august, 2019 edition · protection mix improved to highest ever 14.6% leading to sharp increase in...

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August 6, 2019

Peerless Master Picks- August, 2019 Edition

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Stock Picks in August, 2019

August 6, 2019

ICICI Prudential Life Insurance Co. Ltd.

Rating – Buy | Potential Target-Rs 450 | Period- 12 months

We like IPRU’s re-engineered business model which focused on a more diversified product mix and an increasing

protection mix.

Dabur India Ltd.

Rating – Accumulate | Potential Target-Rs 465 | Period- 12 months

Dabur management under is taking steps in right direction with focus on power brands, NPD and increased

distribution reach to drive growth in long term. Reduction in competitive intensity from Patanjali further should

support the cause.

GlaxoSmithKline Pharmaceuticals Ltd.

Rating – Buy | Potential Target-Rs 1500 | Period- 12-18 months

GSK is one of the world’s largest investor in R&D with strong patient-focused pipeline, with the most

completive claims and levels and brilliant execution of launches. Through their innovative products from GSK’s

global pipeline, or through line extensions of existing products and business development, they continue with

their commitment to meet the unmet and underserved healthcare needs of the country.

Housing Development Finance Corporation Ltd Ltd.

Rating – Accumulate | Potential Target-Rs 2400 | Period- 12 months

We believe HDFC Ltd continues to post strong credit growth which beat the industry growth rate driven by

strong retail business. The strong liability franchise and healthy capitalization provides earnings visibility. The

housing finance major, HDFC reported a massive 46 per cent year-on-year growth in June quarter profit at Rs

3,203 crore, driven by a stake sale in Gruh Finance, and showed 14 per cent increase in net interest income at Rs

3,129.8 crore. Spreads and AUM growth moderated as the corporate book had lumpy repayments. Individual

AUM growth was strong; Corporate NPLs increased, largely as expected. Remain our preferred pick in financial

space.

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List of Stock Picks in August, 2019

August 6, 2019

COMPANY SECTOR LTP (Rs) RATING

MARKET

CAP

(Rs BN)

POTENTIAL

TARGET

(Rs)

POTENTIAL

UPSIDE

HDFC Ltd. Housing Finance 2152 Accumulate 3714 2400 12%

ICICI Pru Life

Insurance Co. Ltd. Insurance-Life 392 Buy 562 450 15%

Dabur India Ltd. Consumer Care 430 Accumulate 760 465 8%

GSK Pharma Ltd. Pharmaceuticals 1199 Buy 204 1500 25%

(INITIATED PRICE based on last regular trading price as on 5 August, 2019 in NSE)

Note: All price target for next 12 months except GSK Pharma.

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SECTOR: HOUSING FINANCE

CMP: Rs.2152

Target Price: Rs.2400

Period: 12 months

HDFC Ltd. Accumulate Sector: Housing Finance |NSE Code: HDFC

Excellent profitability with strong lending growth

For Q1FY20, HDFC Bank has reported a very strong set of operating

numbers yet again coupled with stable GNPA/NPA. Standalone Profit

after tax increased 46% for the quarter ended June 30, 2019 at Rs 3,203

crore (Previous Year: 2,190 crore).

The company staged 24% growth in individual loans (after adding back

loans sold in the preceding 12 months). 16% growth in the individual loan

book on an Assets Under Management (AUM) basis as at June 30, 2019.

Spread and Margin:

The spread on loans over the cost of borrowings for the quarter ended

June 30, 2019 was 2.25%. The spread on the individual loan book was

1.91% and on the nonindividual book was 3.07%. Net Interest Margin was

3.3%, the same as the corresponding quarter last year.

Leading Operation details

As on June 30, 2019, the loan book stood at Rs 4,16,597 crore as against

Rs 3,74,575 crore in the previous year. The average size of individual loans

stood at Rs 27.8 lac. Individual loans comprise 74% of the Assets Under

Management (AUM).

However, provision for unsecured credit and agri loan spiked, which led

to jump in credit cost by 34bps/33.8bps on yoy/qoq basis.

Loan growth moderated to 17.1% yoy ( previously was 24% in past three

quarters) led by moderating auto loans and base effect in the unsecured

segment. Disbursement grew by 12%.

Advances growth moderated: Softening of auto loan segment

(contributes 28% of retail loans), which grew 9% yoy (flat qoq) led to

moderate growth in advances.

Personal and credit card loan have reported very healthy growth of 25%

and 28% yoy respectively. However, it is slower than historical growth

rate of 35% yoy.

Deposits grew at 18.5% yoy (3.4% qoq) owing to 22.5% yoy growth in term deposit. CASA mix declined 270bps qoq to

39.7% (42.4% in 4QFY2019).Core income under pressure, cost/income declines: Total other income grew at healthy rate

of 30% yoy led by treasury gains. However, core fees barely grew at 12% primarily owing to plunge in mutual fund

distribution fees and decline in disbursement in the unsecured book. Opex grew at 18.9% yoy (flat qoq), primarily led by

higher employee expenses (+22.5% yoy). Further, the cost-tocore income ratio declined by 192bps/70bps on yoy/qoq

basis to 39%.

Provisions Increased: During the quarter, the key monitorable was spike in provision expenses i.e. 60%/38% on yoy/qoq

basis. This was largely led by (a) agri portfolio, (b) step-up provision towards unsecured loan, (earlier the bank used to

take write-off between 150-180 dpd, now provides 100% within 150dpd, (c) contingent provision worth of Rs. 165cr,

Key Stock Data

No of Shares (mn) 1690

Market Cap ( Rs bn) 3714

52 week high (Rs) 2357

52 week low (Rs) 1645

6m avg Volume (NSE &BSE) 3 mn

Beta 1.01

Face value ( RS ) 2

Shareholding Pattern

Holder's Name

% Share Holding as

on Jun2019

% Share Holding as

on Mar2019

Change %

Promoter 0 NA NA

FIIs 74.69 72.44 2.25

Mutual Funds 7.99 7.91 0.08

Insurance Companies 6.45 6.37 0.08

Other DIIs 0.32 2.39 -2.07

Non Institutional Investors 10.55 10.89 -0.34

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and (d) growth in balance sheet size. Ongoing slowdown in auto segment and subdued environment in real estate has

impacted the HDB financials. GNPA/NNPA was at 2.3%/1.7% (jump of 50bps/40bps qoq), largely NPA increased in

construction finance segment. HDFC Securities' PAT declined by 8% qoq.

Strong Capital Adequacy Ratio:

The capital adequacy ratio stood at 18.8%, of which Tier I capital was 17.3% and Tier II capital was 1.5%. The capital

adequacy ratio is calculated after factoring in the final dividend for FY19. As per the regulatory norms, the minimum

requirement for the capital adequacy ratio and Tier I capital is 13% and 10% respectively.

Increasing distribution network adds strength:

HDFC’s distribution network spans 557 outlets which include 196 offices of HDFC’s distribution company, HDFC Sales

Private Limited (HSPL). HDFC covers additional 5 locations through its outreach programmes. Distribution channels form

an integral part of the distribution network with home loans being distributed through HSPL, HDFC Bank Limited and

third party direct selling associates. The Corporation also has an online digital platform for loans. To cater to non-

resident Indians, HDFC has offices in London, Dubai and Singapore and service associates in the Middle East.

Key Financials: Indicator Q1FY20 Q1FY19 YOY(%) FY19

I Total Revenue from Operation 12900.29 9947.35 12.05878 43348.04

II Other Income 5.82 4.63 25.70% 29.97

III Total Income(I + II) 12996.11 9951.98 30.59% 43378.01

IV Total Expense 9011 6881.98 30.94% 30259.24

V Profit Before Tax(III-IV) 3985.11 3070 29.81% 13118.77

VI Total Tax Expense 782.01 880 -11.14% 3486.31

VII Net Profit after Tax(V-VI) 3203.1 2190 46.26% 9632.46

VIII Other Comprehensive income 261.98 -29.17 -131.53

IX Total Comprehensive Income(VII+VIII) 3465.08 2160.83 60.36% 9500.93

Paid-up Equity Share Capital(Face value Rs2)

345.06 336.73 344.29

Reserves excluding Revaluation Reserves as on Mar31,2019

77011.8

(Rs Crore)

Key Ratio: Indicators Mar-19 Mar-18 Mar-17

EPS(Standalone) 56.53 67.31 46.08

Book Value 449.36 389.43 249.55

P/E 39 33.4 46.6

P/BV(X) 4.38 4.68 6.02

ROE% 14.52 16.45 16.26

ROA% 2.09 2.74 2.2

Outlook:

The company continues to post strong credit growth which beat the industry growth rate driven by strong retail

business. The strong liability franchise and healthy capitalisation provides earnings visibility. It reported massive 46 per

cent year-on-year growth in June quarter profit at Rs 3,203 crore, driven by a stake sale in Gruh Finance, and showed 14

per cent increase in net interest income at Rs 3,129.8 crore. We expect AUM CAGR of 13%over FY19-21E with earnings

CAGR of 10 percent and recommend ‘ACCUMULATE’ with price target of Rs 2400 in time frame of next 12 months.

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SECTOR: INSURANCE-LIFE

CMP: Rs.392


Period: 12 months

ICICI Prudential Life Insurance

Co. Ltd BUY

Sector: Insurance-Life |NSE Code: ICICIPRU

Re engineered business model adds to more diversified product mix

adds scalability and edge

Since Q3FY19, the company has been trying to diversify its customer base

and has taken several initiatives in Business Growth and Product Mix. As a

result of this, the company has also witnessed a change in its product mix

wherein the share of non-linked savings has increased.

Retail business continues to dominate the product mix, contributing more

than 90% of NB-APE.

The company has seen growth across product categories. Annuity and

pro-

tection have grown well. Though ULIP continues to be the mainstay, its

share in the overall product mix has reduced

IPLI has a large addressable bancassurance network consisting of as many

as 8,209 branches. Of this, 4,867 branches belong to parent ICICI Bank,

which exclusively sources for IPLI and does so with great cross sell culture

and high efficiency. We consider the bancassurance network of IPLI a key

sustainable competitive advantage that will serve to drive its growth for a

considerable period of time.

IPLI has the second best expense ratio among 9 key life insurer peers

IPLI has the third best persistency outcomes across time cohorts among 9

key life insurer peers

Strong performance; VNB margins a positive surprise

1QFY20 PAT at Rs 2.8b came in marginally higher than our estimate of

INR2.7b. Gross premium was up 14.7% YoY, mainly led by robust growth

in single premiums. Group premiums grew 105% YoY to Rs 8.2b.

Total APE(Annual Premium Equivalent) grew 5.3% YoY to Rs 14.7b led by robust 88% YoY growth in Protection APE to

INR2.1b, even as Savings APE declined 2.1% YoY to Rs 12.5b. Share of Protection in total APE improved further to 14.6%

(8.2% in 1QFY19) while share of ULIPs in total APE declined around 860bp YoY to 71.2%.

Protection mix improved to highest ever 14.6% leading to sharp increase in VNB.

VNB(Value of New Business) margins increased ~350bp YoY to 21% due to improvement in product mix, which resulted in

26.6% YoY growth in the VNB to Rs 3.1b. Growth in the VNB was mainly led by Retail and the Group Protection business

(Management expects to double the VNB over the next 3-4 years). Thirteenth month persistency declined 140bp YoY to

84.4% (330bp YoY improvement in 61st month persistency). According to the sensitivity analysis disclosures, a 100bp

change in the interest rate could impact the VNB/EV by ~4.4%/~2.0%.

Company Data

No of Shares (Mn) 1435

Market Cap (Rs Bn) 562


52 week low (Rs) 277.35

6m avg. volume (NSE&BSE) 1.8 mn

Beta 0.99

Face value ( RS ) 10


Holder's Name

% Share Holding as on

Jun2019

% Share Holding as on

Mar2019 Change

%

Promoter 74.98 74.98 0

FIIs 11.48 10.08 1.40

Mutual Funds 5.67 5.92 -0.25


Other DIIs 0.11 0.09 0.02

Non Institutional Investors 7.21 8.4 -1.19

Source: BSE

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Renewal premium growth was low at 7.9% YoY as large pool of policies crossed 5 year completion. While mass lapse

ratio has not increased surrender payouts increased and renewal premiums dropped.

The company reiterated its aspiration to double the FY19 VNB over the next 3-4 years on back of its four P strategy.

VNB growth in Q1FY20 was mainly attributable to improving product mix.

The company stated it is focusing on improving persistency further and is taking necessary measures. As per the

company, persistency experience continues to be better than assumptions factored into EV calculation.

The company stated that its Q1FY20 margin is based on assumptions including expense forecast for the full year. In turn,

expense forecast for the full year is the same as that experienced in FY19.

Margin expansion in FY19 over FY18, due to product mix change, was held back due to negative impact of worsening

expenses.

There is no such drag due to deterioration of expenses in Q1FY20.

Other highlights:

• The share of Banca in the distribution mix declined 320bp to 52.4%,

• Total AUM grew 15% YoY to INR1.6t with debt equity mix of 52%:48%,

• Solvency ratio stood at 217% (235% as at 1QFY19).

ULIP segment sales declined as equity market conditions remain tepid; additionally management is more focused on

protection.

Protection mix improved to highest ever 14.6% leading to sharp increase in VNB.

Reduction in cost ratios of savings business also contributed to expansion of VNB margins.

Business Metrics:

1QFY19 4QFY19 1QFY20 YOY (%) QoQ (%)

New Business Premium (Rs bn) 17.7 40.9 22.9 29.2 -44.1

Product mix on APE basis (Rs bn)

Individual Savings 12.6 21.4 12.3 -2.5 -42.5

PAR 1.4 2.3 1.4 4.4 -38

Non-PAR 0.1 0.3 0.4 238.5 57.1

ULIP 11.1 18.9 10.5 -6.1 -44.5

Group Savings 0.2 0.5 0.2 26.3 -55.6

Protection 1.1 2.6 2.1 87.7 -18

Individual Protection 0.7 2 1.4 91.7 -32.4

Group Protection 0.4 0.6 0.8 81 33.3

Total 14 24.6 14.7 5.3 -40.2

Product mix - APE Basis (%)

Individual Savings 90.5 87.2 83.8 -670bps -340bps

PAR 9.7 9.3 9.7 -10bps 30bps

Non-PAR 0.9 1.1 3 210bps 190bps

ULIP 79.8 76.7 71.2 -860bps -560bps

Group Savings 1.4 2.2 1.6 30bps -60bps

Protection 8.2 10.6 14.6 640bps 390bps

Individual Protection 5.2 8.3 9.4 420bps 110bps

Group Protection 3 2.3 5.2 220bps 290bps

Total 100 100 100

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Risks:

PLI needs to do better on the Surrender Ratio front but has managed to make significant improvement

Persistency ratio captures all factors due to which a policy may not be ‘premium-paying’ at a given point in time

including surrender, lapse and other factors. Of these factors, surrender is a key consideration since, after surrender, the

relationship between the policyholder and insurer ends as far as the specific contract is concerned. A lapsed policy, on

the other hand, can always come back in force if a policyholder re-starts premium payment. Hence, it is important to

look at the surrender ratio metric separately, as it acutely focuses on the incidence of surrender.

The surrender ratio for IPLI at 9.8% for FY18 is in the bottom 3 among 9 key Indian life insurers. However, IPLI has

turned things around materially in 1HFY19 with its Surrender Ratio dropping to 6.9%, though it needs to do more on this

front.

Outlook & Valuation:

We like IPRU’s re-engineered business model which focused on a more diversified product mix and an increasing

protection mix. Sharp increase in VNB margin (to 21%) drive up. We rate ICICIPRU to ‘ACCUMULATE’ with target price of

Rs 450 in time frame of 12 months.

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SECTOR : CONSUMER CARE

CMP: Rs.430


Period: 12 months

Dabur India Ltd. Accumulate Sector: Consumer Care |NSE Code: DABUR

Growth driven by strong domestic volume

Domestic business grew at 10.5% YoY (on the strong 24/21% 1QFY19

base). Ex-beverages, domestic volumes grew an impressive 15%.

International business reported growth of 7% in constant currency terms

led by strong growth in Turkey, SSA, Pakistan and Nepal. EBITDA margins

expanded 157 bps to 20.1% on account of 67 bps, 59 bps & 40 bps dip in

advertisement, employee expenses & other overheads to sales,

respectively

Still, management commentary remains cautious, with weaker growth in

June vs. Apr and May. Liquidity stress was seen in the wholesale channel

(~37% in Dabur’s revenue).

The strong show was led by

(1) Distribution expansion in rural (direct reach at 48k villages vs. 44k),

(2) More LUPs at Rs 10 driving rural growth,

(3) A&P focus on power brands (8 brands contribute ~65% of revenues).

Rural grew 13% YoY

Key strengths and Investment rationale

Corrective action in place to revive Juices business

Given increased competition from milk based beverage manufacturers,

Dabur has launched differentiated masala range (Mixed fruit and Aam

Panna) and mixed berries variant. It plans to penetrate in rural areas using

Rs 10 (Real Koolerz) range, as juice being more of urban oriented category.

Oral care continues to smile

Market share gains (40bps), increasing preference towards natural

products (15 per cent growth in Dabur Red) led to double digit volume

growth. Babool, which was struggling on account of launches made by

competitors in access packs, has been relaunched on ayurvedic platform at

disruptive price point (30/100 gm)

Health supplements was an outlier

It grew 20 per cent on back of market share gains (about 100bps) in glucose category. Glucose saw strong growth owing

to trade related disruption for key competitor (Kraft Heinz sold to Zydus) and launch of Mango variant.

Hair care

Double digit growth across VAHO portfolio; however coconut oil disappointed due to increased competitive intensity

from Marico. Almond hair oil grew handsomely due to 50 per cent additional offer in Modern Trade.

Key Stock Data

No of Shares (mn) 1762

Market Cap ( Rs bn) 760



6m avg Volume (NSE &BSE) 2.61 mn

Beta 0.83

Face value ( RS ) 1


Holder's Name

% Share Holding as

on Jun2019

% Share Holding as

on Mar2019

Change %

Promoter 67.88 67.9 -0.02

FIIs 17.76 18.21 -0.45

Mutual Funds 3.88 3.83 0.05


Other DIIs 0.56 0.33 0.23

Non Institutional Investors 7.34 7.23 0.11

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New Power brands

Focus on Honitus (cough & cold), Pudin Hara (digestive) and Lal tail and will take other brand once each of the brand

reach Rs 100 crore revenue potential.

Key Financials: Year to March (Rs mn) 1QFY20 FY19 FY18 YoY (%)

Net Revenue 22,733 85,331 77,219 11.2

Material Expenses 11,477 43,090 38,199 12.8

Employee Expenses 2,314 9,379 7,928 18.3

Advertisement and Publicity 2,021 6,083 6,067 0.3

Other Operating Expenses 2,344 9,382 8,850 6

EBITDA 4,576 17,396 16,174 7.6

EBITDA Margin 20.1 20.4 20.9

Adjusted EBITDA (IND-AS 116) 4,484 17,396 16,174 7.6

Depreciation 528 1,769 1,622 9.1

EBIT 4,049 15,627 14,552 7.4

Other Income 733 2,962 3,052 -3

Interest Cost 153 596 531 12.2

PBT before exceptional 4,629 17,993 17,073 5.4

PBT 4,432 17,239 16,928 1.8

Tax 794 2,786 3,354 -16.9

PAT 3,638 14,463 13,577 6.5

Paid up Equity share capital 1767 1,766 1,761 NA

EPS(Basic) 2.06 8.17 7.69

Key Ratio: Key Ratio FY19 FY18

EBITDA Margin 20.4 20.9

EV/EBITA(X) 41 44.1

ROE (%) 25 25.9

ROCE (%) 22.7 22.4

Outlook & Valuation:

Dabur management is taking steps in right direction (focus on power brands, NPD and increased distribution

reach) to drive growth in long term. Reduction in competitive intensity from Patanjali further should support

the cause. In FY20, we expect recovery in gross margins (+70bps vs. -103bps in FY19) led by price hikes and

benign input cost inflation.

We expect Dabur to generate revenue, PAT growth at 10.7% on the back of strong volume growth of 7% in

FY19-21E. We recommend ‘ACCUMULATE’ with price target of Rs 465 is based on 38x Jun-21E EPS.

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SECTOR : PHARMACEUTICALS

CMP: Rs.1199


Period: 12-18 months

GlaxoSmithKline Pharmaceuticals Ltd.

BUY

Sector: Pharmaceuticals |NSE Code: GLAXO

GSK to focus on 20 brands, 5 disease segments to drive India

growth

• GlaxoSmithKline Pharmaceuticals, the Indian unit of British drug

major GSK said it will focus its energies on 20 brands and five

therapeutic segments anti-infectives, dermatology, respiratory,

gastro-intestinal and anti-pyretic to drive future growth in India.

• The drug maker is also seeking deeper engagement with

distribution channel partners and securing control over the

supply chain with its own factories. After two consecutive years

of lacklustre performance on account of GST rollout,

competition and price control, GSK sales rose 8 percent year-on-

year (YoY) in FY19 to Rs 3,128 crore.

• Around 17 percent of GSK’s revenue comes from price-controlled

products.

• To concentrate on the strategy, GSK had sold 10 tail-end brands

in FY19, including its Vitamin C brand Celin and anti-infective

brand Septran.

• GSK is also investing in increasing people in the front end. The

company has added 700 marketing representatives (MR) in

targeted segments taking the total strength to 3,500. GSK had

discontinued the incentive scheme based on the sales

generated by the MRs and moved to the scientific details

discussed with the doctors.

• The company has launched Nucala for asthma and Infanrix Hexa

vaccine,which are expected to drive sales.Infanrix Hexa vaccine

is a pediatric six-in-one combination vaccine to protect children from six diseases such as diphtheria, tetanus, pertussis

cough), hepatitis B, poliomyelitis (polio) and Haemophilus

influenza type b.

• Seven of GSK’s brands appear in the list of top 50 medicine brands in India. The drug maker’s antibiotic

Augmentin contributes about one-tenth of the company’s revenues. The vaccine division that markets eight

vaccines including Synflorix (pneumonia), Rotarix (diarrhoea), among others contributed around one-fourth of

the revenues in FY19.

• GSK has around 30 percent market share, growing at 13 percent in the private market for vaccines, which is

currently estimated to be Rs 2,200 crore for the year ended February 2019, as per IQVIA.

• GSK is also building a new factory at Vemgal near Bengaluru with an investment of Rs 1,000 crore. The upcoming

facility will be the first greenfield pharmaceutical site that GSK has built across the globe over the past 10 years.

Company Data

No of Shares (Mn) 169

Market Cap (Rs Bn) 204



6 m avg. volume (NSE&BSE) 19760

Beta 0.83

Face value ( RS ) 10


Holder's Name

% Share Holding as

on Jun2019

% Share Holding as

on Mar2019 Change %

Promoter 75 75 0

FIIs 1.35 1.45 -0.10

Mutual Funds 3 2.92 0.08

Insurance Companies 0 N.A N.A

Other DIIs 8.13 8.16 -0.03

Non Institutional Investors 12.52 12.47 0.05

Source: BSE

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Q1FY19 Update

Key Highlights of performance (Q1, YoY)

• The total income also rose by 7.1% to Rs788cr in Q1 as against Rs735.7cr for the corresponding quarter ended

June 30, 2018.

• Net profit up 35 percent to Rs 113.5 crore as against net profit of Rs 84.08 crore for the corresponding period

previous fiscal.

• Ebitda up 21.8 percent to Rs 165.3 crore.

• Margins at 21 percent versus 18.4 percent.

• Decent start to the year; margin improves further.

• GSK’s efforts to rationalize its portfolio have begun paying off.

Low earnings base phase coming to an end, also see earnings growth normalizing in future.

Key Financials

Annual P/L in last 4 Years

19-Mar 18-Mar 17-Mar 16-Mar

Total Revenue 3,230.00 2,925.20 2,975.00 2,857.00

Operating Expenses 2,522.10 2,363.20 2,483.10 2,258.40

Operating Profit 606.5 508.4 419.9 476.8

Operating Profit Margin 18.78% 17.38% 14.12% 16.69%

Total Expenses 2,571.20 2,401.40 2,509.60 2,283.40

EBIDT 708 562 491.9 598.6

EBIDT margin 21.92% 19.21% 16.54% 20.95%

Depreciation 48.6 38 26.3 24.9

Net Profit 425.4 352 336.8 374.5

Basic EPS (INR) 25.1* 41.6 39.8 44.2

(*EPS and book value adjusted for 1:1 bonus) (Rs in Cr)

Q1FY20 Results

19-Jun 18-Jun YoY change

Total Revenue 818.6 753.4 8.65

Operating Expenses 622.5 595.3 4.57

Operating Profit 165.5 140.4 17.88

Operating Profit Margin 21.00% 19.08% 10.06

Profit Before Tax 176 138.3 27.26

Tax 62.6 49.7 25.96

Net Profit 113.5 88.6 28.1

(Rs in Cr)

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Key Indicators

19-Mar 18-Mar 17-Mar

Book Value (Rs) 126.5* 245.6 239.4

RoA 10.88% 8.87% 11.14%

ROE 19.85% 16.92% 16.60%

ROCE 26.82% 14.85% 14.61%

(* Adjusting bonus)

Key Risks:

Controversies regarding issue of safety of drugs affects company’s image

Patent expiry for a number of bulk-buster products

Recommendation: With innovation being a key priority, GSK Pharma has continued to launch more innovative products from their

strong global pipeline and their multi-channel focus. It has sustained industry-leading growth with competitive

costs, margin and cash flow. Improved operational efficiencies improved 2% in their EBITDA margin to 21%, as

against the same period last year, the company has improved EPS to 26.29 in FY19 from 15.64 in FY16 and expects

strong growth of over coming years.

We are positive on long term prospect of the company and recommend ‘BUY’ in GSK Pharma with potential target

of INR 1500 in next 12-18 months period.

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Disclaimer

RATING PARAMETER

BUY We expect the stock to deliver more than 15% return over the next 12months

ACCUMULATE We expect the stock to deliver 6% - 15% return over the next 12months

REDUCE We expect the stock to deliver 0% - 5% return over the next 12months

SELL We expect the stock to deliver negative return over the next 12months NOTE: Target prices are for a period of 12-month perspective. Returns stated in the rating parameter are for our internal benchmark.

TECHNICAL CALL RATING PARAMETER

BUY: A condition that indicates a good time to buy a stock. The exact circumstances of the signal will be determined by the indicator that an analyst is using. SELL: A condition that indicates a good time to sell a stock. The exact circumstances of the signal will be determined by the indicator that an analyst is using. A recommendation to buy or sell stock when it trades at specified price. They serve to either protect your profits or limit your losses.

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17

and buy or sell the securities thereof, of company (ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or

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august, 2019 edition · protection mix improved to highest ever 14.6% leading to sharp increase in...

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