‘Growing business at cheap valuation’

DEWAN HOUSING Bliss GVS Pharma ‘Buy,

Add On DIPS’

Shareholding Pattern (%) Particulars Dec’17 Sep'17 Jun'17

Promoters 60.2% 60.2% 60.2%

FPI 7.6% 11.7% 11.2%

DII 0.4% 0.5% 0.6%

Others 31.8% 27.7% 28.0%

Relative Capital Market Strength

Bliss GVS Pharma Ltd

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March 15, 2018

Rating Matrix

CMP Rs184.85

Rating Buy , Add on DIPS

Holding Period 12 to 18 months

Current Level Investment

Upside Potential 25%-30%

52 week H/L Rs230/Rs.129.0

Face value 1

Sector Pharmaceuticals

Category Mid-Cap

F&O Stock NO

Source: Choice Research/ Annual reports; Financial data-Ace equity

• Bliss GVS Pharma Ltd. is an Indian pharmaceutical and company headquartered in Mumbai, India. Bliss GVS primarily develops, manufactures and markets products across various therapeutic categories including Anti-fungal, Contraceptive, Laxative, Anti-haemorrhoidal, Anti-spasmodic, Anti-malarial, Anti-biotic, Anti-microbial, Anti-inflammatory, Antipyretic, Analgesic and several others.

• Bliss Gvs pharma is among the world leaders in Suppositories and Pessaries dosage forms with one of the largest portfolios in this segment. It has three decades of experience in suppositories and pessaries. It is the only EU-GMP certified suppositories and pessaries manufacturer in India. Suppository is a solid dosage form that is inserted into the rectum (rectal suppository), vagina (vaginal suppository) or urethra (urethral suppository), where it dissolves or melts and exerts local or systemic effects. Suppositories are used to deliver both systemically and locally acting medications.

• A Pessary is a medical device inserted into the vagina, either to provide structural support, or as a method of delivering medication. The other products include are Dry Powder for Oral Suspension, Liquid Preparastions, Oral Solids, Sachets, Parenterals, Topical Preparations along with other Healthcare product

Results of operations: • The Net Sales of the Company increased to Rs. 7997.4MN from Rs. 5468.9 Lakhs

in the previous year, at growth rate of 46.23%. Profit after tax was Rs. 1163.4mn as compared to Rs. 1001.4mn in the previous year. EBITDA was Rs. 1936mn as compared to Rs. 1557.2mn in the previous year growing by 24.4% YoY.

• The Company booked a profit of Rs. 139.3mn due to foreign exchange fluctuation and better Foreign Exchange management. During the year, the Company spent on R&D activities was about Rs. 37.7mn

• Net profit of Bliss GVS Pharma rose 20.6% to Rs 259.83mn in the quarter ended December 2017 as against Rs 215.41mn during the corresponding previous quarter ended December 2016.

• Sales de grew by 15.2% to Rs 1944.5mn in the quarter ended December 2017 as against Rs 2292.97mn during the previous quarter ended December 2016.

• EBITDA grew by 7.5% to Rs 259.8mn in the quarter ended December 2017 as against Rs 215.4mn during the previous quarter ending in December 2016.

• Bliss GVS board is considering disinvesting subsidiary by pulling out plug on the provision of medical care in Kenya, citing over-reliance on tenders, meanwhile focus on expanding its pharmaceutical business in the country. his decision has been made essentially to lower dependence on tender-driven managed healthcare business to focus on growing pharmaceutical business.

Outlook: The Company has established brand operations in existing markets that provide an ideal platform to extend the Bliss GVS product portfolio and with that, build new revenue streams. On the back of significant expansion across both Pharmaceutical & Healthcare verticals, the Company could be poised for an accelerated growth Valuation: At CMP of Rs. 184.8 ,Bliss GVS Ltd. is trading at a P/E multiple of 12.8(x) compared to the industry peer of 25.2(x). The company has an upside potential of 25% to 30% in the next 12 to 18 months. We arrive at a target price in range of Rs231 to Rs.240. Thus we assign a “BUY on DIPS” rating on the stock. :

Particulars FY15 FY16 FY17

OI 4,071.34 5,468.94 7,997.41

Growth Rate (%) 18.1% 34.3% 46.2%

EBITDA 1,034.39 1,557.20 1,936.42

EBITDA Margin (%) 25.4% 28.5% 24.2%

PAT 613.93 1,001.46 1,163.38

NPM (%) 15.1% 18.3% 14.5%

P/E 22.21 15.86 16.4

EPS 5.8 8.0 11.3

EV/EBITDA 11.58 7.56 10.4

P/BV 4.0 3.2 3.5

Particulars Q3FY18 Q3FY17 YoY(%)

Revenue from Operations

1944.49 2292.97 -15.2%

EBITDA (excl OI) 480.61 446.88 7.5%

EBITDA Margin (%) 24.7% 19.5% NA

PAT 259.83 215.41 20.6%

PAT Margin (%) 13.4% 9.4% NA

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Bliss GVS Pharma Ltd. Sensex

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FY13 FY14 FY15 FY16 FY17

Revenue from Operations

EBITDA Margin (%)

2 Source: Choice Research/ Annual reports; Financial data-Ace equity

Particulars FY13 FY14 FY15 FY16 FY17 CAGR

(FY13-FY17)

Revenue from Operations 3,966.25 3,446.42 4,071.34 5,468.94 7,997.41 19.2%

Growth Rate (%) 48.5% -13.1% 18.1% 34.3% 46.2%

EBITDA (excl Other Income) 1,111.56 712.2 1,034.39 1,557.20 1,936.42 14.9%

EBITDA Margin (%) 28.0% 20.7% 25.4% 28.5% 24.2%

PAT 595.85 410.32 613.93 1,001.46 1,163.38 18.2%

NPM (%) 15.0% 11.9% 15.1% 18.3% 14.5%

Net Worth 2,580.06 2,868.81 3,370.83 4,126.22 4,832.26

Total Assets 5,709.11 7,003.54 6,621.68 8,742.32 10,992.36

Debt 1,474.98 1,725.68 1,595.47 1,315.09 1,993.21

Cash Flow from Operations 65.04 411.52 376.12 1,129.47 2,878.56

Current Ratio(x) 1.7 1.5 1.7 1.5 1.3

D/E(x) 0.6 0.6 0.5 0.3 0.4

Profitability ratios (%)

ROCE (%) 28.5% 15.4% 22.0% 28.8% 28.7%

RoE (%) 23.1% 14.3% 18.2% 24.3% 24.1%

ROA (%) 10.4% 5.9% 9.3% 11.5% 10.6%

Efficiency ratios (x)

Receivable days 171.03 241.81 206.07 182.13 119.88

Inventory Days 20.71 34.22 29.51 24.04 19.99

Payable days 105.12 148.76 108.77 95.25 66.51

Financial Analysis

Peer Comparison

Quarter Results (Q3FY18):

Particulars (Rs. MN.) Q3FY18 Q2FY18 QoQ(%) Q3FY17 YoY(%)

Revenue from Operations 1944.49 2244.39 -13.4% 2292.97 -15.2%

EBITDA (excl OI) 480.61 474.6 1.3% 446.88 7.5%

PAT 259.83 394.98 -34.2% 215.41 20.6%

Companies (Rs. Mn.) CMP RoE

(TTM) 12M R (%) M. Cap

EPS (TTM)

BVPS EBIDTA

Margin (%) NPM (%)

M.Cap/ Debt

Bliss GVS Pharma Ltd. 184.85 27.5% 23.56 19,067.3 14.4 52.5 25.2% 16.5% 7.6 Hikal Ltd. 215.2 12.6% 9.12 17,689.4 9.6 76.4 18.8% 6.6% 3.2 Morepen Laboratories Ltd. 32.8 8.2% 61.39 14,753.3 0.7 8.1 11.0% 5.5% 1127.9 Nectar Lifesciences Ltd. 30.1 5.5% -15.8 6,739.0 2.5 46.2 11.9% 3.0% 0.9 Strides Shasun Ltd. 717.9 6.3% -39.9 64,153.5 19.1 304.1 14.3% 4.9% 1.9 Suven Life Sciences Ltd. 180.3 17.2% 5.28 22,942.2 10.7 62.3 32.8% 23.5% 41.6 Average 226.8 0.1 7.3 24,224.1 9.5 91.6 0.2 0.1 197.2

Companies (Rs. Mn.) P/E (x)

P/Bv (x)

P/Sales (x)

EV/EBIDTA (x)

D/E PAT

(TTM) EBIDTA (TTM)

Sales (TTM)

EV/ Sales

Bliss GVS Pharma Ltd. 12.8 3.5 2.1 8.9 0.5 1,487.6 2,266.4 9,000.9 2.2 Hikal Ltd. 22.3 2.8 1.5 10.2 0.9 793.2 2,273.0 12,094.7 1.9 Morepen Laboratories Ltd. 49.6 4.1 2.7 24.6 0.0 297.4 598.0 5,455.6 2.7 Nectar Lifesciences Ltd. 11.9 0.7 0.4 6.5 0.8 568.4 2,223.9 18,656.2 0.8 Strides Shasun Ltd. 37.7 2.4 1.8 19.0 1.2 1,703.5 4,982.8 34,748.2 2.7 Suven Life Sciences Ltd. 16.9 2.9 4.0 12.3 0.1 1,359.9 1,898.4 5,792.8 4.0 Average 25.2 2.7 2.1 13.6 0.6 1,035.0 2,373.7 14,291.4 2.4

2 Source: Choice Research/ Annual reports; Financial data-Ace equity

Company Profile: Bliss GVS Pharma Ltd.is engaged in the manufacture of a wide range of Pessary Formulations, Suppository Formulations, Calcium Preparation, Protein Powders, Iron Preparation, Antibiotics, Analgesic & Antipyretics, Respiratory, Anti-inflammatory, Dermatological Preparations, Anti-Diarrhoeal products. The company’s most unique product is ‘Today Vaginal Contraceptive’, a safe female contraceptive. Therapeutic Areas: Anti-haemorrhoidal, Erectile Dysfunction, Laxatives, Anti-inflammatory, Anti-emetic, Anti-depressant, Antimigraine, Vaginal Contraceptive, Antifungal, Anti-bacterial, Anti-spasmodic, Lubricant, Anti-malarial, Anti-infective, Haematinic, Appetiser, Vitamin Supplement, Nutritional Supplement, Antacid Analgesic, Anti-helmintic, Anti-pyretic, Health Suppliments, Anit-Biotics, Anti-Ulcer, Anti-Septic, Laryngitis , Pharyngitis • Bliss GVS manufacturing plants are certified to be GMP compliant by local and international standards: EU GMP, WHO GMP,

OHSAS -18001: 2007 and ISO-14001:2004. This Company is the only EU-GMP certified suppositories manufacturer in India. Manufacturing Capacity: The company has the capacity to produce 341.4 million units/annum of Suppositories & Pessaries, 250 million units/annum of Tablets, 6 million units/annum Dry Syrup, 21.6 million units/annum units of Satchets, 12.48 million vials/ annum of Dry Powder Injectable, Ampoules and 7.5 million tubes/ annum of Ointments, Creams & Gels. It has 4 Manufacturing units in Maharashtra, one in Daman, and another one is to be launched soon. Highlights: 1. Segment leadership in Antimalarial products across most African markets. 2. The only EU-GMP certified suppositories manufacturer in India. 3. Company continued to grow geographies in Kenya, Nigeria and France on the back of contract manufacturing and new

product launch. 4. Bliss GVS Pharma's manufacturing facility (Unit-II) situated at Palghar, Maharashtra has successfully completed the re-audit

as per EU - GMP guidelines by European Authorities. This inspection was completed without any deficiencies, hence a smooth flow of operations can be expected for the coming terms

Profitability Margins

Particulars Q3FY18 Q2FY18 FY13 FY14 FY15 FY16 FY17

Revenue Growth Rate (%) -13.4% 0.7% 48.5% -13.1% 18.1% 34.3% 46.2%

EBITDA Growth Rate (%) 1.3% -25.9% 55.8% -35.9% 45.2% 50.5% 24.4%

EBITDA Margin (%) 24.7% 21.1% 28.0% 20.7% 25.4% 28.5% 24.2%

EBIT Growth Rate (%) -2.6% -27.8% 55.3% -42.4% 52.2% 54.6% 21.8%

EBIT Margin (%) 21.3% 19.0% 26.5% 17.6% 22.6% 26.0% 21.7%

PAT Growth Rate (%) -34.2% 7.0% 13.4% -31.1% 49.6% 63.1% 16.2%

PAT Margin (%) 13.4% 17.6% 15.0% 11.9% 15.1% 18.3% 14.5%

Expenditure Break up Values in Rs. Mn.

Particulars Q3FY18 Q2FY18 %age change FY17 FY16 %age change

Cost of material consumed 838.83 1,161.75 -27.8% 3430.2 2574.5 33.2%

Purchase of Stock In Trade 10.85 11.72 -7.4% 261.4 50.8 414.6%

Changes in Inventory -58.47 78.3 -174.7% -98.3 -42.1 133.5%

Excise Duty 0.34 2.62 -87.0% 32.9 26.1 26.1%

Employee Cost 177.28 170.43 4.0% 606.5 337.3 79.8%

Finance Cost 47.21 61.54 -23.3% 199.2 186.1 7.0%

Depreciation and Amortisation 48.6 48.6 0.0% 201.1 132.6 51.7%

Other Expenses 509.79 366 39.3% 1860.9 991 87.8%

Total 1574.43 1900.96 NA 6493.9 4256.3 NA

Choice’s Rating Rationale The price target for a large cap stock represents the value the analyst expects the stock to reach over next 12 months. For a stock to be classified as Outperform, the expected return must exceed the local risk free return by at least 5% over the next 12 months. For a stock to be classified as Underperform, the stock return must be below the local risk free return by at least 5% over the next 12 months. Stocks between these bands are classified as Neutral. Don’t be an Investor by Force, Be an investor by CHOICE

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OUR TEAM Fundamental Research Team

Name Designation Email id Contact No.

Sunder Sanmukhani Head-Fundamental Research sanmukhanis@choiceindia.com 022 - 6707 9910

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