynaecology
IPM13(gr%)
IPM14(gr%)
GI +
Hepatoprotecti
ve
Nutraceuticals
Anti - Infective
CNS
Anti-Diabetic
CVS
Respiratory
LPC FY13
LPC FY14
Anti - TB
60
50
40
30
20
10
0
(10)
With an increase in MRs, price increases taken in limited products and heavier
penetration into the untapped rural markets, we forecast LPC to post a growth of
~16% CAGR over FY14 17E period from INR 25.1bn in FY14 to INR 39.2bn in
FY17E.
Exhibit 18: LPC EU QoQ revenue (INR bn)
14%
Q3FY15
Gynaecology
Q2FY15
CNS
60%
50%
40%
30%
20%
10%
0%
-10%
Q1FY15
10%
15%
Q4FY14
GI
Q3FY14
8%
Q2FY14
8%
Anti-Biotic +
Cephal
Anti Diabetic
Q1FY14
Anti - Asthma
4%
India Y-o-Y %
Q4FY13
Anti - TB
23%
Q3FY13
14%
4%
India
9
8
7
6
5
4
3
2
1
0
Q2FY13
CVS
Q1FY13
Exhibit 17: Indian therapeutci mix
11 March 2015 | Page 59
Lupin Ltd.

LPC is the 8th largest generics player in the Japanese market and has a strong presence
in the Neurology, CVS, GI and Injectable segments. JPM is the 2nd largest pharma
market in the world, valued ~USD 110bn. JPM has been conventionally resistant to the
generics penetration with the current generic market penetration stationed at ~44%.
Japanese government has set latest targets to achieve 60% generic penetration by
FY17E providing an opportunity of ~30-35% additional volume of genericized products
within a span of 3 4 years. Patent expiries in range of USD 16 17bn also add
significant opportunities for LPC outside US and especially in Japan.
Exhibit 19: Japan formulation trend (JPY mn)
25000
20000
15000
10421
11646
FY10
FY11
19785
21399
FY13
FY14
14194
10000
5000
0
FY12
LPCs JPM has grown at 20% CAGR from JPY 10.4bn in FY10 to JPY 21.4bn in FY14
on back of strong traction observed by Kyowa in JPM coupled with an efficient product
mix. Acquisition of Irom Pharma has added colour to the JPM markets for LPC enabling
LPCs entry into the USD 9bn injectables marketplace within the DPC hospital segment
in JPM. LPC expects Irom acquisition to fully turnaround within 2 yrs from a CRAMS
base.
Exhibit 20: LPCs Japanese QoQ revenue spread (INR bn)
Q3FY15
Q2FY15
120%
100%
80%
60%
40%
20%
0%
-20%
Q1FY15
Q4FY14
Q3FY14
Q2FY14
Q4FY13
Q3FY13
Q2FY13
Q1FY13
Japan Y-o-Y %
Q1FY14
Japan
4
4
3
3
2
2
1
1
0
Turnaround of Irom Pharma

remains the key trigger point for
LPCs growth escalation in JPM.
We expect LPC to post a growth
of 12% CAGR over FY1417E
period from JPY 21.4bn in FY14
to JPY 30bn in FY17E.
We expect LPC to post a growth of 12% CAGR over FY1417E period from JPY
21.4bn in FY14 to JPY 30bn in FY17E on a constant currency basis showcasing
superior growth from Irom in the DPC injectable space and stronger traction in
Kyowa through the latest amendments in place in Japan to amplify generic
penetration. We expect in all JPM to generate revenues in tune of INR 12.9bn in
FY14 and INR 16.4bn in FY17E to LPC.
Exhibit 21: Sales from Japanese operations of Kyowa and Irom Pharma (JPY mn)
18000
16000
14000
12000
10000
8000
6000
4000
2000
0
21.9%
21.0%
15918
14194
13984
20.0%
11646
11.8%
10421
25.0%
13.8% 15.0%
10.0%
5833
5.0%
5512
0.0%
-1.5%
0
FY10
FY11
FY12
-6%
I'rom Sales
Kyowa Sales
Y-o-Y%Kyowa
YoY% I'rom
-5.0%
-10.0%
FY13
FY14

11 March 2015 | Page 60
Lupin Ltd.

Leisure uptick in EU markets
LPC has grown at ~ 24% CAGR from INR 1.2bn in FY10 to INR 2.9bn in FY14. The
major markets include France, Germany and UK. We expect LPC to enhance its
presence in the EU nations, especially in Germany, UK and France through a better
product mix and ramp up in launches to grow at ~8% CAGR over FY1417E from
INR 2.9bn in FY14 to INR 3.7bn in FY17E.
Exhibit 22: EU QoQ revenue trend (INR bn)
80%
70%
60%
50%
40%
30%
20%
10%
0%
-10%
-20%
3,500
2,934
3,000
2,356
2,500
1,975
1,809
2,000
1,500
1,236
1,000
500
Q3FY15
Q2FY15
Q1FY15
Q4FY14
Q3FY14
EU Y-o-Y %
Q2FY14
Q4FY13
Q3FY13
Q2FY13
Q1FY13
Q1FY14
Europe
1
1
1
1
1
1
0
0
0
0
0
Exhibit 23: Annual EU formulations sales (INR mn)
0
FY10
FY11
FY12
FY13
FY14
Foray into the Latam markets

LPC has completed its acquisition of Mexicos Grin Laboratories in H1FY15 and Q3FY15
marks the 1st quarter for Grin Labs under LPC. Mexican pharma market is valued at ~
USD 13.5bn growing at ~10% CAGR, making it the 2nd largest market in the Latam
region after Brazil. Grin Labs is the 4th largest Ophthalmic player (Ophthalmic market
valued at ~USD 275mn) in the Mexican markets with sales of USD 28mn in CY13.
Acquisition of Grin Labs provides an entry into the Latam markets, commercial platform
to leverage LPCs existing product pipeline, a launch-pad for LPC to further build
capabilities for specialty pharma plus bestowing LPC a well-built and dominant portfolio
of OTC and Gx products.
LPCs Mexican operations kick

started with Grin Laboratories
first quarterly performance in
Q3FY15 with a phenomenal
growth. We expect the Mexican
operations to grow at 10%
CAGR going forward.
RoW markets presenting unblemished vibrations

The South African pharmaceutical market is valued at about USD 3.5bn. The generics
market grew by 6% in value terms and 2% by volume during FY14. LPCs subsidiary
Pharma Dynamics (PD) remains the largest CVS player in the South African market. LPC
is the 4th largest generics player in the SA markets growing at substantial 31% CAGR
from ZAR 218mn in FY10 to ZAR 638mn in FY14. We expect LPC to flourish at 9.3%
CAGR from FY1417E in the SA markets to reach ZAR 834mn in FY17E from ZAR
638mn in FY14 on a constant currency basis amounting to ~INR 5bn in FY17E on
back of growing tender business in SA markets.
Exhibit 24: South Africa revenues
Exhibit 25: LPCs South Africa QoQ revenue trend
700
638
SA Y-o-Y%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
600
498
500
395
400
288
218
200
Q3FY15
Q2FY15
Q1FY15
Q4FY14
FY14
Q3FY14
FY13
Q2FY14
FY12
Q1FY14
FY11
Q4FY13
FY10
Q3FY13
Q2FY13
100
Q1FY13
300
South Africa
11 March 2015 | Page 61
Lupin Ltd.
The Australian pharmaceutical market is valued at USD 13.5bn. The generics market is
estimated to be USD 2.2bn, growing at approximately 8% per annum. LPC operates in
the Australian market through its subsidiary Generic Health Pty Ltd. (GH) having a strong
presence in both ethical medicine and OTC markets. LPC demonstrated a whopping
growth in the Australian markets of 74% CAGR over FY11-14 period from AUD 6mn in
FY11 to AUD 30mn in FY14. We expect superior traction to carry forward in the
Australian markets, highlighting a growth of 13% CAGR over FY14-17E period from
AUD 30mn in FY14 to AUD 43mn in FY17E on a constant currency basis amounting
to INR 2.4bn in FY17E.
We anticipate Australian and

Philippines of LPC to grow at
13% CAGR and 21% CAGR over
FY14-17E period respectively.
Exhibit 26: Annual Philippines revenue trend

1000
909
800
659
596
600
409
328
400
200
0
FY10
FY11
FY12
FY13
FY14
The Philippines pharma market is valued at USD 3.3bn and grew by 6.6% in FY14. LPC
has grown at a substantial pace of 29% CAGR in the Philippines market from PHP
328mn in FY10 to PHP 909mn in FY14. LPC operates through its subsidiary Multicare
Pharma in Philippines, and we forecast a strong momentum to persist enabling a
growth at 21% CAGR over FY14-17E period from PHP 909mn in FY14 to PHP
1,610mn in FY17E on a constant currency basis amounting to INR 2.1bn in FY17E.
The other RoW market of LPC is expected to clock a 12% CAGR growth over FY14-17E
period.
Exhibit 27: LPCs RoW QoQ revenue trajectory
3
Exhibit 28: Annual RoW trend

80%
RoW
RoW Y-o-Y%
25000
23126
21424
CAGR 32%
60%
20000
40%
2
20%
14770
15000
1
0%
Q3FY15
Q2FY15
Q1FY15
Q4FY14
Q3FY14
Q2FY14
Q1FY14
Q4FY13
-40%
Q3FY13
0
Q2FY13
-20%
Q1FY13
10000
9240
7741
5000
0
FY10
FY11
FY13
FY14
We anticipate the overall RoW markets (including Australian and Philippines) of

LPC to demonstrate a fine momentum growing at a rapid pace of 19.6% CAGR over
FY14-17E period from INR 6.4bn in FY14 to INR 10.9bn in FY17E on back of
rampant launches in these markets, established distribution channels and efficient
field force productivity in these geographies.
FY12
We anticipate the overall RoW

markets (including Australian
and Philippines) of LPC to
demonstrate
19.6%
CAGR
growth over FY14-17E period
from INR 6.4bn in FY14 to INR
10.9bn in FY17E.
11 March 2015 | Page 62
Lupin Ltd.
Other Segments to carry forward the momentum

API business on growth trajectory
LPCs API revenue generation has grown by merely 6% CAGR over FY07 FY14 from
INR 7.5bn in FY07 to INR 11.1bn in FY14 due to higher internal captive consumption and
reduced exports.
Exhibit 29: Annual API trend
Anti TB
60%
Exhibit 30: API segmentation in FY14

CVS
Cephalosporins
Others
Anti TB
CVS
Cephalosporins
Others
50%
25%
40%
26%
30%
2%
20%
10%
47%
0%
FY10
FY11
FY12
FY13
FY14
The API segmentation of LPC consists of Anti TB, Cephs, CVS and Others, amongst
which Cephs occupy the highest concentration followed by Anti-TB and Other. We
believe the API industry is set to witness a boost on back of global patent expiry over a
timeframe from FY15E FY20E.
Exhibit 31: LPC 's API Q-o-Q revenue path (INR bn)
26%
4
3
3
30%
20%
20%
20%
25%
23%
20%
10%
11%
15%
10%
5%
4%
5%
API
API Y-o-Y%
0%
0%
1
-7%
Q3FY15
Q2FY15
Q1FY15
Q4FY14
Q3FY14
Q2FY14
Q1FY14
Q4FY13
Q3FY13
Q2FY13
-10%
Q1FY13
-5%
We expect LPCs API unit to cultivate secondary growth at ~10% CAGR over FY14
17E from INR 11.1bn in FY14 to INR 14.9bn in FY17E as LPC will focus on acute
vertical integration enhancing its internal captive consumption for only prominent
prospects focusing primarily on US, IPM and RoW markets.
We expect LPCs API unit to
cultivate growth at ~10% CAGR
over FY14 17E from INR 11.1bn
in FY14 to INR 14.9bn in FY17E.
11 March 2015 | Page 63
Lupin Ltd.
R&D: A strong keystone for LPCs future endeavors

LPC has increased its focus on R&D activities on the prospects of establishing a highly
differentiated specialty business. R&D Spend in FY14 was at 8.6% of LPCs FY14 sales
of INR 111.2bn registering a growth of ~24% Y-o-Y. We expect LPC to continue on its
aggressive R&D pace to oscillate between 9 9.3% in FY17E to INR 16.7bn. LPC plans
to develop a niche quality pipeline in areas of complex injectables, derma, inhalation
(MDIs, DPIs and Nasal Spray) and ophthalmic products.
17.0
14.5
7.7
60%
50%
11.2
40%
9.6
30%
4.1
1.4 2.0
5.3 5.9
20%
2.7
10%
FY17E
FY16E
FY15E
FY14
0%
FY13
Q3FY15
Q2FY15
0%
Q1FY15
0
Q4FY14
2%
Q3FY14
0.5
Q2FY14
4%
Q1FY14
Q4FY13
6%
Q3FY13
1.5
Q2FY13
8%
Q1FY13
18.0
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
FY12
10%
FY11
2.5
FY10
12%
FY09
R&D%
FY08
R&D
Exhibit 33: R&D spend(INR bn) &growth curve and R&D % to sales
FY07
Exhibit 32: R&D expenditure (INR bn) and % to sales
On the biosimilar front, LPC possess a powerful pipeline of molecules under

development, amongst which 3 products are scheduled to commence Clinical Trials till
end of FY15. LPCs NCE pipeline is also gathering momentum; with its first NCE entering
into Ph II (centred in CNS area) and 2 NCEs entering into Ph I (focus in endocrine
disorder & cancer). LPC currently has 10 NCE programs in various phases of
development.
11 March 2015 | Page 64
Lupin Ltd.
Strategic Alliances and Tie-Ups: Engineering a promising

future
LPC stuck a recent accord with Merck Serono for EMs such as Brazil, Indonesia,
Mexico, Philippines and countries in the CIS and African region. LPC will develop
products, file product dossiers and supply finished products to Merck Serono which will
be the marketing authorization holder for the products leveraging its strong existing EM
distributions network to offer an enlarged product basket in the EMs, fully utilizing the
growing prospects in these newer geographies. The partnership seeks to focus in the 5
main therapeutic areas of CVS, GI, Diabetes, Anti-Infective and endocrinology; with a
target to launch the in CY16, where LPC will receive upfront payments and milestone
based licensing fees.
LPC furthermore signed a deal with Salix to market, distribute and sell first-in-line
treatments for Hepatic Encephalopathy (Zaxine) and opiod induced constipation
(Relistor; USD 50mn in branded sales in FY14) in Canada allowing LPC to leverage
Salixs product capabilities and enhancing distribution channel across the lucrative
Canadian markets. We believe Zaxine and Relistor to present a USD 25-35mn
opportunity in the Canadian markets alone, enabling LPC to generate ~USD 5-7mn from
this partnership in FY16E.
LPC has also ventured into the lucrative biosimilars space, with a tie-up with Yoshindo
Inc. of Japan creating a new entity YLB (YL Biologics). YLB will be jointly managed by
both the partners and will be responsible for conducting clinical development, regulatory
filings and marketing authorizations in Japan. YLB intends to in-license LPCs mAbs
(monoclonal antibodies). Initially LPCs Etanercept biosimilar (Enbrel by Takeda having
sales of USD 496mn in Japan in CY13) for treatment of rheumatoid arthritis, psoriasis
and ankylosing spondylitis will be in-licensed by YLB and LPC and Yoshindo will
leverage their sales network platforms for distribution across Japanese markets. We
anticipate YLB to commercialize Etanercept biosimilar for JPM by FY18E/19E, were we
expect the Enbrel biosimilar to fetch ~USD 60mn due to inflexible generic penetration
seen going forward in the JPM.
LPC has entered into a strategic agreement with Celon Pharma SA (Poland) on Feb-15
for gAdvair DPI (or Salmeterol DPI, Advair Diskus having brand sales at USD 7bn in
CY14) development and commercialization across various markets such as US, Mexico,
Canada, EU etc in a bid to enter into the untapped global inhalation market.
LPC acquired Nanomi B.V. in the Netherlands for its patented technology platforms that
would help develop products in the Complex Injectables space.
With a healthy balance sheet, debt free status, superior cash flow generations and good
track record of acquisition, LPC can go further for inorganic growth through acquisitions
in select markets such as Latam& CIS markets.
LPC has launched a new version of asthma drug delivery device in the US market under
a licensing agreement with the New Jersey-based respiratory research and development
company InspiRX Inc. InspiraChamber anti-static valve holding chamber (VHC) has been
designed to amplify delivery of aerosol therapies having an estimated market size of
~USD 100mn; adding potency to LPCs Bx business as LPC has exclusive rights to
promote, distribute and market the product and at the same time enabling to penetrate
the untapped US respiratory markets.
LPC has in place an assortment of strategic partnerships and agreements
encompassing, biosimilars space, marketing distribution and product supply
proposals, which can fortify LPCs grip globally in a long haul. All these accords
are essential for LPC to engineer its new-fangled growth drivers going forward
such as entering into the novel biosimilars space, expanding geographies and
enabling a robust product supply chain.
11 March 2015 | Page 65
Lupin Ltd.

LPC with its robust and rich ANDA pipeline, high return ratios, debt free status and with
abundant growth drivers at place is expected to generate healthy returns going forward.
We remain convinced of LPCs execution competence and new catalysts in place to drive
further earning upgrades and re-rating.
We assign a BUY rating to LPC valuing its base business at a 22x FY17E EPS of
INR 110 (base EPS of INR 78, key ANDAs at INR 29.5 and strategic acquisitions to
add INR 2.5) to arrive at a TP of INR 2,420 with a potential upside of 30%.
We expect LPC to register a growth of 18.7% CAGR over FY1417E from INR 112bn
in FY14 to INR 187bn in FY17E posting a growth of 21.7% CAGR in PAT over the
period from INR 18.6bn in FY14 to INR 33.7bn in FY17E with superior return ratios
such as RoE of 27.5% and RoCE of 37%.
Exhibit 34: PE band of LPC
3000
Price
16x
18x
20x
22x
24x
2500
2000
1500
1000
500
Jan-16
Oct-15
Jul-15
Apr-15
Oct-14
Jan-15
Jul-14
Apr-14
Jan-14
Jul-13
Oct-13
Apr-13
Jan-13
Jul-12
Oct-12
Apr-12
Jan-12
Jul-11
Oct-11
Apr-11
Oct-10
Jan-11
Jul-10
Apr-10
Key Catalysts:
LPCs earnings growth is to be driven over FY1417E through unfolding of a robust

ANDA pipeline and increased filings in niche and complex category.
Rebuilding of LPCs US Bx portfolio through product life cycle management of its
Suprax brand, new-fangled product launches and extension in its Alinia and Locoid
lotion brands to stem Bx slide and revitalize growth.
Prospective M&A Activity to expand LPCs presence in RoW markets (of CIS and
Latam) is another growth driver going forward.
Sluggish rate of FDA approval

and slower than expected
turnaround of Irom business in
Japan can cause downside to
our estimates.
KeyConcerns:
Delay in regulatory approval affecting US launches

Slow than expected turnaround of Irom business in the JPM affecting LPCs strategy
in Japan.
Potential generic competition in LPCs US Bx business, especially in Suprax can
result in escalating declension of revenue realization and hinder Bx brand rebuilding
endeavours.
Currency depreciation in EMs can also lead to depression in our estimates, given
LPCs ~10% dependence of overall revenues from RoW markets.
11 March 2015 | Page 66
Lupin Ltd.
Financials
P&L
P&L
Ratio Analysis
FY14
FY15E
FY16E
FY17E
Gross Sales
113,671
135,039
160,583
188,640
Net Sales
112,866
134,176
159,557
187,435
Expenditure
82,838
98,443
116,800
135,397
Operating Profit (incl. OI)
30,028
35,733
42,757
52,039
OI
1,165
1,188
1,212
1,236
EBIDTA
31,193
36,921
43,969
53,275
Interest
267
267
268
268
2,610
2,740
2,877
3,021
Depreciation
PBT
28,317
33,914
40,824
49,985
Tax
9,622
10,174
12,247
14,996
PAT
18,695
23,739
28,577
34,990
41.0
52.9
63.6
77.9
EPS
Balance Sheet
Balance Sheet (in INR
mn.)
ASSETS
Gross Block
Net block
Long Term Loans and
Advances
Current Investment
Inventories
Cash and Bank
Short Term loan and
advances
Sundry Debtors
Total Assets
FY14
FY15E
FY16E
FY17E
448.4
41.0
3.0
47.5
154.7
154.7
34.0%
44.7
16.4%
30.8%
27.6%
19.9%
25.1%
6,537
45.7
7.4
2.7
449.1
52.9
10.0
59.0
198.7
198.7
32.0%
49.3
17.6%
29.9%
27.5%
20.9%
25.3%
6,574
35.4
6.3
1.9
449.1
63.6
15.0
70.0
250.1
250.1
30.0%
58.5
17.8%
28.4%
27.6%
20.2%
25.6%
7,817
29.4
5.3
1.6
449.1
77.9
15.0
84.6
316.1
316.1
30.0%
71.0
18.5%
27.5%
28.4%
19.9%
26.6%
9,183
24.0
4.5
1.4
Cash Flow
FY14
FY15E
FY16E
FY17E
Cash Flow Tables

PBT
52,839
33,556
21
69,049
48,802
21
87,037
64,360
21
111,447
85,822
21
3,730
1,764
21,295
7,975
2,313
4,431
25,298
9,759
2,748
5,269
30,083
11,509
3,268
6,190
35,339
13,322
3,839
3,017
24,641
2,843
101,154
3,584
29,273
3,377
127,292
4,262
34,810
4,016
157,597
5,007
40,893
4,717
195,148
LIABILITIES
Share Capital
897
Total Reserves
68,157
Long Term Borrowing
5,072
Trade Payable
15,941
2,876
4,024
3,454
Minority Interest
669
Total Liabilities
101,090
897
88,336
6,025
18,938
3,417
4,780
4,103
795
127,292
897
111,442
7,165
22,520
4,063
5,684
4,879
946
157,597
897
141,086
8,417
26,455
4,773
6,678
5,732
1,111
195,148
RATIOS
Shares
EPS (in INR.)
DPS (in INR.)
CEPS ((in INR.)
Adj. BV (in INR.)
PATM%
ROE%
EBIDTAM%
ROA%
OPM%
P/E Ratio
P/BV Ratio
PEG Ratio
Adjustments
Net Profit
FY14
FY15E
FY16E
FY17E
28,317
33,914
40,824
49,985
4,105
3,957
4,275
4,617
32,422
Changes in WC
(4,663)
WC
27,758
Cash from Operating
Activities
20,039
Activities
(8,585)
Cash from Financing
Activities
(8,571)
2,883
Opening Cash & Cash
Equivalents
3,109
Closing Cash & Cash
Equivalent
6,066
37,871
45,099
54,602
(5,540)
(6,588)
(7,739)
32,331
38,511
46,863
22,157
26,264
31,868
(10,199)
(12,129)
(14,248)
(10,182)
(12,108)
(14,224)
1,776
2,027
3,396
6,066
7,842
9,869
7,842
9,869
13,265
11 March 2015 | Page 67
Lupin Ltd.
Company Profile
Lupin is an innovation led transnational pharmaceutical company producing and
developing a wide range of branded and generic formulations as well as biotechnology
products and APIs globally. The Company is a significant player in the Cardiovascular,
Diabetology, Asthma, Pediatric, CNS, GI, Anti-Infective and NSAID space and holds
global leadership positions in the Anti-TB and Cephalosporin segment. Lupin is the 5th
largest and fastest growing top 5 generics player in the US (5.3% market share by
prescriptions, IMS Health) and the 3rd largest Indian pharmaceutical company by sales.
The Company is also amongst the top10 generic pharmaceutical players in Japan and
South Africa (IMS).
11 March 2015 | Page 68
India Research
11 March 2015
Dr Reddys Labs| BUY

INITIATING COVERAGE
Bloomberg Code: DRRD:IN | Reuters Code: REDY.NS
Ripe for gains

Dr. Reddys Laboratories Limited (DRRD)
DRRD with its robust and rich ANDA pipeline and abundant growth drivers in place such as
traction in US markets sustained by newer launches, turnaround in the PSAI segment and
vigorous momentum in RoW markets, gives us confidence that DRRD will continue to trade on
a higher end of its PE band. We remain convinced of DRRDs execution competence and new
catalysts in place to drive further earning upgrades and re-rating. DRRDs key strength lies in
its drug discovery pipeline, NCE division and its robust US operations. We expect DRRD to
register a growth of 14.4% CAGR over FY14FY17E from INR 132bn to INR 198bn in FY17E
posting a PAT growth of ~16% CAGR over the period from INR 19.6bn in FY14 to INR 30.4bn
in FY17E.We assign a BUY rating to DRRD to arrive at a TP of INR 4,909 with a potential
upside of 41%.
Pharmaceuticals
Current Price:
INR 3,477
Target Price:
INR 4,909
Expected Upside (%)
41%
Stock Details
Bloomberg Code
DRRD: IN

DRRD has established a front foot in the niche and complex to manufacture segment of the
US markets with steadily enhancing its product pipeline, with a pending product pipeline of 72
ANDAs targeting an addressable market of ~ USD 40bn of innovator brand sales value. We
expect DRRD to clock a 20% CAGR growth over FY14-17E in the US markets from USD
921mn in FY14 to USD 1.6bn in FY17E on back of ramp up in product launches in limited
competition generics landscape in the US markets.
Reuters Code
REDY.NS

DRRD domestic operations account for ~13% share in its consolidated revenue in FY14 which
stood at INR 15.7bn up by ~8% YoY. DRRD enjoys a strong footing in the untapped
opportunity amongst the anit-neoplastics (oncology) portfolio and a robust GI portfolio. We
expect DRRD to clock earnings growth of 18.3% CAGR from INR 1.1bn in FY14 to INR 1.9bn
in FY17E on account of deeper market penetration and enjoying limited competition in the
biosimilar marketplace; with DRRD possessing a strong biosimilars pipeline enabling a
strengthened product offering across all verticals.
591,785
52 week H/L (INR)
3,662 / 2,250
Promoter Group
25.49%
FII
38.53%
DII
5.68%
Others
30.30%

DRRD
100%
BSEHC
80%
60%
40%
20%
0%
-20%
FY14A
FY15E
FY16E
FY17E
CAGR (%)
Net Sales(INR bn)
134
148
171
198
14
PAT (INR bn)
19
21
24
30
16
PATM%
14.6
14.4
14.3
15.3
NA
RoE %
27.6
26.8
27
26.3
NA
EPS (INR)
115
125
144
179
24
BV (INR)
463
468
597
761
18
P/E (x)
30
25
24
19
NA
Mar-15
Stock Performance
Return (%)
1 Mth
6 Mths
1 Yr
Absolute
12%
17%
29%
Relative*
(1)%
(8)%
(38)%
Key Financials
Year
Jan-15
Nov-14
Sep-14
Jul-14
May-14
Mar-14
Jan-14

PSAI witnessed a staggered growth of ~6% CAGR from INR 16.6bn in FY08 to INR 24bn in
FY14 attributable to elevated internal captive consumption of API, inferior external sales on
account of subdued demand and price correction in the API sector. We expect PSAI segment
to register a temperate growth of 5.7% CAGR to INR 28.4bn in FY17E, as DRRD indicated
recovery in its order book for CPS with revenues flowing through going forward.
170.2
M Cap (INR mn)
Nov-13

DRRD has enhanced its presence by steadily growing in the Russian markets, increasing its
share in revenues from 10% in FY10 to 13% in FY14 on back of rampant market penetration
and strong foray into the OTC segments which constitutes ~39% of overall Russian revenues
in H1FY15. We anticipate DRRD to grow at a sluggish rate of 6.4% CAGR over FY14-17E
from INR 16.3bn in FY14 to INR 19.7bn in FY17E due to an uncertain macroeconomic
condition in the region, high degree of currency depreciation and moderate enlargement in the
OTC portfolio foreseen in the markets. If this depreciation trend persists on RUB in a longer
run, we can expect DRRD to be jolted with a sizeable plunge in revenues from its Russian &
CIS geographies, which clubbed in all contributes 16% to overall revenues in FY14.
EU operations have plummeted substantially from holding 14% share in revenues in FY10 to
~5% in FY14 de-growing considerably by ~8% CAGR to INR 6.9bn in FY14 on account of
catastrophic acquisition of Betapharm of Germany, which still presents a sluggish turnaround.
RoW markets formed ~6% of DRRDs overall revenues in FY14, budding at a whopping 27%
CAGR from INR 2.8bn in FY10 to INR 7.3bn in FY14. The RoW markets for DRRD comprises
of South Africa, Brazil, Venezuela, Turkey, Australia and Mexico. We expect a 19% CARG
growth from INR 7.3bn in FY14 to INR 12.4bn in FY17E in these markets through vigorous
launches and strategic tie-ups providing a massive growth arena for DRRD to spread.
Shares O/S (mn)
Analyst
Hemanshu Srivastava
Tel: 022-30863778
Dr Reddys Laboratories
Dr. Reddys Laboratories (DRRD)

DRRD with its robust and rich ANDA pipeline and abundant growth drivers at place such
as traction in US markets sustained by newer launches, turnaround in the PSAI segment
and vigorous momentum in RoW markets, is likely to remain on a higher end of its PE
band as we remain convinced of its execution competence and new catalysts in place to
drive further earning upgrades and re-rating. DRRDs key forte lies in its drug discovery
pipeline, NCE division and its robust US operations.
We expect DRRD to register a growth of ~14.6% CAGR over FY14 FY17E from INR
132bn in FY14 to INR 198bn in FY17E posting a PAT growth of 15.7% CAGR over the
period from INR 19.6bn in FY14 to INR 30.4bn in FY17E with a consistent EBITDA
margins of ~25% in FY17E.
We assign a BUY rating to DRRD valuing its base business at a 22x FY17E EPS of INR
223.1 (Base business at INR 178.7, Habitrol acquisition to add INR 6.6 and key ANDA
opportunities at INR 37.8) to arrive at a TP of INR 4,909 with a potential upside of 41%.
11 March 2015 | Page 70
Business Mix
DRRD derives its revenues from 4 major markets, US; Indian, Russia & CIS and RoW.
DRRD has grown at a 17% CAGR over FY04-14 from USD 463mn in FY04 to USD 2,203mn in
FY14 on back of sturdy US operations coupled with rampant launches in the US markets, strategic
prominence towards Russian and RoW markets coupled with valuable launches in the Indian
markets encompassing biosimilars.
Q3FY15
Q2FY15
PSAI
Exhibit 4: FY14 revenue contribution
CIS
3%
24.0
3.1
132.2
10.9
100
US
43%
50
India
12%
RoW
6%
RoW & CIS
Exhibit 3: FY14 geographic spread

EU
PSAI 5%
18%
Q1FY15
Europe
Q4FY14
FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14
Russia
Q3FY14
546
447
India
Q2FY14
FY04
1365
Q1FY14
1250
463
1677
1563
1510
US
Q4FY13
1901
18000
16000
14000
12000
10000
8000
6000
4000
2000
0
Q3FY13
2133 2203
Q2FY13
CAGR 17%
Exhibit 2: Quarterly Revenue mix of DRRD (INR mn)
Q1FY13
Exhibit 1: Annual revenue trend of DRRD (USD mn)
16.3
55.3
7.0
15.7
0
US
Russia
13%
India
Russia Europe
RoW &
CIS
PSAI
Others
Total
Exhibit 5: Financial health of DRRD

35%
0.30
30%
0.25
25%
PATM
RoCE (pretax)
0.20
20%
0.15
15%
10%
0.10
5%
0.05
0%
0.00
FY10
FY11
FY12
FY13
FY14
RoCE
Net
Debt:Equity
Ratio
9MFY15
Exhibit 6: Quarterly Revenue mix

120%
PSAI %
100%
40%
22%
9%
8%
14%
14%
27%
6%
7%
11%
13%
25%
7%
8%
13%
13%
30%
5%
7%
11%
10%
20%
31%
32%
32%
34%
38%
39%
46%
43%
47%
40%
44%
Q2FY14
Q3FY14
Q4FY14
Q1FY15
Q2FY15
Q3FY15
16%
12%
5%
10%
11%
Q1FY14
18%
4%
12%
12%
13%
Q4FY13
16%
4%
8%
12%
11%
Q3FY13
19%
5%
8%
11%
12%
Q2FY13
14%
5%
9%
12%
11%
Q1FY13
19%
5%
8%
14%
13%
21%
6%
8%
13%
12%
80%
60%
Europe %
CIS & RoW
%
Russia %
0%
India%
US%
11 March 2015 | Page 71

DRRD has established a front foot in the niche and complex to manufacture segment of
the US markets with steadily enhancing its product pipeline, with a pending product
pipeline of 72 ANDAs targeting an addressable market of USD 40 bn of innovator brand
sales value. Of these 72 pending ANDAs, 30 target the complex generics, 45 Para IV
filings and 11 FTF status products. A forte of product pipeline constituting a strudy and
well-built injectable protfolio (amassing sales of ~USD 225mn in FY14); 72pending
ANDAs for Oral, Topical, Transdermal, Injectable and OSD and 2 pending NDA
approvals with the FDA targeting a peak potential sales turnover in the range of USD 30 300mn can position DRRD in the driving seat for an enhanced, sustained and continous
revenue source in the cutthroat US generics marketspace.
Exhibit 7: Drug Filing and Approvals obtainted in FY14
Softgel , 3
Topical/Tran
sdermal, 4
Injectables ,
10
Exhibit 8: US sales (USD mn)
Complex
Injectables/S
terile , 15
CAGR
32%
1000
900
800
700
600
500
400
300
200
100
0
Complex
OSD, 10
OSD, 30
100
921
54
301
FY10
417
FY11
570
FY12
738
FY13
FY14
780
9MFY15
Recent approvals from FDA to market Nexium (USD 4bn), Valcyte (USD 440mn),
Docetaxel Injection (USD 218mn), Allegra D-12 (USD200 mn), Rapamune (USD200 mn),
DRRD has established a well-built pipeline targeting niche and complex to manufacture
molecules catering towards controlled driven escalation with approvals expected through
FY15E FY17E of Copaxone (USD 2.5bn), Glivec ( USD 2bn), Liposomal Doxorubicin
(USD 300mn), Xeloda and Evista (USD 1.5bn), Namenda (USD 1.5bnHigh
competition), Lunesta (USD 750mn), Pristiq (USD 600mnLimited Competition), Zemplar
(USD 150mn Limited Competition), Aloxi (USD 420mn FTF), Cymbalta (USD 2.5bn
High Competition), Mozobil (USD 720mn FTF) and biosimilars Rituxan ( USD 1.5bn) &
Neulasta (USD 1.5bn).
Exhibit 9: Quarterly ANDA Approvals
16
14
13
9
13
9
2
Q1FY15
FY14
Q4FY14
Q3FY14
Q2FY14
Q1FY14
FY13
Approved
2
0
Q3FY15
44
22
9MFY15
Q2FY15
Q2FY13
ANDA Filed
Q4FY13
4
2
Q3FY13
Q1FY13
18
16
14
12
10
8
6
4
2
0
DRRD has witnessed a massive growth of ~32% CAGR in its US operations from USD
303mn in FY10 to USD 921mn in FY14 on account of bouyant progress in the generics
landscape interlinked with flourishing penetration in key molecules such as Zolderonic
Acid (65%/62% market share in Q4FY14/H1FY15), Decitabine (58%/70% market share
in Q4FY14/H1FY15), Azacitidine (44%/54% market share in Q4FY14/H1FY15).
Divalproex ER (11%/20% market share in Q1FY15/Q2FY15), Ziprasidone(30%/48%
market share in Q1FY15/Q2FY15) & Metoprolol (19%/23% market sharein
Q1FY15/Q2FY15).
We expect DRRD to clock a

21.3% CAGR growth over FY1417E in the US markets from
USD 921mn in FY14 to USD
1.6bn in FY17E.
11 March 2015 | Page 72
Exhibit 10: Market share data of DRRDs top drugs in US
Molecules
Mar
May
Jun
Aug
Decitabine
58%
62%
66%
70%
Azacitidine
44%
44%
54%
54%
Zolderonic Acid
60%
62%
61%
56%
Metoprolol
16%
19%
20%
23%
Divalproex ER
9%
11%
12%
20%
Ziprasidone
2%
30%
44%
48%
Copaxone
20mg
&
40mg
generates ~USD 4.2bn in sales
to Teva. With Teva enhancing
Copaxone 40 mg market share,
the tapered Copaxone 20mg
market of ~USD 1.5 bn will only
fetch DRRD ~ USD 15-23mn in
sales.
Exhibit 11: QoQ US sales of DRRD (INR mn)

80%
70%
60%
50%
40%
30%
20%
10%
0%
Q3FY15
Q2FY15
Q1FY15
Q4FY14
Q3FY14
Q2FY14
Y-o-Y %
Q1FY14
Q3FY13
Q2FY13
Q1FY13
Sales
Q4FY13
18000
16000
14000
12000
10000
8000
6000
4000
2000
0
We expect DRRD to clock a base business CAGR growth of 14.6% from FY14 to FY17E
(excluding one-offs and ANDA launches) on account of efficient product mix, stipulated
launches in the niche segment and deeper penetration in the US markets proepelling
DRRDs revenue from US operations from USD 921mn in FY14 to USD1,591mn in
FY17E.
Copaxone 20mg & 40mg generates ~USD 4.2bn in sales to Teva. Currently 4 filers
Natco, Momenta, Synthon and DRRD are expected to receive approvals in September
2015 for Copaxone 20mg with the opportunity to launch Copaxone 40mg available in
FY17. We expect Copaxone 20 mg to turn into a 5 generics players market in Spetember
2015. With Teva enhancing Copaxone 40 mg market share through conversion of ~65%
patients from 20mg to 40mg and pricing the product at a ~13% discount to cushion the
impact of generics launch. Henceforth, the tapered Copaxone 20mg market of ~USD 1.5
bn will only fetch DRRD ~ USD 15-23mn in sales.
Nexium (USD 4bn), a limited generics competition arena, can potentially harness DRRD
reveneues intune of USD 56mn. Other high value ANDA launches at DRRDs disposal
include of Namenda (ability to generate USD 34mn/yr), Pristiq (abiltiy to generate USD
56mn/yr) and Gleevec (ability to generate USD 45mn/yr).
Late opportunities in FY19 21 for DRRD include Viagra, Mozobil, etc. DRRD enjoys a
FTF status for Mozobil (USD 720 mn) of Sanofi/Genzyme, enabling marketing exclusivity
period of 6 months with prospects of clocking a turnover of USD 115mn for the drug.
Viagra from Pfizer runs out of patent protection in FY20-21, enabling DRRD to benefit
from limited competition and early entry, generating ~USD 72mn/yr from the drug.
We expect DRRD to clock a 21.3% CAGR growth over FY14-17E in the US markets
from USD 921mn in FY14 to USD 1.6bn in FY17E on back of rampup in product
launches in limited competition generics landscape in the US markets.
Habitrol Acquistion
An OTC nicotine replacement therapy transdermal patch which DRRD has acquired from
Novartis as indicated by the management complements its OTC portfolio in the US and
has market opportunity of ~USD 58mn. We expect the Habitrol acquistion to further pave
the way for DRRD to move in-roads into the US OTC markets, which has grown from 3%
stake in revenues in FY08 to 25% in FY14. We expect Habitrol brand to grow at 13%
CAGR from USD 58mn in FY14 to USD 82.7mn in FY17E enabling superior stake and
de-risks the business model allowing DRRD deeper access into the US OTC markets.
We expect Habitrol brand to

grow at 13% CAGR from USD
58mn in FY14 to USD 82.7mn in
FY17E.
11 March 2015 | Page 73
Exhibit 12: North American revenue trajectory
One Time
100%
3%
5%
80%
60%
40%
92%
36%
5%
2%
57%
20%
US OTC
Canada
15%
9%
3%
15%
3%
US Rx
14%
21%
20%
25%
2%
2%
78%
73%
FY13
FY14
2%
73%
82%
FY10
FY11
63%
0%
FY08
FY09
FY12
Exhibit 13: Habitrol revenue projectipons (USD mn)
Exhibit 14: DRRDs ANDA pipeline

Drugs
Market Size
Release Date
FTF
Nexium
2,500
FY15
No
Copaxone 20mg
1,500
2016
No
Copaxone 40mg
2,500
2016
No
Liposomal Doxorubicin
300
FY16
No
Xeloda and Evista
1,500
FY16
No
Glivec
2,000
FY16
No
Valcyte
440
FY15
No
Rituxan
1,500
2016
No
Neulasta
1,500
2017
No
200
Nov-14
No
Allegra D-24
DocetaxelInj
218
1-Nov
No
Cymbalta
2,500
FY15
No
Namenda
1,500
FY16
No
Aloxi
420
FY16
No
Zemplar
150
FY15
No
Pristiq
900
FY16
No
Rapamune
269
FY16
No
Mozobil
720
FY19-FY20
Yes
Lunesta
750
FY15
No
Treanda
530
May-16
Exp. FTF
Viagra
1,800
FY20 - 21
No
Effient
609
FY17
No
Amitiza
450
Unknown
No
Diprivan
75
Jan-16
No
Kuvan
134
2-Apr-17
No
Vascepa
110
Sep-16
No
Vimovo
292
23-Apr-16
No

11 March 2015 | Page 74

DRRD is a research driven Indian pharma exhibiting a high degree of research in
innovative pharma segment as well as in reverse engineering of branded generics
formulation. Branded generics sector holds ~72% of the market share in the Indian
pharma industry. Formulations division of DRRD alone contributed ~82% in consolidated
revenue in FY14.
DRRD has been a laggard in the IPM in comparison to its peers, growing at a 12%
CAGR from INR 10.2bn in FY10 to INR 16bn in FY14 because of high dependence on
acute therapeutic segment as comparison to high dominance in chronic segment by the
peers. DRRDs domestic operations account for ~13% share in its consolidated revenue
in FY14 which stood at INR 15.7bn up by ~8% YoY. In terms of ranks based on revenue
generated, DRRD ranks 18th in the IPM, having a market share of 2.19%. DRRD enjoys a
strong footing in the untapped opportunity amongst the anit-neoplastics (oncology)
portfolio and a robust GI portfolio.
DRRD currently enjoys a 2.19% market share in the Indian Pharma market and with
an arsenal of products lined up, stronger recovery being witnessed in the IPM,
DRRD can grow at 13.3% CAGR from FY14FY17E enhancing its revenue from
Indian operations from INR 16bn in FY14 to INR 23bn in FY17E.
DRRDs Domestic market is

expected to grow at 13.3%
CAGR from FY14 FY17E.
Exhibit 15: DRRDs IPM therapeutic breakup

Gynaecology Vitamins Stomatologicals Anti Infective
4%
4% Others 3%
8%
3%
Pain
9%
Anti- Neoplastics
11%
Derma
7%
Anti - Diabetic
6%
Cardiac
17%
GI
23%
Respiratory
5%
Exhibit 16: DRRDs domestic revenue trend (INR mn)

Y-o-Y %
20%
12%
3000
10%
8%
2000
6%
4%
1000
2%
Q3FY15
Q2FY15
Q1FY15
Q4FY14
Q3FY14
Q2FY14
Q1FY14
Q4FY13
Q3FY13
Q2FY13
0%
Q1FY13
20%
13%
14000
14%
11%
20%
15%
12000
15%
10000
8000
10%
6000
8%
4000
5%
2000
0
0%
9MFY15
4000
16000
FY14
14%
25%
FY13
16%
Y-o-Y %
FY12
5000
Sales
18000
FY11
18%
FY10
Sales
6000
Exhibit 17: Annual domestic revenue trend (INR mn)
11 March 2015 | Page 75
DRRD till date has 4 biosimilars in its pocket, launched in the Indian markets namely
Filgrastim (Grafeel), Rituximab (Reditux), Darbepoetin Alpha (Cresp) and Pegfilgrastim
(Peg-grafeel). DRRD has witnessed a massive growth of ~36% CAGR from INR 638mn
in FY10 to INR 2,159mn in FY14 in biosimilars revenues. Even though biosimilar s
presents a lucrative opportunity in itself, the projected traction has not been witnessed as
such. With a high degree of entry barriers at place, huge cost involvement in synthesizing
biosimilars and enormous potential present, we expect DRRD to clock earnings
growth of 18.3% CAGR from INR 2.1bn in FY14 to INR 3.6bn in FY17E on account
of deeper market penetration and enjoying limited competition in the biosimilar
marketplace. With the necessary approvals from the EU and LATAM markets,
DRRD can congregate hefty additional revenue to its biosimilar portfolio.
Exhibit 18: DRRDs biosimilar revenues from Indian markets (INR mn)
CAGR 36%
2500
2000
2159
1500
1502
1000
500
1225
We expect DRRD to clock

earnings growth of 18.3%
CAGR from INR 2.1bn in FY14
to INR 3.6bn in FY17E on
account of deeper market
penetration
and
enjoying
limited competition in the
biosimilar marketplace.
883
638
0
FY10
FY11
FY12
FY13
FY14
11 March 2015 | Page 76
Russian & CIS Markets amidst hurdles

DRRD obtains ~13% of its consolidated revenues from Russian markets which have been growing
at a CAGR of 23% from INR 7.2bn in FY14 to INR 16.3bn in FY14. DRRD has enhanced its
presence by steadily growing in the Russian markets, increasing its share in revenues from 10% in
FY10 to 13% in FY14 on back of rampant market penetration and strong foray into the OTC
segments which constitutes ~39% of overall Russian revenues in H1FY15 as compared with ~18%
in FY10. The Russian Pharma market has grown at ~8% CAGR from FY10 FY14, whereas
DRRD has outgrown the market with a sturdy growth of ~23% CAGR.
Exhibit 20: Russian revenue mix of OTC and Rx
Exhibit 19: Russian annual revenue trend (INR mn)
Sales
Y-o-Y %
Rx
18000
16000
14000
12000
10000
8000
6000
4000
2000
0
60%
50%
80%
40%
60%
30%
0%
0%
FY12
FY13
FY14
71%
66%
26%
29%
34%
39%
18%
FY10
FY11
FY12
FY13
FY14
20%
10%
FY11
74%
61%
82%
40%
20%
FY10
OTC
100%
9MFY15
Exhibit 21: QoQ Russian revenues path (INR mn)
Q3FY15
Q2FY15
Q1FY15
Q4FY14
50%
40%
30%
20%
10%
0%
-10%
-20%
Q3FY14
Q2FY14
Y-o-Y %
Q1FY14
Q3FY13
Q2FY13
Q1FY13
Q4FY13
Sales
5000
4000
3000
2000
1000
0
Currency Crisis Setback

Russian Rouble has depreciated ~84% YTD (Apr-14 to Jan-15), impacting DRRDs revenue
streams heavily. Currently with RUB 840mn as hedges of RUB:INR :: 1.70 maturing over the next 4
months, ~40% of Russian revenues acting as natural hedges and selected price increases in the
OTC segment constituting ~34% of total Russian revenue, enabling DRRD to de-risk the business
model in Russia & CIS region, which has been heavily affected by colossal currency slides in near
term. With crude set to test lower levels of USD 40/barrel in CY15, we expect rouble depreciation
to have a moderate impact of ~ (-5%) on overall revenues of FY15E. We anticipate DRRD to
grow at a sluggish rate of 6.4% CAGR over FY14-17E from INR 16.3bn in FY14 to INR 19.7bn
in FY17E due to an uncertain macroeconomic condition in the region, high degree of
currency depreciation and moderate enlargement in the OTC portfolio foreseen in the
markets. If this depreciation trend persists on RUB in a longer run, we can expect DRRD to be
jolted with a sizeable plunge in revenues from its Russian & CIS geographies, which clubbed in all
contributes ~16% to overall revenues in FY14.
Exhibit 22: Russian markets trajectory
8%
21.0%
17%
16%
19.0%
8%
1%
12.5%
1%
0%
9MFY15
8%
27.5%
FY14
24.0%
FY13
25.0%
27%
23%
FY12
24%
FY11
25%
FY10
30%
25%
20%
15%
10%
5%
0%
Y-o-Y%(Volume Growth)
Industry%
Y-o-Y%(Rev Growth)
We anticipate DRRD to grow

at a sluggish rate of 6.4%
CAGR over FY14-17E from
INR 16.3bn in FY14 to INR
19.7bn in FY17E due to an
uncertain
macroeconomic
condition.

11 March 2015 | Page 77

EU Markets
DRRDs EU operations have plummeted substantially from holding 14% share in
revenues in FY10 to ~5% in FY14. Revenues from EU markets have de-grown
considerably by ~8% CAGR from INR 9.6bn in FY10 to INR 6.9bn in FY14. The
catastrophic acquisition of Betapharm of Germany, which presented a humongous
opportunity in the once striking German markets, presents roadblock to DRRD, which
faces a huge task to turnaround this particular business segment from a tender based
business into a specialty products business establishing a more robust structure. We
expect the EU operations to remain relatively moribund growing by 2.5% CAGR
from INR 6.9bn in FY14 to INR 7.5bn in FY17E owing to global cues, currency crisis
and weak demand witnessed in the region.
Exhibit 23: European revenue trend (INR mn)
Sales
Exhibit 24: European QoQ revenues spread (INR mn)

2,500
Y-o-Y %
12000
41%
50%
Sales
Y-o-Y %
2,000
40%
10000
30%
8000
1,500
20%
6000
-2%
-7%
-13%
0%
-10%
500
Q2FY15
9MFY15
Q1FY15
FY14
Q4FY14
FY13
Q3FY14
FY12
Q2FY14
-30%
FY11
Q1FY14
Q4FY13
-20%
Q3FY13
2000
Q2FY13
-10%
-19%
FY10
1,000
Q1FY13
4000
10%
25%
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
-25%
-30%
RoW Markets
RoW markets formed ~6% of DRRDs overall revenues, budding at a whopping ~27%
CAGR from INR 2.8bn in FY10 to INR 7.3bn in FY14; enlarging its presence and
dominance in DRRDs overall revenue base from 4% in FY10 to ~6% in FY14. The RoW
markets for DRRD comprises of South Africa, Brazil, Venezuela, Turkey, Australia and
Mexico. This massive revenue turnover is attributable to the consistent price hikes
coupled with high base volumes witnessed in these regions.
We expect DRRD to enhance its presence across these high growth markets in the
next couple of years, diversifying its revenue streams by enhancing the presence
of RoW markets to ~7% in overall revenues growing at a CARG of 19% from INR
7.3bn in FY14 to INR 12.4bn in FY17E through vigorous launches and strategic tieups.
Exhibit 25: Annual RoW revenues trend
8,000
7,359
7,000
5,533
6,000
5,000
3,904
4,000
3,000
3,365
2,873
2,000
1,000
0
FY10
FY11
FY12
FY13
FY14
We expect DRRD to enhance

its presence in RoW markets
to ~7% in overall revenues
growing at a CARG of 19%
from INR 7.3bn in FY14 to INR
12.4bn in FY17E.

11 March 2015 | Page 78
PSAI Segment to gradually turnaround

The PSAI segment consists of 2 main sectors i.e. API and CPS (Custom Pharmaceutical
Services) standing currently at a ratio of 69:31 respectively. PSAI witnessed a staggered
growth of ~6% CAGR from INR 16.6bn in FY08 to INR 24bn in FY14 attributable to
elevated internal captive consumption of API, inferior external sales on account of
subdued demand and price correction in the API sector. PSAI segment on a constant
dollar basis has registered a 3.6% CAGR growth over FY08-14 from USD 327mn in
FY08 to USD 404mn in FY14.
On the DMF front, DRRD has filed 215 DMFs in US, 184 DMFs in EU and in RoW
markets, 304 DMFs have been filed. DRRD has reduced its dependency on PSAI
segment from 30% share in FY10 revenues to 19% share in FY14.
We expect PSAI segment to register a temperate growth of 5.7% CAGR from INR
24bn in FY14 to INR 28.4bn in FY17Ewith a diminution in overall revenue share
from 18% in FY14 to 15% in FY17E, as DRRD indicated recovery in its order book
for CPS with revenues flowing through going forward. Henceforth, we iterate a
moderate outlook for the CPS division which could witness steady inflow from its
recovering order book in a couple of quarters. The API segment is also on the cusp
of headwinds, with a host of patent expiries worth ~USD 80bn through FY19E, providing
a prospective revenue source going forward. Management expects the PSAI segment to
develop into a growth engine in the next couple of years.
Exhibit 26: DMF filings of DRRD (Total 720 till 9MFY15)
Exhibit 27: Annual PSAI revenue (INR mn)

Sales (in INR mn)
35000
US, 218
21%
25000
20000
47%
29%
30000
RoW, 313
Y-o-Y %
9%
-4%
15000
10000
Europe, 189
5000
-22%
9MFY15
FY14
FY13
FY12
FY11
FY10
60%
50%
40%
30%
20%
10%
0%
-10%
-20%
-30%
Exhibit 28: QoQ PSAI revenue (INR mn)

33%
12,000
10,000
36%
40%
28%
Sales
Y-o-Y %
20.8%
14%
30%
20%
6%
8,000
10%
0%
-6%
6,000
0%
-10%
-19%
4,000
-20%
-29%
2,000
-35%
-30%
Q3FY15
Q2FY15
Q1FY15
Q4FY14
Q3FY14
Q2FY14
Q1FY14
Q4FY13
Q3FY13
Q2FY13
-40%
Q1FY13
11 March 2015 | Page 79
R&D Activities and Strategic tie-ups

DRRD intends to launch differentiated formulations, construct complex to manufacture
compounds and first to market products thereby establishing a reliable and flexible
supply chain. For such a goal, DRRD has constructed branded generics and proprietary
products portfolio through heavy R&D investments and a globalized access route to a
talent pool and scientific capabilities encompassing ventures with Octoplus Technology
Development Center (TDC) in Netherlands; Chirotech TDC in UK; TDC in Princeton,
USA and Integrated Product Development Center in Hyderabad.
Exhibit 29: Annual R&D spend (INR mn) and its % to overall revenue
14000
12400
11.2%
12000
10000
10%
7.10%
7.0%
9.4%
6.1%
7670
5.0%
5060
6000
3530
4040
7990
6.6%
6.0%
8000
4000
12%
8%
6%
5910
3790
4%
9MFY15
FY14
FY13
FY12
FY11
0%
FY10
FY09
2%
FY08
2000
DRRD has in place 15+ products at differentiated developmental/ clinical stages with a
peak sales potential of USD 30mn 300mn targeting Dermatology and Neurology
segments through creation of a low risk innovation model.
DRRD has assembled a commercial operational base in Dermatological segment
targeting sales in tune of USD 40mn, with a sales force of 54 representatives and
encompassing a pipeline of steroid responsive dermatoses and acne. DRRD is
anticipating its first set NDA filings in 2015/16 with 1-2 NDA filings per year from 2016/17
onwards. DRRDs R&D spend will continue to remain in the upper band of ~11% for
FY15E and FY16E given the kind of innovative model DRRD has fashioned. We expect
these businesses will become self sufficient and cash accretive over 34 years going
forward and would power growth beyond FY20E.
DRRD has assembled a

commercial operational base
in Dermatological segment
targeting sales in tune of USD
40mn.
11 March 2015 | Page 80

DRRD with its robust and rich ANDA pipeline and abundant growth drivers at place such
as traction in US markets sustained by newer launches, turnaround in the PSAI segment
and vigorous momentum in RoW markets, is likely to remain on a higher end of its PE
band as we remain convinced of its execution competence and new catalysts in place to
drive further earning upgrades and re-rating. We assign a BUY rating to DRRD valuing
its base business at a 22x FY17E EPS of INR 223.1 (including base EPS at INR
178.7, Habitrol acquisition to add INR 6.6 and key ANDA opportunities at INR 37.8)
to arrive at a TP of INR 4,909 with a potential upside of 43%.
We expect DRRD to register a growth of 14.6% CAGR over FY14 FY17E from INR
132bn in FY14 to INR 198bn in FY17E posting a PAT growth of 15.7% CAGR over
the period from INR 19.6bn in FY14 to INR 30.4bn in FY17E with a consistent
EBITDA margins of ~25% in FY17E.
Exhibit 30: PE band of DRRD
6000
5000
Price
4000
16x
18x
3000
20x
2000
22x
24x
1000
0
Apr-10
Apr-11
Apr-12
Apr-13
Apr-14
Apr-15
Key Catalysts:
Strong growth in US operations on back of large complex drug ANDA filings and
stronger traction in the launched complex generics.
Earlier than expected Biosimilar launch in Russia.
Earlier than expected turnaround of the PSAI segment and robust traction in the IPM.
Slow rate of FDA approval and

further currency depreciation in
emerging markets can cause a
downside to our estimates.
Key concerns:
Delay in regulatory approvals from FDA affecting US launches.

Adverse foreign exchange fluctuation, especially the continuing depreciation of
Rouble, can cause additional downside to our estimates.
Sluggish growth in the IPM markets can also hamper DRRDs growth prospects.
A potential regulatory risk for DRRDs Indian manufacturing facilities could hamper
DRRDs growth prospects in the UIS markets.
11 March 2015 | Page 81
Financials
P&L
P&L
Ratio Analysis
FY14
FY15E
FY16E
FY17E
Gross Sales
134,973
163,780
174,042
202,441
Net Sales
134,153
160,505
170,562
198,392
Expenditure
OI
101,647
123,654
131,750
151,072
32,506
36,851
38,811
47,321
1,699
1,721
1,743
1,766
EBIDTA
34,205
38,572
40,555
49,087
Interest
1,267
1,330
1,397
1,467
Depreciation
PBT
6,475
7,123
7,835
8,618
26,463
30,119
31,323
39,002
Tax
6,831
6,626
6,891
8,580
PAT
19,632
23,493
24,432
30,421
EPS
115.3
138.0
143.5
178.7
Balance Sheet
ASSETS
Gross Block
Net block
Current Investment
Inventories
Cash and Bank
Sundry Debtors
Total Assets
LIABILITIES
Share Capital
Total Reserves
Long Term Borrowing
Trade Payable
Minority Interest
Total Liabilities
FY14
FY15E
FY16E
FY17E
170.2
115.3
115.3
18.0
153.4
462.7
462.7
25.8%
115.7
14.5%
27.6%
25.5%
14.1%
20.5%
44,770
30.1
4.4
2.3
170.2
138.0
138.0
10.0
179.9
597.5
597.5
22.0%
135.2
14.3%
26.1%
24.0%
13.9%
19.2%
54,325
25.2
3.7
1.3
170.2
143.5
143.5
15.0
189.6
726.0
726.0
22.0%
142.0
14.0%
21.7%
23.8%
12.4%
18.8%
57,729
24.2
3.4
3.9
170.2
178.7
178.7
15.0
229.4
889.8
889.8
22.0%
173.1
15.0%
22.1%
24.7%
13.3%
20.0%
67,149
19.2
3.0
1.2
FY14
FY15E
FY16E
FY17E
PBT
26,463
30,119
31,323
39,002
Adjustments
10,427
11,711
12,694
14,112
Net Profit
36,890
41,830
44,017
53,114
Changes in WC
(10,050)
26,840
WC
Cash from Operating
19,697
Activities
(16,941)
Activities
Cash from Financing
(242)
Activities
2,514
Opening Cash & Cash
5,204
Equivalents
Closing Cash & Cash
8,624
Equivalent
(12,195)
(12,959)
(15,074)
29,635
31,058
38,040
23,009
24,167
29,460
(20,557)
(21,845)
(25,409)
(294)
(312)
(363)
2,158
2,010
3,688
8,624
10,782
12,792
10,782
12,792
16,480
Cash Flow
FY14
FY15E
FY16E
FY17E
119,176
46,408
4
2,322
10,664
24,188
23,006
1,704
10,442
33,253
6,388
158,379
144,612
55,471
74
3,203
12,940
29,350
28,993
2,068
12,671
41,050
7,751
193,572
153,673
63,641
74
4,419
13,751
31,189
29,888
2,197
13,465
50,675
8,237
217,537
178,748
72,510
74
6,097
15,995
36,279
35,270
2,556
15,662
62,557
9,581
256,579
851
76,986
21,823
8,932
20,208
20,607
8,157
157,564
RATIOS
Shares
EPS (in INR.)
Adj. EPS (in INR.)
DPS (in INR.)
CEPS ((in INR.)
Adj. BV (in INR.)
PATM%
ROE%
EBIDTAM%
ROA%
OPM%
P/E Ratio
P/BV Ratio
PEG Ratio
851
100,842
24,635
7,883
24,458
25,005
9,898
193,572
851
122,721
23,907
6,958
26,011
26,572
10,518
217,537
851
150,589
25,619
6,141
30,238
30,908
12,234
256,579
Cash Flow
11 March 2015 | Page 82
Company Profile
Dr. Reddys Laboratories is an integrated global pharmaceutical company, committed to
providing affordable and innovative medicines for healthier lives. Through its three
businesses Pharmaceutical Services and Active Ingredients (PSAI), Global Generics
and Proprietary Products Dr. Reddys offers a portfolio of products and services
including APIs, custom pharmaceutical services, generics, biosimilars, differentiated
formulations and NCEs. Therapeutic focus is on gastro-intestinal, cardiovascular,
diabetology, oncology, pain management, anti-infective and pediatrics. Major markets
include India, USA, Russia and CIS, Germany, UK, Venezuela, S. Africa, Romania, and
New Zealand.
11 March 2015 | Page 83
11 March 2015 | Page 84
India Research
11 March 2015
Aurobindo Pharma| BUY

INITIATING COVERAGE
Bloomberg Code: ARBP:IN | Reuters Code: ARBN.BO
Inorganic methodology to fuel growth engine

ARBP with its multiple growth levers in place will witness a rampant growth phase over FY15FY19E dependent on unfolding of its heavily ramped up ADNA portfolio in US, foray into US
OTC markets, strong footprint in the EU markets, a CS portfolio targeting addressable market
of ~USD 500mn, a germinating injectables pipeline and a broad spectrum peptides business
unfolding in longer run, providing a stark essence to ARBPs non-institutional business.
ARBPs presence in these high margins segment of CS, injectables, penems and peptides will
boost its next growth phase since ~60% of the pipeline in these segments is still yet to unfold.
We expect ARBP to post a staggering revenue growth of 28.1% CAGR over FY14-17E from
INR 81bn in FY14 to INR 170bn in FY17E and a whopping 33.1% CAGR growth in PAT from
INR 11.7bn in FY14 to INR 27.5bn in FY17E. Hence we initiate coverage on this stock with a
BUY rating with the TP of INR 1,707 with a potential upside of 54%.
ARBP has matured at a tremendous pace of 45% CAGR in the US markets over FY09-14 on
back of a strong growing generics portfolio and aggressive ANDA filings in the highly
competitive as well as niche and complex to manufacture compounds over the years
We expect ARBP to project a sturdy US operations growth of ~30% CAGR over FY14-17E
period from INR 34bn in FY14 to INR 75.3bn in FY17E on back of a rampant unfolding of
pending ANDAs, robust traction in Injectables units (AuroMedics), strong product pipeline of
AuroLife and foray into interesting growth driving segments of Penems, Oncology, Hormonal
products and CS (USD 500mn opportunity) to amplify sales.
Pharmaceuticals
Current Price:
INR 1,109
Target Price:
INR 1,707
Expected Upside (%)
54%
Stock Details
Bloomberg Code
ARBP:IN
Reuters Code
ARBN.BO
Shares O/S (mn)
291.5
M Cap (INR mn)
323,273
52 week H/L (INR)
1,273 / 483

Promoter Group
54.10%
FII
37.72%
DII
7.95%

0.23%
We expect ARBP to attain a stronghold in several key markets of France, Italy, Portugal and Others
Belgium and to possess a complementing presence in Germany, Netherlands and Spain,
through this acquisition. Also, it will enhance the overall formulation sales of ARBP in the sales
mix to ~85% in FY15.We expect ARBPs overall EU operations to grow at a rate of 11%
CAGR over FY15-17E from INR 31bn in FY15E to INR 38.7bn in FY17E on back of temperate Stock Performance Chart
demand existing in the market coupled with penetration exercises in the various new channels 435%
AURO
BSEHC
such as GxT, Rx, Hx etc. amidst severe pricing pressure faced in EU markets.
335%
FY15E
121
15
13
34.5
53.4
181
21
FY16E
140
20
14.6
32.5
65.9
234
17
FY17E
170
28
16
32.1
88.8
319
12
CAGR (%)
28
33
NA
NA
30
35
NA
Mar-15
FY14A
81
12
14.4
36.7
40.2
129
28
Jan-15
Nov-14
Sep-14
Jul-14
May-14
Mar-14
Stock Performance
Return (%)
1 Mth
6 Mths
1 Yr
Absolute
7%
28%
120%
Relative*
(5)%
4%
53%
Analyst
Key Financials
Year
Net Sales(INR bn)
PAT (INR bn)
PATM%
RoE %
EPS (INR)
BV (INR)
P/E (x)
Jan-14

RoW markets heading sublimely, will witnessing a robust traction in terms of growth and we
expect these markets to grow at a rate of ~23% CAGR over FY14-17E period from INR 4.6 bn
to INR 8.6 bn in FY17E on back of substantial demand pickup, deeper market penetration and
a healthier product portfolio of ARBP encompassing penems, injectables, CS and OCs.
ARBP has also amplified its filing and plans to scale up operations increasing dependence on
NPNC products (non-penicillin and non-cephs) rather than SSPs and Cephs. To leverage its
cost efficiency and strong product filings, ARBP has entered into long-term supply agreements
with Pfizer (Mar-09) and AstraZeneca to reinforce its revenue visibility. We expect a humble
ARV pickup with Cephs to demonstrate a cyclicity trend and with removal of capacity
constraints and bottleneck issues, plus extensive capacity expansion witnessed in its API
plants.
Nov-13

ARBP completed acquisition of Natrol Inc which provides a branded nutraceutical and dietary 235%
supplement platform. On the valuation front, ARBP acquired Natrol for USD 132.5mn at 1.37x 135%
TTM sales. We consider Natrols acquisition to complement ARBPs strategy of having a
35%
diversified presence in US, strengthening its US manufacturing base and adding growth levers
to ARBP as Natrol possess an extensive distribution network chain incorporating retail
-65%
pharmacy chains and specialty health food stores. ARBP has competencies to make a
significant headway into the OTC market as developmental work for 35 OTC monograph
products and exhibit batches is underway.
Hemanshu Srivastava
Tel: 022-30863778

Aurobindo Pharma

ARBP with its multiple growth levers in place will witness a rampant growth phase over
FY15-FY19E dependent on unfolding of its heavily ramped up ADNA portfolio in US,
foray into US OTC markets, strong footprint in the EU markets, a CS portfolio targeting
addressable market of ~USD 500mn, a germinating injectables pipeline and a broad
spectrum peptides business unfolding in longer run, providing a stark essence to ARBPs
non-institutional business.
With a large chunk of the ANDA pie still to unfold coupled with a stronger base business,
improvement in injectables sales and strong growth in Aurolife (largely dependent on CS
releases and non-institutional business portfolio) as ARBPs presence in these high
margins segment of CS, injectables, penems and peptides will boost its next growth
phase since ~60% of the pipeline in these segments is still yet to unfold.

We expect ARBP to post a staggering revenue growth of 28.1% CAGR over FY14-17E
from INR 81bn in FY14 to INR 170bn in FY17E and a whopping 33.1% CAGR growth in
PAT from INR 11.7bn in FY14 to INR 27.5bn in FY17E enhancing its EBITDA margins by
330bps from 22.6% in FY15E to 25.9% in FY17E as in our opinion, improvement in
margins will be witnessed gradually as effects of integration will kick in from FY16E
onwards.
We assign a BUY rating to ARBP valuing its base business at a 18x FY17E EPS of INR
94.8 (base EPS at INR 88.8, key ANDAs at INR 3.5 and Natrol acquisition at INR 2.5) to
arrive at a TP of INR 1,707 with a potential upside of 54%.
11 March 2015 | Page 86
Aurobindo Pharma
Business Mix
ARBP obtain its revenues from 3 foremost markets of US, EU and API (including ARVs, SSPs,
Cephs and NBLs). RoW markets encompassing of India, South Africa, Brazil, Mexico contribute
only a minute fraction to ARBPs overall revenue.
Exhibit 1: FY14 Sales breakdown (INR bn)
Exhibit 2: Capex & Net Debt:EBITDA ratio

Capex
90
10.1
80
82.4
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
8.8
70
9.8
60
50
8.4
6.7
40
4.6
34.0
30
20
10
0
US
EU
RoW
ARV
SSP
Cephs
NBL
6.0
5.0
4.0
3.0
2.0
1.0
0.0
FY12
Total
FY13
FY14
FY15
FY16
Exhibit 3: Debt profile of ARBP
Exhibit 4: Annual revenue trend (INR bn)

Working Capital Loans
Term Loans
700
600
500
400
300
200
100
0
Net Debt/EBITDA
100
82.4
89.6
80
59.2
321
333
358
60
238
82
97
108
112
150
180
180
163
FY12
FY13
FY14
H1FY15
30.3
34.5
FY09
FY10
40
42.3
46.7
20
0
FY11
FY12
FY13
FY14 9MFY15
Exhibit 5: Percentage revenue distribution

100%
9%
20%
14%
21%
9%
20%
15%
80%
16%
60%
24%
18%
13%
13%
14%
6%
7%
16%
5%
8%
17%
5%
8%
16%
13%
13%
7%
8%
26%
28%
25%
30%
FY10
FY11
FY12
FY13
40%
20%
0%
9%
15%
7%
7%
18%
FY09
12%
11%
12%
10%
6%
8%
41%
FY14
7%
8%
7%
8%
5%
NBL
Cephs
27%
SSP
ARV
38%
9MFY15
RoW
EU
US
Exhibit 6: Revenue breakup of ARBP

100
80
60
40
20
0
3
6
7
5
2
2
5
3
7
6
5
2
2
9
4
8
6
7
2
3
12
FY09
FY10
FY11
8
9
8
8
4
5
7
7
6
8
3
4
12
18
FY12
FY13
10
9
10
8
5
7
7
7
7
7
4
24
34
35
FY14
9MFY15
NBL
Cephs
SSP
ARV
RoW
EU
US
11 March 2015 | Page 87
Aurobindo Pharma

ARBP has matured at a tremendous pace of ~45% CAGR in the US markets over FY0914 on back of a strong growing generics portfolio and aggressive ANDA filings in the
highly competitive as well as niche and complex to manufacture compounds over the
years from 82 in FY07 to 378 in H1FY15, with approximately 181 pending approvals
becoming one of the largest ANDA filers amongst its domestic peers and all geared up to
reap the benefits.
Exhibit 7: Products in the Injectable Portfolio
Exhibit 8: US Injectables sales (USD mn)

Products in
Injectable
Portfolio
Respiratory
SSP
Ophthalmic
40
36.7
35
32.3
30
Penems
25
20
General
Parenteral,
51
14.6
15
9.7
10
5
0
FY13
FY14
H1FY14
H1FY15
Exhibit 9: ANDA approvals

400
350
300
145
250
88
200
29
68
84
FY10
32
28
102
119
26
26
27
155
165
165
Awaiting Approvals
9MFY15
FY14
FY13
FY12
Tentative Approval
FY11
FY08
53
26
59
FY09
47
12
23
65
14
49
FY07
100
92
75
150
50
182
Final Approval
ARBP has incremented its US share to revenues from 18% in FY09 to 41% in FY14.
Going ahead, with USD 70bn going off-patent in the US over the next 3 years, we believe
ARBP is well placed to tap this opportunity.
Exhibit 10: QoQ US sales in USD mn
185
193
197
Q2FY15
Q3FY15
93
90
Q3FY13
Q4FY13
117
Q2FY14
80
Q2FY13
59
105
Q1FY14
151
150
100
186
Q1FY15
200
Q4FY14
250
50
ARBP has a massive pending

ANDA arsenal targeting complex
to manufacture coupled with a
highly competitive products
basket. ARBPs AuroLife and
AuroMedics are the two key US
businesses maturing steadily.
Q3FY14
Q1FY13
11 March 2015 | Page 88
Aurobindo Pharma
AuroLife registered ~USD 32mn sales for Q2FY15 as compared with ~USD 25mn in
Q1FY15 with a cumulative filing of 37, whereas ARBPs injectable arm, AuroMedics
generated USD 32mn in H1FY15 (USD 15mn/17mn in Q1FY15/Q2FY15) and ~USD
37mn in FY14. Tazo-Pip is the principal contributor to injectables revenue (~30% in
Q2FY15) followed by Nafcillin, Oxacillin, Lidocaine and Piperacillin. ARBP expects ~USD
70-75mn sales from the injectable segment in FY15E, with filing of 20 -25 injectables and
obtaining approvals for ~25-28 over H2FY15E and FY16E (~Six quarters) period.
ARBP has 7 controlled substances pending for approval by the FDA (having an
addressable market size of ~USD 500mn). ARBP expects to files its 1st DMF for Peptides
at the end of FY15E, followed by 2 more filings in FY16E with inspection anticipated
within a timeframe of 12-18 months. ARBP is expects peptide commercial operations
for regulated markets of US & EU to kick in from end of FY17E onwards with a
peak potential for ~USD 100mn from the 15-20 products present in the markets,
making it one of the most lucrative, high margin business prospect amongst the
entire pharma spectrum.
Exhibit 11: QoQ US revenues in INR mn
56%
Q3FY13
Q4FY13
72%
61%
29%
Q3FY15
50%
62%
Q2FY13
90%
79%
Q2FY15
130%
Y-o-Y %
Q1FY15
US
140%
120%
100%
80%
60%
40%
20%
0%
81%
Q4FY14
Q3FY14
Q2FY14
Q1FY14
20%
Q1FY13
14
12
10
8
6
4
2
0
Exhibit 12: ANDA pipeline of ARBP

Drugs
Market Share
Release Date
FTF
Nexium
4,000
Apr-16
No
Valsartan (Diovan)
2,000
Jan-15
No
Ampyra
366
26-Nov-16
No
Effient
609
29-Jul-16
No
Namenda
2,200
Nov-16
No
Onglyza
733
9-Oct-16
No
Precedex
151
Sep-16
No
Vimpat
643
26-Nov-15
No
Sustiva
185
11-Mar-16
No
In the Penems front, ARBP has filed 2 products, have 1 in product development and 1
product has commenced commercial operations in Mexico, with Brazilian approval along
its heels to push growth further upwards in FY16E. ARBP is concurrently establishing a
front foot in the Oncology and Hormonal turf, developing a strong portfolio for hospital
business in form of vials, pre-filled syringes and soft gel capsules.
ARBP possess a perilous debt profile with current debt standing at ~USD 447mn, and
the management intends to reduce debt levels by another USD 25-40mn in H2FY15E to
bring down its debt to ~USD 410mn.
We expect ARBP to project a

sturdy US operations growth of
~30% CAGR over FY14-17E
period from INR 34bn in FY14 to
INR 75.3bn in FY17E on back of
a rampant unfolding of pending
ANDAs and diversification into
CS and Penems segment.
We expect ARBP to project a sturdy US operations growth of ~30% CAGR over

FY14-17E period from INR 34bn in FY14 to INR 75.3bn in FY17E on back of a
rampant unfolding of pending ANDAs, robust traction in Injectables units, strong
product pipeline of AuroLife and foray into interesting growth driving segments of
Penems and CS to amplify sales.
11 March 2015 | Page 89
Aurobindo Pharma

ARBPs binding offer to acquire commercial operations in seven Western European
countries from Actavis projects steaming aspiration for evolvement. With this acquisition,
ARBP marks a sturdy entry into EU complementing its established base in Germany,
Netherlands and Spain; railroading into French and Italian markets plus an established
infrastructural base in UK. The acquired business generated sales in tune of ~EUR
320mn in CY13 growing at ~10% YoY and augmenting ARBPs EU sales towards ~EUR
400mn. Although these businesses are presently loss-making (~EUR 20mn), ARBP
expects them to return to profitability in amalgamation with its vertically integrated
platform and existing commercial setup.
Exhibit 13: Acquired EU operations spread
Spain
9%
Italy
8%
Exhibit 14: Actaviss acquired businesss dosage forms
Others Powder
8%
1%
Gels
1%
Portugal
5%
France
44%
Netherlands
11%
Liquids
16%
Creams
1%
Capsules
14%
Tablets
59%
Germany
22%
Belgium
1%
The acquisition marks ARBPs entrance and stronghold into 7 key EU markets (apart
from existing market of UK); opens up newer therapeutic segments such as oncology,
hormones, OCs (oral contraceptives), derma, ophthalmic and penems; intensifies
product pipeline competent to launch ~200 products within the next 2-3 years and
enables entrance into newer channels of Rx (Retail generics), Hx (hospital products), Bx
(OP) (branded out of patent products), Generic tenders and OTC.
Exhibit 15: Channels acquired in EU
GxT
16%
OTC
2%
Gx
48%
Exhibit 16: Therapuetic segments of the acquired unit in EU
Dermatologic
al
5%
Other
9%
AntiNeoplastics
9%
CV&Respirat
ory
28%
Hx
25%
CNS
21%
AntiInfectives
15%
Digestives
13%
Rx
9%
ARBP has grown at a rate of ~30% CAGR over FY10-14 in its EU operations from INR
2.4bn in FY10 to INR 6.7bn in FY14. The acquisition will make ARBP one of the leading
Indian pharmaceutical companies in EU and by leveraging its proficient supply
infrastructure, widening product portfolio through introduction of its own products, and an
ingrained hospital infrastructure enabling ARBP to launch its own high margin products
such as injectables and specialty products.
We expect ARBP to attain a stronghold in several key markets of France, Italy,
Portugal and Belgium and to complement ARBPs presence in Germany,
Netherlands and Spain. Also, it will enhance the overall formulation sales of the
company in its sales mix to ~85% in FY15.
11 March 2015 | Page 90
Aurobindo Pharma
ARBP intends to turnaround Actaviss loss making unit in 3 phases:
Step 1: Supplying APIs to Actavis to enhance product mix and leverage operational
efficiencies.
Step 2: Substitution of Actaviss approved product portfolio, with ARBPs
correspondingly approved products.
Step 3: In-house product development and regulatory approval filings in order to
leverage ARBPs vertically integrated platform and benefit from its operational
efficiencies.
Exhibit 17: ARBPs QoQ EU revenue trend

470%
Europe
Y-o-Y %
359% 349%
500%
30
400%
25
300%
24.3
20
200%
82%
36%
67%
9%
29% 36% 46%
100%
-29%
0%
Q3FY15
Q2FY15
Q1FY15
Q4FY14
Q3FY14
Q2FY14
Q1FY14
Q4FY13
Q3FY13
Q2FY13
-100%
Q1FY13
10
9
8
7
6
5
4
3
2
1
0
Exhibit 18: Annual revenue trend of ARBP in EU
15
10
5
6.7
2.0
2.4
3.4
FY09
FY10
FY11
3.8
4.7
FY12
FY13
0
FY14
9MFY15
Exhibit 19: EU revenue projections till FY17E

45.00
38.7
40.00
34.6
35.00
31.1
30.00
25.00
20.00
CAGR 30%
15.00
10.00
5.00
2.0
2.4
3.4
3.8
4.7
FY09
FY10
FY11
FY12
FY13
6.7
0.00
FY14
FY15
FY16E
FY17E
We expect ARBPs overall EU operations to grow at a rate of 11% CAGR over

FY15-17E from INR 31bn in FY15E to INR 38.7bn in FY17E on back of temperate
demand existing in the market coupled with penetration exercises in the various
new channels such as GxT, Rx, Hx etc. amidst severe pricing pressure faced in
generics amongst the EU nations of France, Italy etc. We expect ARBP to enhance
its EU share in overall revenues from 8% in FY14 to 22% in FY17E.
Exhibit 20: ARBPs revenue breakup in FY17E
SSP
8%
Cephs Non Betalactam

(NBL)
6%
9%
ARV
6%
EU
22%
RoW
5%
US
44%
ARBPs strategy to turnaround

this loss making acquisition in
EU remains a key challenge and
with a robust pipeline and new
channels of GxT, Rx and Hx;
ARBP can grow at a 11% CAGR
over FY15-17E.

11 March 2015 | Page 91
Aurobindo Pharma

ARBP completed acquisition of Natrol Inc which provides a branded nutraceutical and
dietary supplement platform. Natrol has USD 97mn in FY14 sales with USD 15.2mn
EBITDA and a PAT of USD 6.4mn. Natrol currently has 7 brands with more than 500
SKUs. ARBP also gets access to Natrols manufacturing base in Chatsworth California.
Natrols core market is principally US along with intensifying sales from Europe and Asia.
The nutraceutical market is pegged at USD 35bn in USA in FY14 and is estimated to
reach USD 55bn in FY20 on back of healthy growth. Natrol mainstay brand categories
include its Core brand Natrol, Sports Nutrition brand Prolab & MRI and Specialty
Products brands like NuHair, Laci Le Beau, Promensil, Shen Min etc.
On the valuation front, ARBP acquired Natrol for USD 132.5mn at 1.37x TTM sales
given that the Natrol has an overall debt of USD 69mn and has been acquired at an
even handed valuation of 2.08x EV/Sales. ARBP also assumed liabilities in tune of
USD 8-10mn.
Exhibit 21: Natrols revenue projection over FY14-19E
Revenue(mn$)
EBIDTAM %
PAT (mn$)
PATM%
160
136
140
124
116
120
100
105
97
20%
25% 25%
21%
22%
20%
18%
16%
80
15%
60
13.1%
40
9.6%
8.2%
20
30%
148
6.6%
11
10.3%
13
10%
11.0%
15
19
5%
0%
FY14
FY15E
FY16E
FY17E
FY18E
FY19E
We consider Natrols acquisition to complement ARBPs strategy of having a diversified

presence in US, strengthening its US manufacturing base and adding growth levers to
ARBP as Natrol possess an extensive distribution network chain incorporating retail
pharmacy chains and specialty health food stores with a strong distribution network with
Walgreens, Cosco etc and an able bodied e-commerce platform enabling ARBP to
tactically position itself into US nutraceuticals space. It provides ARBP with an
opportunity to possess an established platform becoming a part of a growing
Nutraceutical business in US. ARBP has competencies to make a significant headway
into the OTC market as developmental work for 35 OTC monograph products and exhibit
batches is underway.
We expect Natrols acquisition to post a significant earnings growth of 8.7% CAGR
over FY14-17E period on back of elevated demand in the nutraceuticals space, reorganization of its business coupled with new product launches under its flagship
brands. We expect Natrol to post a sturdy PAT growth of 26.2% CAGR over FY14FY17E on account of optimized operational efficiencies achieved in coherence with
ARBP.
ARBP acquired Natrol for USD

132.5mn at 1.37x TTM sales of
USD 97mn in FY14 and we
expect it to showcase a growth
of 8.7% CAGR over FY14-17E
enabling ARBP to enter into the
US OTC segment.
11 March 2015 | Page 92
Aurobindo Pharma

RoW markets heading sublimely
ARBPs RoW markets primarily constitutes markets of Canada, Brazil and South Africa;
with a minute contribution to revenues from markets of India, Russia, Mexico, Australia,
New Zealand, Central African Nations (such as Nigeria, Ghana etc), etc. which have
showcased a massive growth in tune of ~22% CAGR over FY10-14 period from INR
2.1bn in FY10 to INR 4.6bn in FY14. ARBPs RoW markets have witnessed a robust
traction in terms of growth and we expect these markets to grow at a rate of ~23%
CAGR over FY14-17E period from INR 4.6bn to INR 8.6bn in FY17E on back of
substantial demand pickup, deeper market penetration and a healthier product
portfolio of ARBP encompassing penems, injectables, CS and OCs.
Exhibit 22: RoW sales QoQ
2
Exhibit 23: Annual RoW trend and projection over FY14-17E
RoW
100%
Y-o-Y %
80%
1
1
60%
40%
20%
10
8
Q3FY15
Q2FY15
Q1FY15
-40%
Q4FY14
0
Q3FY14
Q2FY14
-20%
Q1FY14
0
Q4FY13
Q3FY13
5.9
0%
Q2FY13
7.0
1
0
Q1FY13
8.6
4.2
2.0
2.1
2.0
4.6
2.6
1
0
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16EFY17E
Supply agreements and additional gears in play to further fortify

growth
ARBP has amplified its filing and plans to scale up operations increasing dependence on
NPNC products (non-penicillin and non-cephs) rather than SSPs and Cephs. To
leverage its cost efficiency and strong product filings, ARBP has entered into long-term
supply agreements with Pfizer (Mar-09) and AstraZeneca (Sept-10), providing significant
revenue visibility going forward. ARBP also plans to strengthen its revenue visibility with
other MNCs for more supply agreements.
Exhibit 24: ARBPs API segmentation over FY09-FY14
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
17%
24%
25%
19%
22%
27%
33%
33%
35%
18%
16%
17%
25%
25%
30%
25%
27%
20%
34%
29%
23%
24%
24%
27%
FY09
FY10
FY11
FY12
FY13
FY14
Non Betalactam
SSP & Ceph - Sterile
Ceph - Oral
We expect ARBPs RoW markets

to grow at a rate of ~23% CAGR
over FY14-17E period from INR
4.6bn to INR 8.6bn in FY17E.
SSP - Oral
ARBP is one of the largest generic suppliers under ARV contracts, with a 35% market
share. The company enjoys high market share on account of being vertically integrated
in all its products as well as possess a larger product basket. On the ARV facade cyclicity
persists with the current trend in place, as the management has guided towards an
11 March 2015 | Page 93
Aurobindo Pharma
overall topline growing in the range of 9-10%, whereas the bottomline showcasing
enhanced effect due to a superior product mix constituting of triple combination products
having higher margins and lower rate of competition. Given the kind of skewedness the
tender business in ARV presents, H2FY15 tends to be a more robust in terms of growth.
We expect a humble ARV pickup of ~8% CAGR from INR 8.4bn in FY10 to INR 10.7bn in
FY17E owing to persistent seasonal trends and currency depreciation amongst various
emerging economies.
ARV
Y-o-Y %
60%
CAGR 8%
12
10.7
8
6
-20%
1
1
-60%
5.0
8.4
8.8
9.5
-40%
Q3FY15
Q2FY15
Q1FY15
Q4FY14
Q3FY14
Q2FY14
Q1FY14
Q4FY13
Q3FY13
Q2FY13
Q1FY13
4.6
FY11
7.5
6.9
FY10
0%
FY09
7.9
FY13
CAGR 14%
20%
FY12
FY15
10
FY14
40%
FY17E
Exhibit 26: Annual ARV trend and projections over FY14-17E
FY16E
Exhibit 25: ARBPs ARV QoQ revenue
In FD units, capex investment into Unit-7 in terms of capacity is underway and the facility
for Actaviss EU requirement in Vizag, has also commenced. For the next growth trigger
in ARBPs US operations, commencement of a facility in Naidupet is underway. ARBP
plans to enhance its presence in niche product pipeline of microspheric and liposomal
drug delivery products apart from CS, injectables and peptides which it already
possesses.
18.0
80%
16.0
10.0
20%
8.0
0%
6.0
4.0
CAGR 35%
8.3
6.9
2.7
3.1
3.9
2.0
FY17E
FY16E
0.0
FY15
Q3FY15
Q2FY15
Q1FY15
Q4FY14
Q3FY14
Q2FY14
Q1FY14
Q4FY13
-40%
Q3FY13
0
Q2FY13
-20%
Q1FY13
12.0
40%
2
1
14.0
FY14
60%
15.4
CAGR 15%
13.0
11.3
10.1
FY13
100%
FY12
Y-o-Y %
FY11
Non- Betalactam
FY10
Exhibit 28: NBL annual trend and projection over FY14-17E
FY09
Exhibit 27: NBL QoQ revenues
~90% of ARBPs API requirement is met through internal captive consumption. ARBP
has initiated sturdy investment plan across all its plants to remove capacity constraints
and bottlenecks, wherein certain capacities of API would kick in from FY16E, but the
major capacity unit in terms of volumes in Vizag would kick in towards the end of
H2FY16E FY17E.Cephs also demonstrate a cyclicity trend, with the ability to generate
a moderate growth during H2FY15E. Traditionally, Cephs, SSPs and NBLs (Nonbetalactlam) have grown by ~16% CAGR over FY10-14 period from INR 16bn in FY10 to
INR 28.6bn in FY14 on account of colossal growth in NBL products.
11 March 2015 | Page 94
Aurobindo Pharma
Exhibit 29: Cephs QoQ revenue (in INR bn)
Exhibit 30: Cephs annual trend and projection over FY14-17E
Cephalosporins
80%
Y-o-Y %
14
CAGR
12%
70%
60%
12
CAGR 7%
2
50%
2
40%
30%
20%
12.2
10.6
9.5
9.4
10
8.8
8.5
7.5
8
6.3
6.8
10%
2
0%
Q3FY15
Q2FY15
Q1FY15
Q4FY14
Q3FY14
Q2FY14
Q1FY14
Q4FY13
-20%
Q3FY13
2
Q2FY13
-10%
Q1FY13
4
2
0
We expect, with ARBPs ongoing plans to remove capacity constraints and

bottleneck issues, plus extensive capacity expansion witnessed in its API plants,
the Cephs, SSPs and NBL units are the major beneficiaries, amassing stronger
growth in tune of ~11% CAGR over FY14-17E from INR 28.6bn in FY14 to INR 39bn
in FY17E.
Exhibit 31: SSPs QoQ revenue trend (INR bn)
SSP
Exhibit 32: SSP annual trend and projection over FY14-17E
Y-o-Y %
40%
30%
3
2
SSP
14
20%
12
10%
10
CAGR
12%
11
10
8
7
6
Q3FY15
Q2FY15
Q1FY15
Q4FY14
Q3FY14
-30%
Q2FY14
0
Q1FY14
Q4FY13
-20%
Q3FY13
Q2FY13
Q1FY13
-10%
0
We expect SSPs to grow at 10% CAGR from INR 9.7bn to INR 13bn in FY17E;
Cephs to grow at ~12% CAGR from INR 8.7bn to INR 12.2bn in FY17E and NBL
products to showcase a moderate growth of ~15% CAGR from INR 10.1bn in FY14
to INR 15.4bn in FY17E.
13
12
2
0%
CAGR
10%
We expect SSPs to grow at 10%

CAGR, Cephs to grow at ~12%
CAGR and NBL products to
showcase a moderate growth of
~15% CAGR.
11 March 2015 | Page 95
Aurobindo Pharma

ARBP with its robust portfolio encompassing a loaded ANDA pipeline; integration of
Actaviss Western EU operations; invigorating product pipeline (enveloping CS, OCs,
penems, injectables, peptides etc); convalescent debt profile and multiple growth levers
in place, is likely to witness the next re-rating and earnings upgrades as we remain
swayed of its ability to supremely perform and position the catalysts of expansion into the
right direction.
We assign a BUY rating to the stock valuing its base business at 18x FY17E EPS of
INR 94.8 (base EPS of INR 88.8, key ANDAs at INR 3.5 and Natrol acquisition at
INR 2.5) to arrive at a TP of INR 1,707 with a potential upside of 54%.
We expect ARBP to register a growth of 28.1% CAGR over FY14-17E period from
INR 81bn in FY14 to INR 170bn in FY17E posting a PAT growth of 33.1% CAGR
from INR 11.7bn in FY14 to INR 27.5bn in FY17E enhancing its EBIDTA margins by
330bps over FY15-17E to 25.9% in FY17E.
Exhibit 33: PE band of ARBP
2000
1500
Price
12x
14x
16x
18x
20x
1000
500
Jan-16
Oct-15
Jul-15
Apr-15
Jan-15
Oct-14
Jul-14
Apr-14
Jan-14
Oct-13
Jul-13
Apr-13
Jan-13
Oct-12
Jul-12
Apr-12
Jan-12
Oct-11
Jul-11
Apr-11
Jan-11
Oct-10
Jul-10
Apr-10
-500
Source: ACE Equity, Bonanza Research
Key Catalysts:
Earlier than expected recovery of ARBPs Actavis operations can enhance margins
by improving profitability significantly.
ARBPs earnings growth in US markets is principally dependent on a hefty lump of
unfolding ANDAs in its pipeline.
Penems, CS, peptides, hormonal and oncology products are the next levers, ARBP
has in-store, set to drive the subsequent chapter of growth.
Key Concerns:
Delay in regulatory approval from US FDA can upset ARBPs US launches causing a
noteworthy downside to our estimates.
Slow than expected turnaround of Actaviss acquired Western EU operations will
affect ARBPs strategy in EU markets.
Currency depreciation in the EU markets and EMs can cause a downside to our
estimates.
Slow rate of FDA approval can

cause delays in vital product
launches in US plus a sluggish
turnaround in the Actaviss
acquired EU operations can
cause significant downside to
our estimates.
11 March 2015 | Page 96
Aurobindo Pharma
Financials
P&L
P&L (INR mn)
Ratio Analysis
FY14
FY15E
FY16E
FY17E
Gross Sales
82,592
122,558
142,528
172,616
Net Sales
80,998
120,842
140,533
170,200
Expenditure
59,678
93,757
106,568
126,364
Operating Profit (inc. OI)
21,320
27,085
33,964
43,836
OI
232
237
242
247
EBIDTA
21,552
27,322
34,206
44,083
Interest
3,102
3,257
3,420
3,590
Depreciation
3,125
3,313
3,512
3,722
15,325
20,753
27,275
36,770
PBT
Tax
3,635
5,188
6,819
9,192
PAT
11,691
15,565
20,456
27,577
53
66
89
EPS
40
Balance Sheet
Balance Sheet (INR mn.)
ASSETS
Gross Block
Net block
Long Term Loans and
Advances
Current Investment
Inventories
Cash and Bank
Short Term loan and
advances
Sundry Debtors
Total Assets
RATIOS
FY14
Shares
291.5
EPS (in INR.)
40.2
Adj. EPS (in INR.)
40.2
DPS (in INR.)
CEPS ((in INR.)
50.8
128.7
Adj. BV (in INR.)
128.7
23.7%
39.6
PATM%
14.2%
ROE%
36.8%
EBIDTAM%
26.6%
ROA%
15.3%
OPM%
22.3%
37,691
P/E Ratio
27.4
P/BV Ratio
4.0
PEG Ratio
0.7
FY15E
FY16E
FY17E
291.5
53.4
53.4
2.0
64.8
180.8
180.8
25.0%
44.8
12.7%
34.5%
22.6%
16.3%
19.6%
41,672
20.7
2.7
0.4
310.5
65.9
65.9
2.0
77.2
234.8
234.8
25.0%
56.8
14.4%
32.6%
24.3%
16.3%
21.5%
47,334
16.8
2.4
1.0
310.5
88.8
88.8
2.0
100.8
319.2
319.2
25.0%
77.3
16.0%
32.1%
25.9%
17.3%
23.4%
49,675
12.4
2.0
0.6
Cash Flow
FY14
FY15E
FY16E
FY17E
41,830
27,217
198
62,071
41,613
228
72,185
52,750
276
87,424
62,158
276
Cash Flow (INR mn)

PBT
7,890
0
23,675
1,786
2,112
1,937
7
35,132
1,689
2,587
2,440
7
40,857
3,488
3,374
2,715
7
49,482
3,988
3,991
2,372
26,366
2,417
94,898
3,520
34,327
3,458
125,556
4,094
44,326
3,728
156,484
4,958
60,985
3,153
192,685
FY14
FY15E
FY16E
FY17E
15,325
20,753
27,275
36,770
4,927
5,219
5,361
5,411
42,181
Adjustments
Net Profit
20,252
25,972
32,636
Changes in WC
(5,619)
(8,337)
(9,696) (11,743)
Cash Flow after changes in WC
14,633
17,635
22,940
Cash from Operating Activities
11,551
13,060
17,620
30,438
23,995
Cash Flow from Investing Activities (12,499) (18,547) (21,569) (26,122)
Cash from Financing Activities
(2,656) (3,942) (4,584) (5,552)
(3,604) (9,428) (8,533) (7,679)
Opening Cash & Cash Equivalents (45,002) (48,757) (58,185) (66,718)
Closing Cash & Cash Equivalent
(48,757) (58,185) (66,718) (74,396)
LIABILITIES
Share Capital
292
Total Reserves
37,210
Long Term Borrowing
14,939
Trade Payable
13,512
3,877
23,546
1,266
Minority Interest
257
Total Liabilities
94,898
310
52,397
22,168
20,051
5,753
22,688
1,879
310
125,556
310
72,579
25,780
23,318
6,690
25,257
2,185
365
156,484
310
98,797
31,223
28,240
8,103
22,936
2,646
430
192,685
11 March 2015 | Page 97
Aurobindo Pharma
Company Profile
Aurobindo Pharma Limited, headquartered at Hyderabad, India, manufactures generic
pharmaceuticals and active pharmaceutical ingredients. The companys manufacturing
facilities are approved by several leading regulatory agencies like US FDA, UK MHRA,
Japan PMDA, WHO, Health Canada, MCC South Africa, ANVISA Brazil. The companys
robust product portfolio is spread over 6 major therapeutic/product areas encompassing
Antibiotics, Anti-retrovirals, CVS, CNS, Gastroenterologicals, and Anti-Allergics,
supported by an outstanding R&D set-up. The Company is marketing these products
globally, in over 125 countries.
11 March 2015 | Page 98
Aurobindo Pharma
Institutional Equities Team

Kamal Bansal
Head of Equity
kamal@bonanzaonline.com
Yogesh Nagaonkar
Co. Head of Equity & HOR
022-306 3514
n.yogesh@bonanzaonline.com
Sales
022-3086 3681
subham.s@bonanzaonline.com
Institutional Sales
Subham Sinha
Institutional Dealing
Hareesh Bohra
Sales Trader
022-3086 3786
hareeshbohra@bonanzaonline.com
Manoj Pawar
Sales Trader
022-3086 3982
manoj.p@bonanzaonline.com
Nitesh Jalan
Sales Trader
022-3086 3758
nitesh.j@bonanzaonline.com
Corporate Office :Plot No. M-2, Cama Industrial Estate, Walbhat Road, Behind The Hub Goregaon (E), Mumbai - 400 063. Tel.: 022-67605500 / 600
Head Office :2/2 A, First Floor, Lakshmi Insurance Building, Asaf Ali Road, New Delhi - 110 002. Tel.: 011-30181290 / 94
Web: www.bonanzaonline.com
11 March 2015 | Page 99

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Pharmaceutical Sector - Quinque Pillars of Evolution - 11mar2015 1

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March 2015

DR. REDDYS AUROBINDO

(The Whiz kid)

(Quality Emperor) (King of Affordability)

US markets: The biggest chunk of the pie

IPM: Vibrant and stiff

Biosimilars: The next frontier for growth

EMs: Boulevard for burgeoning expansion

Developed Markets: Penetration the key for success

Covered Company Summary

Cipla Ltd. (CIPLA)

Sun Pharmaceuticals Industries Ltd. (SUNP)

Lupin Ltd. (LPC)

Dr Reddys Laboratories (DRRD)

Aurobindo Pharma (ARBP)

11 March 2015 | Page 2

Quinque pillars of evolution

Expected Upside (%)

Expected Upside (%)

Expected Upside (%)

Dr. Reddy Labs

Expected Upside (%)

Expected Upside (%)

SUNP possesses a robust US portfolio capable of higher leverage, a sound management

Source: Company, Bonanza Research

Exhibit 2: Sensex vs. BSEHC index returns chart

Source: Company, Bonanza Research

Exhibit 4: 10 Year performance of the Indian Pharma cos

Source: Company, Bonanza Research

11 March 2015 | Page 4

Grin Labs, Mexico

Intrexon, Merck &

USD 1.2bn contract with

Source: Company, Bonanza Research

11 March 2015 | Page 5

US Markets: The biggest chunk of the pie

We expect the US markets to

Exhibit 6: Value of Drugs to go off patent in US (USD bn)

2008 2009 2010 2011

Source: Bloomberg, Bonanza Research

2012 2013 2014

Source: Bloomberg, Bonanza Research

Source: Bloomberg, Bonanza Research

11 March 2015 | Page 6

HCV: Direct Acting Antivirals (DAA)

Source: Bloomberg, Bonanza Research

Diabetes is one of the largest

Exhibit 10: Percentage of contribution from US by Indian cos.

Source: Company, Bonanza Research

Source: Company, Bonanza Research

11 March 2015 | Page 7

Source: Bloomberg, Bonanza Research

11 March 2015 | Page 8

IPM: Vibrant and stiff

HHI of Indian Pharma Market

Source: Company, Bonanza Research

Government-mandated price controls

Delay in new product approvals

Delay in clinical trial approvals

Uncertainties over FDI policy

Market size of IPM according to

11 March 2015 | Page 9

Exhibit 14: IPM Therapy distribution from 2010-2014