Académique Documents
Professionnel Documents
Culture Documents
63
Target (INR)
115
CNX Pharma
7,158
52 Wk High/Low (Rs.)
75 / 53
91,000
Shareholding Pattern
30-Jun-13
Promoters
59
DIIs
13.88
FIIs
2.81
Indian Public
24.12
NRIs/OCBs/Custodians/ Others
Stock Performance
1m
3m
6m
Absolute
1%
0%
1%
Relative
-10%
-10%
-20%
Tie-up with Watson, Aspen and DSM to drive its revenue growth
Indoco has tie-up with Watson /Actavis, USA to filed for 21 products (cumulative
market size of $3 billion), with 10 already filed since the last 3 years. And further to
ramp up its business in the Emerging markets, South Africa, Africa, New Zealand,
Australia, etc, Indoco has partner with Aspen Pharmacare Ltd. (Ninth largest
generic company in world) to market more than 50 products in 30 geographies.
With DSM- Austria, Indoco has signed to manufactured 8 APIs, which could
witness order flow at any time now. Till now, Indoco is growing from its own
capacities. In the last 3 years, Indoco has invested in infrastructure and R&D in
expectation on big over flow. We expect results would start coming, as 4
products launches has started in USA with Watson and also approval would start
getting on its 10 ANDA. Thus, FY14 is going to the year, where result will start to
flow in for Indoco, but from FY15 onwards, visibility will be higher, as results flow
would start getting better and bigger.
Aggressive products launches and marketing to help Indoco to beat industry
growth rate in the domestic market Indoco markets and distributes finished
dosages in 18 therapeutic segments through its 8 marketing divisions. In FY13,
Indoco launched 37 products, out of which 9 products cater to chronic ailments.
In the future, Indoco aims to launch around 30 products every year, with more
from chronic segments. The Company enjoys a good position in the domestic
market with 26 brands ranking amongst the top 5 positions in their respective
segments. We feel that, Indoco is aggressively ramping up its product launches in
the domestic market and this would help in growing its revenue higher than the
industry level of 12% and also would witness margin expansion as more products
is sale from its own brand.
Management Strong, Young and ambitious, is looking for high growth phase
In the last 3 years, many developments had happen, which ranges from new
strategic alliances, investing in R&D and manufacturing infrastructure, to
launching new products, either domestic or in international markets. All this
happening is a sign of the company management willingness to scale up its
operation on a global platform. Indoco strength lies in its large manufacturing
capabilities with strong R&D facilities, supported by large marketing network for
domestic market and international market. We believe that Indoco has the
capabilities to growth faster and bigger and with strong management willing to
take the wheel of growth, we expect more tie-ups with global pharma players,
aggressive products launches and filing of ANDA, ramping up the R&D, which in
all, could transform Indoco to a more integrated global pharma player in future.
FY11
FY12
FY13
FY14E
FY15E
Total Revenue
484
571
632
742
901
1,056
20.19
18.00
10.61
17.36
21.52
17.15
68
85
93
119
157
192
Growth (%)
EBITDA
FY16E
51
47
43
67
93
122
Growth (%)
21.77
-9.24
-7.80
55.10
39.83
31.39
Margin (%)
10.59
8.14
6.79
8.97
10.32
11.58
EPS (Rs.)
8.34
5.05
4.65
7.22
10.09
13.26
PER (x)
7.55
12.48
13.53
8.73
6.24
4.75
EV/EBIDTA (x)
10.82
8.66
7.86
6.16
4.67
3.83
P/B (x)
1.66
1.66
1.40
1.01
1.40
1.21
PAT
Institutional Research
DCF VALUATION
Free Cash Flow (Rs. crore)
FY13
FY14E
FY15E
FY16E
FY17E
FY18E
43
67
93
122
149
178
42
Net Profit
Depreciation
24
25
28
33
38
(19)
(59)
(21)
(53)
(14)
Capex
(43)
(40)
(65)
(72)
(60)
(50)
(7)
35
30
114
174
Discounted Value
(5)
20
15
99
152
FY18E
Terminal Phase
Discounted value till FY18E
286
1,380
Total Value
1,666
153
Net Debt
Total Shareholders Value
1,513
9.22
164
115
82%
Assumptions
Risk Free rate
10.00
Risk Premium
15
Adjusted Beta
0.62
19.3
16%
WACC (%)
Execution Risk Premium (%)
Discount rate (%)
Terminal growth rate (%)
14.391
0.5
14.89
2.0
Institutional Research
INVESTMENT RATIONALE
Watson, Aspen and DSM: Strategic Alliance - Game Changer for Indoco
Tie-up with Watson, is going to gain its pace from FY14 onwards
Indoco has tie-up with Watson /Actavis, USA (Watson) to file for 21
products (cumulative market size of $3 billion). At present, 10 products are
already filed since the last 3 years. Additionally, Indoco has 37 ANDAs at
various stages of development, out of which 13 will be filed in Indoco's
name and the rest through partners in the US market.
Institutional Research
Amt. in Crores
Febrex Plus
110
66
Cyclopam
347
56
Sensodent-K
419
30
ATM
494
26
Cital
486
26
Brands
Indoco is ranked 29th as per AWACs and 26th as per the CMARC Prescription
Ranking (Rxs). Indoco markets and distributes finished dosages in 18
therapeutic segments through its 8 marketing divisions. In FY13, Indoco
launched 37 products, out of which 9 products cater to chronic ailments. In
FY3, Indoco's domestic business witness a healthy growth of around 14%,
better that the industry growth of 12%. Also, during the year, two brands
moved up the ranks, making the total number of brands to five in the top 500
brand category. Indoco has a strong position in the domestic market with its
26 brands ranking amongst the top 5 positions in their respective segments.
In FY13, a number of strategic initiatives were taken by the Company, which
focus on brand building, aggressive product launches, selective therapies,
which are majorly in the chronic segment and training & development of the
field force.
Future Outlook
In the future, Indoco aims to launch around 30 products every
year, with more from chronic segments, which will increase its share
to around 20-25% within the next 3-4 years. We believe that, the
company legacy brands will continue to do well and thus the base
revenue of the company will remain intact, while new launches
could act as the growth drivers.
Thus, we feel that, aggressively product launches in the domestic
market and support with higher marketing people would surely
help in growing its revenue higher than the industry level of 11%12% and this also would result in some margin expansion as more
products will sell from its own brand.
Major therapies of the domestic branded formulations
Therapy (INR In Crores)
Contribution %
FY13
FY12
Respiratory
18.2
73
68
Growth %
7.9
Stomatologicals
17.4
70
60
17.2
Anti - Infectives
15.5
62
56
11.6
Gastro Intestinal
13.7
55
45
21.3
Pain / Analgesics
7.5
30
22
37.9
Ophthalmic / Otologicals
5.6
23
19
21.6
Gynaec.
5.5
22
19
15.6
5.2
21
17
24.2
Institutional Research
revenues of INR 19.5 crores as against INR 36.0 crores during FY12.
Indoco international business is set for a high growth phase from FY14, on account
of strategic alliance and infrastructure investment, which started from the last 3
years. We expect export business to grow to contributing higher from around 35% to
36% in FY14, 41% in FY15 and to 42% in FY16.
Institutional Research
COMPANY STRENGTH
Annual capacities
Tablets
10 billion
Capsules
60 million
Liquid Orals
50 million bottles
External Preparations
15 million tubes
Ampoules
30 million
Vials
60 million
LOCATION
DOSAGE Form
APPROVALS
GOA I
GOA II
STERILE PRODUCTS
GOA III
TABLETS
Under process
WALUJ, Maharashtra
TABLETS
Emerging Markets
EU GMP
Future Outlook
Manufacturing excellence is Indocos core strength. The companys
innate need to constantly evolve and consistently excel has propelled it to
create world class manufacturing facilities to meet the requirements of its
customers. Indoco has been consistently expanding and upgrading its
manufacturing capacities by building newer facilities to meet the
chanlleges of the global markets.
Thus, as one of the leading player in Indian pharma manufacturing space,
we believe that, more tie-ups with global pharma players can happen in
the future, where it can form a strong partnership between manufacturer
and product player. This could lead to acquiring new capabilities in the
field of product development and filling, which could transform it to a
more integrated global pharma player in future.
GOA II Plant
Institutional Research
Location
Intermediates : Rabale
API Business
The API division provides a strong support to the Company's efforts of
backward integration by using own APIs in the ANDAs and Dossiers
developed for regulated markets. At the same time, the available
capacities are being used for manufacturing APIs for catering to domestic
as well as international markets.
Indoco is exporting APIs and intermediates to more than 30 countries
including USA, United Kingdom, Italy, Egypt, Argentina, U.A.E, Guatemala,
Taiwan and Pakistan. Indoco's new initiative - 'AnaCipher' will provide
analytical services and meet customers' analytical research needs, utilizing
its state-of-art infrastructure and highly experienced human resource. The
analytical facility of AnaCipher has been approved by USFDA.
Future outlook
The API business is expected to grow at a much faster pace and will
contribute to the Company's formulation business in regulated markets
through backward integration in selected APIs. Part of the API production
will be marketed in domestic and international markets with higher
penetration in the emerging markets. Indoco has tie up with DSM
Pharmaceutical Products, Austria for marketing 8 APIs and any order from
this tie-up will be a big boost to the API business.
INDOCOs BRANDED PRODUCTS
Institutional Research
API development
Formulation development
Analytical services
FDFs
18
PCT applications
Total
API
24
13
18
37
Institutional Research
Thus in the last 4 years, Indoco has spend more than INR 250 crore in
building up its R&D facilities in Mumbai, plus also has set up another
plant in Goa for formulation and another one for APIs at Rabale, which
is a USFDA compliant. The Goa III plant is in the process of getting
approval by the regulatory authorities from UK-MHRA, TGA Australia &
MCC South Africa. At present, the facility has received Certificate of
GMP compliance from German Regulatory Authority.
Thus, much of this spending are done looking into the expectation of
inflow of order from the international business with Watson and Aspen.
We expect, most of capex is done in the form of ramping up the
formulation business and going ahead, majority of the spending would
be focus on boosting R&D and APIs. The company maintenance spend
is around INR 20 crore.
Institutional Research
Revenue Analysis
In FY13, Indoco total revenue grew by 12.4% to INR 631 crores as compared to
INR 569 in FY12. Domestic business contributes 65% of the revenues and
International business contributes 35% of the revenues. In FY13, the international
business grew by 8.4% at INR 218.7 crores as compared to INR 201.7 crores in
FY12. The regulated markets registered a growth of 21.3% at INR 181.4 crores as
compared to INR 149.5 crores and the emerging markets revenues is down to INR
19.5 crores as compared to INR 36.0 crores in FY12.
In Q1FY14, Indoco is starting for selling its first ANDA approval of Glimepiride,
which has market potential of $ 90 million annually and the API consumption is
around 2000 kgs growing at 11%. Besides this Health-Canada approved of 2
ANDS for ophthalmic solutions will also be incremental growth from FY13.
Whereas we expect domestic market to growth above industry level, supported
by sale from its legacy brands and from its new launches and aggressive
marketing. In the international business, we believe that sales from its partnership
with Watson and Aspen are going to be the big growth driver, which can
provide substantial revenue from FY14 onwards.
From FY10-FY13, Indoco revenue grew at CAGR of 17%. We believe that, due to
Indoco initiative in the tie-up in the international business and from its new focus
APIs business strategy, we would witness high growth phase in export from FY14
onwards. Thus we are expecting a growth for FY13 FY16E period at a CAGR of
18% and for FY13 FY18 period at a CAGR of 17%. Our estimate is taken on a
conservative basis and can easily be surpassed, if order from DSM started flowing
and ANDA approval start ticking as per the estimated timeline of the
management.
Domestic Business
40%
Internation Business
35%
30%
25%
20%
15%
10%
5%
0%
FY11
FY12
FY13
FY14E
FY15E
FY16E
Institutional Research
For the period of FY10 FY13, Indoco net profit grew at a CAGR of just 1%.
However looking into better outlook of the company, we expect the net
profit to grow at a CAGR of 41% for the period from FY13 FY16E and for the
period from FY13 FY18E, the CAGR is 33%. We believe that, Indoco
investment in the last 4 years will start to yield from FY14 onwards and if
successful, will provide a strong visibility from FY15 onwards. We have not
incurred any order inflow from its alliance with DSM, as the visibility of inflow is
not clear at this time, however, if that happen, then the profitability growth
would be much higher than our estimate.
18%
PAT
16%
14%
12%
10%
8%
6%
4%
2%
0%
FY11
FY12
FY13
FY14E
FY15E
FY16E
50%
44%
40%
31%
30%
20%
22%
10%
0%
-10%
FY11
FY12-9%
FY13-8%
FY14E
FY15E
FY16E
-20%
Institutional Research
Institutional Research
Current Asset
Trade Payable
40.0%
Sales
30.0%
20.0%
10.0%
0.0%
-10.0%
FY11
FY12
FY13
FY14E
FY15E
FY16E
FY17E
-20.0%
Institutional Research
EQUITY VALUATION
Indoco is a mid-size pharma company, which has one of the large manufacturing
facilities in India. Company is there from the last 60 years in the business of selling
pharmaceutical products in the domestic market and lately is trying to enter the big
league of branded products and generic products in the International markets. In the
last 4 years, the company is preparing for this big event, by investing in infrastructure
and R&D setup, and also plan well on the initial market penetration through tie-up
with global giants. For marketing its products, Indoco has slowly build-up a
relationship with Watson for USA and Aspen for emerging market, Austrialia, New
Zealand & South Africa. We believe that Indoco is at its inflection point where visibility
for higher level of growth phase is starting to show, with first ANDA approval coming
in Q1FY14.
Indoco is currently available at the PER of 13.5x on FY13 earnings and on FY14E and
FY15E earnings, it is trading at 8.7x and 6.2x respectively. The trigger point for Indoco
will be the ANDA approval from USA and new launches of products with Watson and
Aspen. We expect the revenue for the period of FY13 FY18E to growth at CAGR of
17% and the Net profit to grow at the CAGR of 33% for the same period. The higher
rate in net profit is due to lower base for FY13 in net profit.
We have done a DCF valuation on the company and the fair value comes to around
INR 164, which would happen if all the events unfold somewhere near to our
projection and estimate in the future. We believe in the company new management
and feel that they has done their homework well. However, if the event does not
happen fully and thus we are discounting the fair value by 30% as a kind of step
target, which comes to a desired value of INR 115, which is achievable in the next 18
months. However, looking at the long term prospect of 3-4 years, than, our projection
would look valid.
Thus, looking to the high growth of the company earning and its future prospect, we
are giving a recommendation for a BUY at a target price of INR 115, which is around
our DCF desired value and on discounted PER of 11x earnings on FY15E.
CORPORATE GOVERNANCE
Indoco is a 60 years old company with business focus primarily on pharma business,
and true to its main objective, have remained so till now. Indoco boards consist of 8
directors, having 5 Independent Non- Executive. None of the Directors on the Board is
a member on more than 10 Committees. In FY13, 6 Board Meetings were held and
the gap between two Board Meetings did not exceed four months. The Company
has resolved all the complaints as at the end of FY13 to the satisfaction of the
shareholders and no complaints were pending for redressal.
Before its IPO, in 1999, Indoco acquired Warren Pharmaceuticals Ltd. and Warren
Laboratories Pvt. Ltd. thereby adding the product portfolios of Ophthalmic and Oral
Hygiene products into the product basket. This was a strategic acquisition and
complemented the product range and the organizational capabilities. Indoco also
has acquired Karvol, a brand of Solvay Pharma India Ltd, a Multinational Group.
Indocos strategy for growth includes both organic as well as inorganic means.
In 2007, Indoco has approved the amalgamation of M/s. La Nova Chem (India) Pvt
Ltd, a 100% subsidiary of the Company, with the Company and also has acquired the
pharmaceutical business of M/s. SPA Pharmaceuticals Pvt Ltd, Mumbai.
We feel that, in both the accounts, company management has rightly done to
maximize the wealth of the shareholders, which show management applying good
corporate governance to the company. Company from the past 4 years, has done a
sea changes in the terms of annual report filing and disclosures, announcement of
corporate events, management complete focus on growing its core pharma
business, etc, which should bring comfort to the investors from this undue attention by
management on their effort to grow the company core business at the higher level.
Institutional Research
CREDIT RATING
The Companys working capital facilities are rated as A1+ and long term
borrowings are rated as A+ by ICRA. A1 + rating indicate highest credit quality
rating and A+ rating indicates adequate credit quality rating.
COMPANY PROFILE
Indoco Remedies Ltd (Indoco), headquartered in Mumbai, is a fully integrated,
research-oriented global pharmaceutical company with a strong presence in 80
countries including USA & UK. Indoco, a USD 140 million company, employs over
5,500 people including 200 skilled scientists.
The company has 9 manufacturing facilities, 5 for Finished Dosages and 4 for APIs,
supported by a state-of-the-art R&D centre at Rabale, Navi Mumbai. The facilities
have been approved by various regulatory authorities such as UK-MHRA, USFDA,
TGA-Australia, JAZMP- Slovenia, MCC-South Africa, Darmstadt Germany, NDAUganda, TFDA-Tanzania, SBD-Yemen, MOH-Ukraine, PPB-Kenya and FDB-Ghana.
Indoco manufactures a wide range of pharmaceutical products for the Indian and
international markets. It generates more than 50 million prescriptions annually from
over 200,000 doctors in India. Indocos 8 domestic marketing divisions cater to
different therapeutic segments including Respiratory, Anti-Infectives, Dental Care,
Pain Management, Gastroenterology, Opthalmics, Cardiovascular, Anti-Diabetics
etc. Top Indoco brands include Febrex Plus, Cyclopam, Sensodent-K, ATM, Vepan,
Cital, Oxipod, Sensoform, Cloben-G, Karvol Plus and Tuspel Plus. Some of the
recently launched products like MCBM-69, Glychek, Methycal, Rosuchek-D and
Omegachek have become sizeable brands. On the international front, the
Company has tie-ups with large reputed generic companies like Watson- USA,
ASPEN-South Africa and DSM-Austria.
Institutional Research
KEYS MILESTONES
2012: Indoco announced the signing of an agreement with DSM, a 9 billion Company, for commercial cooperation for
Active Pharmaceutical Ingredients (APIs). Indoco and DSM have formed a strategic alliance, wherein DSM shall be
marketing and selling the APIs manufactured by INDOCO.
2011: Indoco received the Silver Quality Excellence Award for Sterile Manufacturing Facility in Goa and Solid Dosages
Facility in Baddi (Himachal\Pradesh) at IDMA's Golden Jubilee celebrations.
2010: Indoco Remedies teams up with ASPEN, South Africa by licensing out intellectual property (dossiers) for marketing
its products in emerging markets covering 30 countries, including SA, Brazil, Mexico, Venezuela, Russia & Australia.
2010: Indoco Remedies licenses out technology to Watson Pharmaceuticals Inc. USA. Under the terms of profit sharing
agreement, Indoco will develop, manufacture and supply a basket of sterile products to Watson for the US market.
2009
UK-MHRA approval for the Solid Oral Dosage forms at Baddi Plant.
Export sales exceeded Rs. 1 Billion in the FY 08-09.
Successfully faced Slovenia audit for the Sterile Facility at Goa Plant II for the Injections Area.
2008
IDMA Quality Excellence Awards 2008 - The Sterile Facility at Goa Plant II received the Gold Award and the Solid
Dosage Forms and Externals Facility at Goa Plant I received the Silver Award.
TGA (Australia) approval for the Solid Dosage, Liquid Orals and Creams & Ointments Dosage forms at Goa Plant
I.
First shipment of Diclofenac Ophthalmic solution shipped to USA against an approved ANDA.
Successfully faced Slovenia audit for the Solid Oral Dosage forms at Baddi Plant.
MCC (South Africa) approval for the Solid Dosage facility at GOA Plant I and for the Sterile facility at Goa Plant
II.
2007
ANVISA (Brazil) approval for the Solid Dosage facility at GOA Plant I.
Commencement of exports to the US markets.
Launch of Warren-Excel and Spera - two specialty marketing divisions.
2006
2005
First ANDA filed on the basis of Exhibit batches manufactured in our sterile facility in Goa.
Development Contracts for injectable products signed with a US Company.
Tablet capacity doubled by commissioning an extended facility in the existing UK-MHRA approved plant.
Shares of the Company listed on BSE and NSE.
2004
Institutional Research
FINANCIAL SUMMARY
INCOME STATEMENT
Year ended 31 Mar (INR in Cr)
Revenue from operations
Growth (%)
Other Operating Income
FY13
FY14E
FY15E
FY16E
FY17E
FY18E
627
734
892
1,045
1,224
1,428
10.44
17.15
21.53
17.13
17.09
16.67
12
Total Revenue
631
740
895
1,047
1,233
1,440
Total Expenses
538
621
738
856
1,001
1,168
Operating Profit
89
113
155
189
223
260
EBITDA
93
119
157
192
232
271
Growth (%)
8.34
27.7
31.8
21.9
21.1
16.9
0.89
1.39
6.06
8.18
11.05
14.92
Depreciation
24
25
28
33
38
42
EBIT
71
96
135
167
205
244
Interest Expenses
22
20
27
24
26
27
49
75
108
142
179
217
49
75
108
142
179
217
15
20
29
39
Net Profit
43
67
93
122
149
178
43
67
93
122
149
178
Growth (%)
-7.8
55
39.83
31.39
22.29
19.40
FY13
FY14E
FY15E
FY16E
FY17E
FY18E
Current Assets
276
366
491
583
813
1,089
Investments
0.12
0.12
0.12
0.12
0.12
0.12
359
368
397
424
431
422
57
57
57
57
57
57
Total Assets
692
791
945
1,064
1,301
1,567
Current Liabilities
199
206
256
272
367
463
43
69
80
61
53
45
BALANCE SHEET
35
35
35
35
35
36
Total Liabilities
278
310
372
368
455
544
Share Capital
18
18
18
18
18
18
396
462
555
677
827
1,005
Warrants
Shareholders Funds
Less: Misc. expenditure
414
481
574
696
845
1,023
692
791
945
1,064
1,301
1,567
Capital employed
493
585
689
792
933
1,103
Institutional Research
FY13
FY14E
FY15E
FY16E
FY17E
FY18E
49
75
108
142
179
217
Depreciation
24
25
28
33
38
42
(19)
(59)
(21)
(53)
(14)
(8)
(9)
(15)
(20)
(29)
(39)
69
74
146
150
228
283
Capital Expenditure
(43)
(40)
(65)
(72)
(60)
(50)
Chg in Investments
0.25
0.25
0.25
0.25
0.25
0.25
0.50
1.39
6.06
8.18
11.05
14.92
-43
-38
-59
-64
-49
-35
26
36
87
87
180
248
(12)
(14)
(17)
(20)
(24)
(29)
26
11
(19)
(8)
(8)
Interest Paid
(20)
(27)
(24)
(26)
(27)
-24
-8
-33
-64
-59
-64
27
54
23
121
183
10
11
39
92
116
236
Closing Balance
11
39
92
116
236
420
KEY RATIOS
Year ended 31 Mar
FY13
FY14E
FY15E
FY16E
FY17E
FY18E
EPS (INR)
4.65
7.22
10.09
13.26
16.22
19.37
-7.8
55
39.8
31.4
22.3
19
14.8
16.1
17.6
18.3
18.8
18.9
11.2
12.9
15.0
15.8
16.5
16.8
ROCE (%)
8.7
11.4
13.5
15.4
16.0
16.2
0.4
0.3
0.4
0.2
0.3
0.3
VALUATIONS
Year ended 31 Mar
FY13
FY14E
FY15E
FY16E
FY17E
FY18E
PER (x)
13.5
8.7
6.2
4.8
3.9
3.3
Price/Book (x)
1.4
1.2
1.0
0.8
0.7
0.6
1.1
0.9
0.8
0.7
0.6
0.5
EV / EBITDA (x)
7.4
5.8
4.4
3.6
3.0
2.6
EV / EBIT (x)
9.8
7.3
5.1
4.2
3.4
2.8
FY13
FY14E
FY15E
FY16E
FY17E
FY18E
6.8
9.0
10.3
11.6
12.0
12.3
0.9
0.9
0.9
1.0
0.9
0.9
1.0
1.0
1.0
1.0
1.0
1.0
6.2
8.4
9.8
11.4
11.4
11.3
Institutional Research
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