february 3, 2020 seasonality, shutdown impact q3…

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Result

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CMP: | 367 Target: | 430 (17%) Target Period: 12 months

Narayana Hrudayalaya (NARHRU)

BUY

February 3, 2020

Seasonality, shutdown impact Q3…

Revenues grew 7.3% YoY to | 785.2 crore. Slow growth was mainly due to

seasonality impact and operational shutdown of its Whitefield Hospital in

Bangalore. EBITDA margins improved 243 bps YoY to 13.1% mainly due

reduction in losses at new hospitals, occupancy improvement and impact of

Ind-AS 116. EBITDA grew 31.7% YoY to | 102.7 crore. Net profit grew

146.6% YoY to | 31.1 crore up from | 12.7 crore in Q3FY19 mainly due to

strong operational performance and lower tax rate.

Blended model of affordable + high-quality services

The company has a legacy model based on affordability over the years. Due

to strict control over costs and capital, the company was making reasonable

profits. However, as it looks to scale up in other regions, where the

consideration for quality has more weight than affordability, the model is

likely to be modified from ‘’affordable’’ to a mix of affordable + quality at

premium. Cases in point are the recent acquisition of Gurugram Hospital and

buying out of partner in the Cayman Islands hospital internationally where

acquisition costs were optically higher.

‘’Asset right model’’ to improve return ratios

Under this model, the company engages with partners who invest in land

and building while it takes care of medical equipment and hospital

management on a revenue share basis. However, the management has

maintained a flexible approach in this regard. Thus, it also owns some

hospitals where the opportunity is right. Due to this focus on balance sheet

and likely improvement in average realisation per operating bed (ARPOB) by

optimising case mix, we expect an improvement in RoCE from 7.7% to

16.5% in FY19-22E.

Valuations & Outlook

The quarter was soft due to seasonality impact and shutdown of Whitefield

facility (Bangalore). New hospitals (SRCC, Gurugram, Dharamshila) continue

to see reduction in losses as the ramp-up in these assets. The management

is currently focusing on improving efficiency and capacity of existing

hospitals and less focus on greenfield or M&A front, which should improve

the return ratios gradually. The improvement and sustainability of these vital

prints hold key as the focus now shifts to improvement in operating leverage

which is visible in 9M performance. The improvement in numbers over the

last few quarters is also on the back of judicious case mix identification

(more focus on oncology, transplants as well as non-invasive procedures).

We continue to believe in the long term prospects of the company on the

back of asset-right model and affordability philosophy. We arrive at an SOTP

target price of | 430 by valuing the matured hospitals and Cayman Islands

at 10x of FY22E EV/EBITDA, new hospitals at 1.5x FY22E EV/sales and other

business at 1x FY22E EV/sales.

Key Financial Summary

(| Crore) FY19 FY20E FY21E FY22E CAGR FY19-22E %

Revenues 2860.9 3189.5 3444.4 3743.4 9.4

EBITDA 287.9 433.1 477.5 552.8 24.3

EBITDA Margins (%) 10.1 13.6 13.9 14.8

Adjusted PAT 59.3 140.4 172.1 238.3 59.0

EPS (|) 2.9 6.9 8.4 11.7

PE (x) 126.5 53.4 43.6 31.5

EV to EBITDA (x) 28.5 19.0 16.9 14.1

Price to book (x) 6.9 6.3 5.6 4.8

RoE (%) 5.5 11.7 12.8 15.2

RoCE (%) 7.7 12.3 12.9 15.5

Source: ICICI Direct Research; Company

Particulars

Particular Amount

Market Capitalisation | 7506 crore

Debt (FY19) | 813 crore

Cash (FY19) | 101 crore

EV | 8219 crore

52 week H/L (|) 389/181

Equity capital | 204.4 crore

Face value | 10

Key Highlights

Seasonality impact and operational

shutdown of its Whitefield Hospital

impacted Q3

Focus now on improvement in

operating leverage and that was

clearly visible in 9M performance

We continue to believe in the long

term prospects of the company on

the back of asset-right model and

affordability philosophy

Maintain BUY

Research Analyst

Siddhant Khandekar

[email protected]

Mitesh Shah, CFA

[email protected]

Sudarshan Agarwal

[email protected]

ICICI Securities | Retail Research 2

ICICI Direct Research Result Update | Narayana Hrudayalaya

Exhibit 1: Variance Analysis

Q3FY20 Q3FY20E Q3FY19 Q2FY20 YoY (%) QoQ (%) Comments

Revenue 785.2 834.8 732.1 822.3 7.3% -4.5%

Slow growth and miss vis-à-vis I-direct estimates due to 1)

seasonality impact and 2) shuting down of Whitefield Hospital.

Excluding Whitefiled revenue growth was 9.6% in India

Raw Material Expenses 184.8 194.4 175.9 191.5 5.0% -3.5%

Employee Expenses 171.7 182.1 158.0 176.0 8.6% -2.5%

Other Expenditure 326.1 332.7 320.2 333.1 1.8% -2.1%

Operating Profit (EBITDA) 102.7 125.6 78.0 121.7 31.7% -15.6%

EBITDA (%) 13.1% 15.0% 10.6% 14.8% 243 bps -172 bps

YoY improvement mainly due to reduction in losses at new

hospitals, occupancy improvement and impact of Ind-AS 116.

Miss vis-a-vis I-direct estimates mainly due to lower than

expected margins in both mature and new hospitals in India

Interest 20.6 21.7 18.4 21.7 11.9% -5.3% Increased mainly due to implementation of Ind-AS 116

Depreciation 46.4 42.9 34.8 42.9 33.1% 8.1% Increased mainly due to implementation of Ind-AS 116

Other Income 5.5 4.2 3.3 6.4 65.7% -13.9%

PBT before EO & Forex 41.2 65.1 28.1 63.4 47.0% -35.0%

Forex & EO 0.0 0.0 0.0 0.0 NA NA

PBT after Exceptional Items 41.2 65.1 28.1 63.4 47.0% -35.0%

Tax 8.8 16.4 13.0 16.8 -32.0% -47.4%

PAT before MI 32.4 48.8 15.1 46.6 115.3% -30.5%

MI 0.0 0.0 0.0 0.0 NA -100.0%

Net Profit 31.4 48.8 12.7 45.3 146.6% -30.7%

YoY growth mainly due to strong operational performance and

lower tax rate. Miss vis-à-vis I-direct estimates mainly due to

lower than expected operational performance and higher

depreciation

Source: ICICI Direct Research

Exhibit 2: Change in Estimates

(| Crore) Old New % Change Old New % Change

Revenue 3,226.2 3,189.5 -1.1 3,488.7 3,444.4 -1.3

EBITDA 444.8 433.1 -2.6 503.3 477.5 -5.1

EBITDA Margin (%) 13.8 13.6 -22 bps 14.4 13.9 -54 bpsChange mainly due to slower than expected reduction in losses in

new hospitals

PAT 146.3 140.4 -4.0 199.8 172.1 -13.9 Changed mainly in sync with operational performance

EPS (|) 7.2 6.9 -4.6 9.8 8.4 -14.1

FY20E FY21E




Conference Call Highlights

Q3FY20 topline was impacted due to operational shutdown of Whitefield hospital in Bangalore and seasonality. Whitefield had H1FY20 turnover of | 37.8 crore, 118 operational beds and an EBITDA margin of 18.6%

Adjusted for Whitefield facility, in Q3FY20 revenue growth for matured hospitals is 8% YoY (vs. 6% including Whitefield) and EBITDAR margin is 23.6% (vs 22.7% incl. Whitefield)

Region wise YoY growth in the quarter was as follows: Bangalore

--1% (6% ex-Whitefield), Southern Peripheral -- 8%, Kolkata --

10%, Eastern Peripheral -- 10%, Western --12%, Delhi NCR -- 28%

Among new hospitals, the management expects Dharamshila to break-even by end of FY20 (has already reached EBITDAR level breakeven). SRCC and Gurugram are likely to take another 1-1.5 years to reach break-even. Cumulative capacity across all three hospitals is ~750-800 that will be commissioned in a staggered manner

Total debt – | 676 crore; net debt - | 570 crore (US$ 49.5% million is foreign currency denominated)

Capex in 9MFY20 - | 100 crore. Guided for maintenance capex in the range of | 100-125 crore and additional ~| 200 crore capex for near term brown field expansion

The company will not venture into new territories but will expand in existing hospitals. Planned expansions at hospitals- Ahmedabad (linear accelerator, +50 beds), Kolkata West Bank (+50 beds, Howrah), Health city Bangalore (creation of OPD block in one hospital), HCCI (oncology Block) and Raipur – (add more beds)

11% contribution from international patients to Indian operations

Indian operations exhibited 9.6% YoY growth (ex-Whitefield) with an EBITDAR margin of 15.6% (adjusting for loss making hospitals)

Q3FY20 HCCI has grown 5.5% YoY; Occupancy at ~40%; moderation in ARPOB due to broadening of payer mix. Once oncology block starts this moderation will be squared off

Q4FY20 to be better than Q2/Q3FY20 due to spill over effect from seasonality

Same level of borrowing in Q4FY20. Depending on government scheme payments. The company has ~| 190 crore receivables from government schemes

The company is negotiating a management contract (fee basis) in eastern Caribbean, which is expected to be finalised by the end of CY20

The company has exited the Durgapur heart centre due to failure of commercial negotiations with new promoter. There is negligible financial impact from the same in FY20

Subdued growth in Bangalore for Q3FY20 (even ex-Whitefield) was due to a drop in Bangladeshi/international patients, which form a major portion of volume. The management expects the volume to come back from Q4FY20 onwards and is planning to increasingly target domestic patients through OPD block

Three flagship hospitals had an EBITDAR margin of ~30% with a YoY revenue growth of ~6%

Going forward, the management has a variety of growth levers to increase ARPOB at its disposal– increasing throughput i.e. decline ALOS (more day-care procedures); focus on high yielding procedures; international patients at Bangalore, Mumbai and Delhi



The management is looking to focus on immunotherapy (CAR-T) for

cancer treatment, going forward, and is already in collaboration with

Syngene (Biocon) for R&D in the field

Exhibit 3: Trends in quarterly performance

(| Crore) Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 YoY (%) QoQ (%)

Total Operating Income 455.3 483.5 521.1 559.2 553.8 646.8 711.3 732.1 765.2 777.4 822.3 785.2 7.3 -4.5

Raw Material Expenses 106.8 108.4 126.1 135.5 133.8 161.2 169.6 175.9 185.6 190.3 191.5 184.8 5.0 -3.5

% of revenue 23.5 22.4 24.2 24.2 24.2 24.9 23.9 24.0 24.3 24.5 23.3 23.5

Gross Profit 348.4 375.1 395.0 423.7 420.1 485.6 541.6 556.2 579.6 587.0 630.8 600.4 8.0 -4.8

Gross Profit Margin (%) 76.5 77.6 75.8 75.8 75.8 75.1 76.1 76.0 75.7 75.5 76.7 76.5 50.2 -24.3

Employee Expenses 95.3 92.4 107.3 107.3 106.8 142.2 155.5 158.0 159.6 165.7 176.0 171.7 8.6 -2.5

% of revenue 20.9 19.1 20.6 19.2 19.3 22.0 21.9 21.6 20.9 21.3 21.4 21.9

Other Manufacturing Expenses200.6 224.4 237.4 256.4 261.8 291.1 313.1 320.2 330.5 318.5 333.1 326.1 1.8 -2.1

% of revenue 44.1 46.4 45.6 45.9 47.3 45.0 44.0 43.7 43.2 41.0 40.5 41.5

Total Expenditure 402.7 425.2 470.7 499.1 502.4 594.5 638.3 654.1 675.7 674.6 700.6 682.5 4.3 -2.6

% of revenue 88.5 87.9 90.3 89.3 90.7 91.9 89.7 89.4 88.3 86.8 85.2 86.9

EBITDA 52.6 58.3 50.4 60.0 51.5 52.3 73.0 78.0 89.5 102.8 121.7 102.7 31.7 -15.6

EBITDA Margins (%) 11.5 12.1 9.7 10.7 9.3 8.1 10.3 10.6 11.7 13.2 14.8 13.1 243.0 -171.6

Depreciation 20.0 21.2 21.8 28.5 23.5 26.1 34.0 34.8 35.9 41.4 42.9 46.4 33.1 8.1

Interest 5.5 5.6 10.3 7.8 8.2 20.5 18.3 18.4 17.5 22.2 21.7 20.6 11.9 -5.3

Other Income 3.9 5.7 5.2 5.7 3.7 4.2 3.1 3.3 7.2 4.8 6.4 5.5 65.7 -13.9

PBT before forex & EO 30.9 37.3 23.5 29.4 23.4 10.0 23.8 28.1 43.4 44.0 63.4 41.2

Forex & EO 1.3 0.0 0.0 1.2 0.0 -1.7 0.0 0.0 0.0 0.0 0.0 0.0

PBT 29.6 37.3 23.5 28.3 23.4 11.7 23.8 28.1 43.4 44.0 63.4 41.2 47.0 -35.0

Total Tax 10.9 15.0 10.1 9.7 9.9 -0.6 8.2 13.0 9.9 13.0 16.8 8.8 -32.0 -47.4

Tax rate (%) 36.9 40.3 42.8 34.1 42.2 -5.2 34.6 46.3 22.8 29.5 26.5 21.4 -2490.1 -506.2

PAT after MI 18.7 22.3 13.5 18.6 13.5 12.3 15.5 15.1 33.4 31.0 46.6 32.4 115.3 -30.4

EPS (|) 0.9 1.1 0.7 0.9 0.7 0.6 0.8 0.7 1.6 1.5 2.3 1.6 115.3 -30.4



ICICI Direct Research

Result Update | Narayana Hrudayalaya

Company Background

Narayana Hrudayalaya (NHL) was incorporated by renowned cardiac

surgeon Dr Devi Prasad Shetty in 2000. It was started as a predominant

cardiac care hospitals group initially. Gradually, it also diversified into other

specialties although cardiac still remains a mainstream specialty followed by

renal (kidney care). NHL network comprises 21 hospitals (including three

managed hospitals), six heart centres, 19 primary care facilities (including

clinics and information centres) a multi-speciality hospital in Cayman Islands

by entering into agreement with the Government of Cayman Islands. The

company has 5770 operational beds and the potential to reach a capacity of

up to 6579 beds. Region wise, southern (mainly Karnataka) and eastern

(mainly Kolkata) regions together account for 72% of the operating

revenues.

Cluster wise bifurcation

Karnataka cluster – Comprises seven hospitals including three in Bengaluru

(ex-Whitefield) and a hospital each in Mysore and Shimoga totalling 2308

operational beds. The company also manages six heart centres totalling 322

operating beds

Eastern cluster - Comprises nine hospitals including hospitals in the greater

Kolkata area encompassing Howrah, Barasat and the Eastern Metropolitan

Bypass, a multispecialty hospital in Jamshedpur, Jharkhand and a

superspeciality hospital in Guwahati, Assam totalling 2020 operational beds.

Western and northern clusters - Comprises five hospitals - Jaipur

(Rajasthan), Palanpur (Gujarat), Ahmedabad (Gujarat), paediatric hospital in

Mumbai (Maharashtra), Raipur (Chhattisgarh), Jammu and Delhi totalling to

1474 current operational beds. The company acquired a multispecialty

hospital has commissioned in Q4FY18.

Health City Cayman Islands (HCCI) - NHL had set up a multi-speciality

hospital in Cayman Islands by entering into an agreement with the

Government of Cayman Islands on April 7, 2010. Health City Cayman Islands

(HCCI) is a joint venture between NHL and Ascension Health Ventures LLC,

a US based trust. This 106 bedded hospital was commissioned in April 2014

and earned JCI, US accreditation in May, 2015 (JCI is the international arm

of The Joint Commission, the leading health care accreditor in the US). NHL

had initially entered into the JV with 28.6% stake in the hospital and then

bought back the rest of the 71.4% stake from Ascension Health for a cash

consideration of US$32 million in 2017 (implied EV of US$70 million for 105

beds). Now, it is the step down subsidiary of Narayana Health. HCCI

primarily targets North American patients (Cayman Islands is 430 miles

south of Miami, near Caribbean islands) and provides high-quality,

affordable health care. For FY19, HCCI revenues was at US$54.5 million with

EBITDA at US$9.5 million (EBITDA margin of 17.4%). For FY19, the hospital

was running at ~32% occupancy rate.

As of FY19, it has 16690 employees, which included 3644 doctors.




Exhibit 4: Revenues to grow at CAGR of 9% over FY19-22E

Source: ICICI Direct Research, Company

Exhibit 5: EBITDA & EBITDA margins trend


Exhibit 6: Net profit to grow at CAGR 59% over FY19-22E


Exhibit 7: RoE & RoCE trend


1363.9

1613.9

1878.2

2281.4

2862.8

3189.5

3444.4

3743.4

0

500

1000

1500

2000

2500

3000

3500

4000

FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E

(|

crore)

Revenues

CAGR 20.4%

CAGR 9.4%

123.7

174.6

228.9212.6

287.9

433.1

477.5

552.8

9.1

10.8

12.2

9.310.1

13.6 13.9

14.8

0

2

4

6

8

10

12

14

16

0

100

200

300

400

500

600


(%

)

(|

crore)

EBITDA EBITDA Margins (%)

-5.8

32.2

84.4

51.2 59.3

140.4

172.1

238.3

-50

0

50

100

150

200

250

300


(|

crore)

Net Profit

5.9

8.8

12.5

6.3

7.7

12.312.9

15.5

-0.8

3.7

8.8

4.9

5.5

11.7

12.8

15.2

-2

0

2

4

6

8

10

12

14

16

18


(%

)

RoCE (%) RoE (%)




Exhibit 8: Valuation

Particulers Valuation Matrix Multiple (x) Enterprise value (| cr)

Hospital (Matured) EV/EBITDA 10.0 6958.3

Cayman EV/EBITDA 10.0 1296.5

Hospital (New) EV/Sales 1.5 548.2

Other Business EV/Sales 1.0 169.6

Net Debt FY22E (| cr) 275.3

EV (| cr) 8697.3

No of shares (cr) 20.4

Per Share Value (|) 430.0

Source: Company

Exhibit 9: One-year Forward EV/EBITDA

Source: Bloomberg, ICICI Direct Research

Exhibit 10: Valuation

Revenues Growth Adj. EPS Growth P/E EV/EBITDA RoE RoCE

(| crore) (%) (|) (%) (x) (X) (%) (%)

FY19 2860.9 77.3% 2.9 0.8 126.5 28.5 5.5 7.7

FY20E 3189.5 11.5% 6.9 136.7% 53.4 19.0 11.7 12.3

FY21E 3444.4 8.0% 8.4 22.5% 43.6 16.9 12.8 12.9

FY22E 3743.4 8.7% 11.7 38.5% 31.5 14.1 15.2 15.5


0

2000

4000

6000

8000

10000

12000

14000

16000

18000

Feb-17

May-17

Aug-17

Nov-17

Feb-18

May-18

Aug-18

Nov-18

Feb-19

May-19

Aug-19

Nov-19

Feb-20

(|

crore)

Narayana 34.4x 32.3x 28.0x 15.0x 6.4x




Exhibit 11: Recommendation history vs. Consensus

Source: ICICI Direct Research; Bloomberg

Exhibit 12: Top 10 Shareholders

Rank Investor Name Filing Date % O/S Position (m) Change

1 Shetty Shakuntala 30-Jun-19 30.4 62.08m 0.0m

2 Shetty Devi Prasad 3-Sep-19 27.7 56.53m (8.2)m

3 United Kingdom Of Great Britain 30-Jun-19 5.8 11.77m 0.0m

4 Ashoka Investment Holdings 13-Aug-19 3.8 7.81m 0.0m

5 ICICI Prudential Asset Management 31-Dec-19 3.1 6.32m (0.2)m

6 Shaw Kiran Mazumdar 30-Jun-19 2.3 4.71m 0.0m

7 Franklin Resources Inc 30-Nov-19 2.2 4.54m (0.0)m

8 CDC India Opp Ltd 30-Jun-19 2.1 4.36m 0.0m

9 Narayana Health Acad Ltd 30-Jun-19 1.8 3.70m 3.7m

10 Fundrock Management Co Sa 30-Sep-19 1.6 3.34m 0.1m

Source: ICICI Direct Research, Bloomberg

Exhibit 13: Share Holding Pattern

(in %) Dec-18 Mar-19 Jun-19 Sep-19 Dec-19

Promoter 63.9 63.9 63.9 63.9 63.9

Others 36.2 36.2 36.2 36.2 36.2


0.0

20.0

40.0

60.0

80.0

100.0

120.0

0

50

100

150

200

250

300

350

400

Feb-20

Jan-20

Dec-19

Nov-19

Oct-19

Sep-19

Aug-19

Jul-19

Jun-19

May-19

Apr-19

Mar-19

Feb-19

Jan-19

Dec-18

Nov-18

Oct-18

Sep-18

Aug-18

Jul-18

Jun-18

May-18

Apr-18

Mar-18

Feb-18

Jan-18

Dec-17

Nov-17

Oct-17

Sep-17

Aug-17

Jul-17

Jun-17

Jun-17

May-17

Apr-17

Mar-17

Feb-17

(%

)(|

)

Price Idirect target Consensus Target Mean % Consensus with BUY




Financial Summary

Exhibit 14: Profit & Loss (| crore)

(Year-end March) FY19 FY20E FY21E FY22E

Revenues 2,860.9 3,189.5 3,444.4 3,743.4

Growth (%) 25.4 11.5 8.0 8.7

Raw Material Expenses 687.5 761.7 820.6 891.8

Employee Expenses 624.1 689.3 744.4 809.0

Other Manufacturing Expenses 1,261.5 1,305.4 1,401.9 1,489.7

Total Operating Expenditure 2,573.0 2,756.4 2,966.9 3,190.6

EBITDA 287.9 433.1 477.5 552.8

Growth (%) 35.4 50.4 10.2 15.8

Interest 71.4 85.1 66.1 44.6

Depreciation 137.4 177.1 198.8 208.8

Other Income 16.7 22.4 17.2 18.7

PBT before Exceptional Items 95.8 193.3 229.7 318.1

Less: Forex & Exceptional Items 0.0 0.0 0.0 0.0

PBT 95.8 193.3 229.7 318.1

Total Tax 34.1 49.8 57.7 79.8

PAT before MI 61.7 143.5 172.1 238.3

Minority Interest 0.0 0.0 0.0 0.0

PAT 59.3 140.4 172.1 238.3

Adjusted PAT 59.3 140.4 172.1 238.3

Growth (%) 16.0 136.7 22.5 38.5

EPS 2.9 6.9 8.4 11.7

EPS (Adjusted) 2.9 6.9 8.4 11.7


Exhibit 15: Cash Flow Statement (| crore)


Profit/(Loss) after taxation 39.4 140.4 172.1 238.3

Add: Depreciation & Amortization 137.4 177.1 198.8 208.8

Net Increase in Current Assets -7.8 -43.9 -35.4 -41.0

Net Increase in Current Liabilities 16.1 46.9 39.5 45.6

Others 93.5 85.1 66.1 44.6

CF from operating activities 278.6 405.6 441.1 496.3

(Inc)/dec in Fixed Assets -149.5 -345.7 -200.0 -150.0

(Inc)/dec in Investments -10.0 10.0 0.0 0.0

Others -26.4 12.2 13.4 14.8

CF from investing activities -185.9 -323.4 -186.6 -135.2

Inc / (Dec) in Equity Capital 0.4 0.0 0.0 0.0

Inc / (Dec) in Debt 27.6 -50.0 -150.0 -200.0

Dividend & Dividend Tax 0.0 -23.8 -20.4 -20.4

Others -55.3 -85.1 -66.1 -44.6

CF from financing activities -27.3 -158.8 -236.6 -265.0

Net Cash flow 65.5 -76.7 18.0 96.0

Opening Cash 35.3 100.7 24.1 42.1

Closing Cash 100.7 24.1 42.1 138.1

Free Cash Flow 129.1 59.9 241.1 346.3


Exhibit 16: Balance Sheet (| crore)


Equity Capital 204.4 204.4 204.4 204.4

Reserve and Surplus 876.8 993.5 1,145.1 1,362.9

Total Shareholders funds 1,081.1 1,197.8 1,349.5 1,567.3

Total Debt 813.5 763.5 613.5 413.5

Deferred Tax Liability 47.9 52.7 57.9 63.7

Minority Interest 0.4 0.4 0.5 0.5

Other liabilities 272.0 299.2 329.1 362.0

Source of Funds 2,214.8 2,313.6 2,350.4 2,407.0

Gross Block - Fixed Assets 2,438.6 2,784.3 2,984.3 3,134.3

Accumulated Depreciation 666.5 843.6 1,042.4 1,251.3

Net Block 1,772.1 1,940.7 1,941.9 1,883.0

Capital WIP 56.1 56.1 56.1 56.1

Net Fixed Assets 1,828.2 1,996.8 1,998.0 1,939.1

Goodwill on Consolidation 66.0 66.0 66.0 66.0

Investments 17.4 7.4 7.4 7.4

Inventory 83.2 92.7 100.1 108.8

Cash 100.7 24.1 42.1 138.1

Debtors 266.4 296.9 320.6 348.4

Loans & Advances & Other CA 77.0 81.0 85.3 89.7

Total Current Assets 527.4 494.6 548.0 685.0

Creditors 333.5 371.6 401.3 436.1

Provisions & Other CL 88.7 97.5 107.3 118.0

Total Current Liabilities 422.2 469.1 508.6 554.1

Net Current Assets 105.2 25.5 39.4 130.9

LT L& A, Other Assets 193.9 213.3 234.7 258.1

Deferred Tax Assets 4.1 4.5 4.9 5.4

Application of Funds 2,214.8 2,313.6 2,350.4 2,407.0


Exhibit 17: Key Ratios (| crore)


Per share data (|)

EPS 2.9 6.9 8.4 11.7

Cash EPS 1.7 5.7 7.4 10.7

BV 52.9 58.6 66.0 76.7

DPS 1.2 1.2 1.0 1.0

Cash Per Share 32.6 41.3 51.0 61.2

Operating Ratios (%)

EBITDA margins 10.1 13.6 13.9 14.8

Net Profit margins 2.1 4.4 5.0 6.4

Cash Conversion cycle 2.1 2.1 2.1 2.1

Asset Turnover 1.2 1.2 1.2 1.2

Return Ratios (%)

RoE 5.5 11.7 12.8 15.2

RoCE 7.7 12.3 12.9 15.5

RoIC 8.4 13.2 14.3 18.1

Valuation Ratios (x)

P/E 126.5 53.4 43.6 31.5

EV / EBITDA 28.5 19.0 16.9 14.1

EV / Revenues 2.9 2.6 2.3 2.1

Market Cap / Revenues 2.6 2.4 2.2 2.0

Price to Book Value 6.9 6.3 5.6 4.8

Solvency Ratios

Net Debt / Equity 0.8 0.6 0.5 0.3

Net Debt / EBITDA 2.5 1.7 1.2 0.5

Current Ratio 1.0 1.0 1.0 1.0





Exhibit 18: ICICI Direct Universe Coverage (Healthcare)

Company I-Direct CMP TP Rating M Cap

Code (|) (|) (| cr) FY19 FY20E FY21E FY22E FY19 FY20E FY21E FY22E FY19 FY20E FY21E FY22E FY19FY20EFY21EFY22E

Ajanta PharmaAJAPHA 1131 1,180 Buy 9869 43.5 43.5 52.3 64.4 26.0 26.0 21.6 17.6 21.8 21.8 20.8 21.9 17.1 17.1 16.0 17.2

Alembic PharmaALEMPHA 620 620 Hold 11687 31.4 31.4 26.6 31.0 19.7 19.7 23.3 20.0 19.6 19.6 13.4 14.9 21.8 21.8 13.3 13.8

Apollo HospitalsAPOHOS 1649 1,800 Buy 22941 17.0 17.0 43.7 68.1 97.2 97.2 37.7 24.2 8.8 8.8 14.8 17.5 7.1 7.1 14.9 19.6

Aurobindo PharmaAURPHA 474 475 Hold 27797 42.1 42.1 55.4 59.5 11.3 11.3 8.6 8.0 15.9 15.9 15.7 16.1 17.7 17.7 16.7 15.4

Biocon BIOCON 293 310 Hold 35184 6.2 6.2 10.3 15.7 47.2 47.2 28.4 18.7 10.9 10.9 15.1 19.4 12.2 12.2 14.7 18.6

Cadila HealthcareCADHEA 258 260 Hold 26382 18.1 18.1 16.6 18.7 14.3 14.3 15.6 13.8 13.0 13.0 11.7 12.4 17.8 17.8 13.5 13.6

Cipla CIPLA 446 520 Hold 35966 18.6 18.6 25.3 30.0 24.0 24.0 17.6 14.9 10.9 10.9 13.6 14.8 10.0 10.0 11.2 11.9

Divi's Lab DIVLAB 1990 1,850 Hold 52828 51.0 51.0 59.1 71.2 39.1 39.1 33.7 27.9 25.5 25.5 22.1 22.8 19.4 19.4 17.0 17.6

Dr Reddy's LabsDRREDD 3151 3,000 Hold 52341 114.8 114.8 154.4 180.9 27.5 27.5 20.4 17.4 11.1 11.1 15.0 17.5 13.6 13.6 14.5 14.9

Glenmark PharmaGLEPHA 303 410 Hold 8560 26.9 26.9 36.7 46.1 11.3 11.3 8.3 6.6 15.3 15.3 15.0 17.0 13.5 13.5 14.0 15.1

Hikal HIKCHE 118 140 Buy 1621 8.4 9.5 11.7 14.0 14.1 12.4 10.1 8.4 14.3 12.8 14.2 15.1 13.6 14.0 14.9 15.4

Ipca LaboratoriesIPCLAB 1252 1,355 Buy 15817 35.1 35.1 60.7 75.3 35.7 35.7 20.6 16.6 15.0 15.0 19.9 21.2 14.2 14.2 18.0 18.9

Indoco remediesINDREM 214 240 Hold 1968 -0.3 3.0 8.4 15.1 -678.7 72.3 25.5 14.1 1.0 4.6 9.3 15.3 -0.4 4.0 10.1 15.4

Lupin LUPIN 720 810 Hold 32607 16.5 16.5 35.0 37.1 43.5 43.5 20.6 19.4 9.4 9.4 9.9 12.1 5.4 5.4 8.4 8.3

Narayana HrudalayaNARHRU 367 430 Buy 7506 2.9 2.9 9.8 13.3 126.5 126.5 37.6 27.6 7.7 7.7 13.9 16.5 5.5 5.5 14.5 16.7

Natco PharmaNATPHA 636 595 Hold 11567 34.9 34.9 23.7 22.0 18.2 18.2 26.8 28.9 21.3 21.3 12.2 10.5 18.5 18.5 10.0 8.6

Sun Pharma SUNPHA 426 470 Hold 102113 15.9 15.9 20.2 24.7 26.8 26.8 21.1 17.2 10.3 10.3 11.3 12.5 9.2 9.2 9.9 11.3

Syngene Int. SYNINT 314 360 Buy 12560 8.3 8.3 9.6 12.0 37.0 37.0 31.7 25.6 14.8 14.8 13.1 15.1 16.8 16.8 14.1 14.9

Torrent PharmaTORPHA 1892 2,020 Hold 32017 48.9 48.9 71.5 91.8 38.7 38.7 26.5 20.6 14.2 14.2 18.4 21.2 17.5 17.5 19.1 20.7

RoE (%)EPS (|) PE(x) RoCE (%)

Source: ICICI Direct Research, Bloomberg




RATING RATIONALE

ICICI Direct endeavours to provide objective opinions and recommendations. ICICI Direct assigns ratings to its

stocks according to their notional target price vs. current market price and then categorises them as Buy, Hold,

Reduce and Sell. The performance horizon is two years unless specified and the notional target price is defined as

the analysts' valuation for a stock

Buy: >15%;

Hold: -5% to 15%;

Reduce: -5% to -15%;

Sell: <-15%

Pankaj Pandey Head – Research [email protected]

ICICI Direct Research Desk,

ICICI Securities Limited,

1st Floor, Akruti Trade Centre,

Road No 7, MIDC,

Andheri (East)

Mumbai – 400 093

[email protected]




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