Recommend BUY

CMP 14.50

Target Price 16.00

ISIN: INE082A01010 AUGUST 23rd

, 2013

KOPRAN LIMITED Q1 FY14

STOCK DETAILS

Sector Pharmaceutical

BSE Code 524280

Face Value 10.00

52wk. High / Low (Rs.) 24.60/11.80

Volume (2wk. Avg ) 49838

Market Cap ( Rs in mn ) 566.23

ANNUAL ESTIMATED RESULTS (A*: ACTUAL / E*: ESTIMATED)

Years FY13A FY14E FY15E

Net Sales 2502.20 2827.49 3138.51

EBITDA 360.20 391.31 442.29

Net Profit 120.60 132.64 140.80

EPS 3.09 3.40 3.61

P/E 4.70 4.27 4.02

SHAREHOLDING PATTERN (%)

1 YEAR COMPARATIVE GRAPH

BSE SENSEX KOPRAN LTD

Company Highlights

� Kopran is an integrated Pharmaceutical

Company which manufactures both Active

Pharmaceutical Ingredients and Finished

Dosage Forms.

� The company has reported its net sales rose by

Rs.597.00 million against Rs.510.00 million in

the corresponding quarter ending of previous

year, an increase of 17.06%.

� During the quarter Q1 FY14, other income

includes net exchange Gain of Rs. 10.38 mn

against net exchange Gain of Rs.1.40 mn in the

quarter ended Q1 FY13.

� During the quarter, the company has launched

Tooth paste under “Sparkle” brand in consumer

care division.

� Kopran Research Laboratories Ltd., Kopran

(H.K) Ltd. and Kopran Life sciences Ltd. are the

existing wholly owned subsidiaries of the

company.

� Net Sales and PAT of the company are expected

to grow at a CAGR of 16% and 32% over 2012

to 2015E respectively.

� India has been ranked as the highest amongst

third world countries and is the most preferred

country for sourcing for the Regulated markets

like the US and Europe.

� PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND

COMPANY NAME (Rs.) Rs. in Mn. (Rs.) Ratio Ratio (%)

Kopran Ltd 14.50 566.23 3.09 4.70 0.47 0.00

Cipla Ltd 399.20 319683.10 19.69 20.22 3.60 100.00

Aarti Drugs Ltd 198.00 2445.90 39.81 5.07 1.18 50.00

Aurobindo Pharma 180.90 52709.20 23.68 7.64 1.79 150.00

FINANCIAL HIGHLIGHTS

Results updates- Q1 FY14

Kopran Limited is currently an integrated

Pharmaceutical Company manufacturing a large

range of products. It manufactures both Active

Pharmaceutical Ingredients and Finished Dosage

Forms, reported its financial results for the quarter

ended 30 June, 2013. The first quarter witness a

healthy increase in overall sales as well as

profitability on account, driven by improved

profitability of both in Pharmaceutical Ingredients

and Finished Dosage Forms.

Months June-13 June-12 % Change

Net Sales 597.00 510.00 17.06%

PAT 27.90 25.10 11.16%

EPS 0.71 0.64 11.16%

EBITDA 88.90 81.90 8.55%

The company’s net profit jumps to Rs.27.90 million against Rs.25.10 million in the corresponding quarter ending

of previous year, an increase of 11.16%. Revenue for the quarter rose by 17.06% from Rs.510.00 million to

Rs.597.00 million, when compared with the prior year period. Reported earnings per share of the company stood

at Rs.0.71 a share during the quarter, registering 11.16% increases over previous year period. Profit before

interest, depreciation and tax is Rs.88.90 millions as against Rs.81.90 millions in the corresponding period of the

previous year.

Expenditure

During the quarter Total Expenses rose by 18 per

cent mainly on account in Cost of material consumed

with other expenses and employee benefit expenses

increased when compare to previous quarter Q1

FY13. Total expenditure in Q1 FY14 was at Rs.

549.00 million as against Rs. 463.70 million in Q1

FY13. Cost of Materials Consumed is Rs. 386.90

million in Q1 FY14 against Rs. 348.20 in the

correspondent quarter of the previous year. Other

Expenditure was at Rs. 99.00 mn against Rs. 88.60

mn in Q1 FY13 and Employee Benefits expenses

stood Rs. 52.40 mn in Q1 FY14 against Rs. 41.70 mn

in the corresponding quarter of previous year,

where as Depreciation & amortization stood at Rs.

30.30 mn.

Segment Revenue

Latest Updates

• “Kopran Ltd. is launched a new brand "SPARKLE" in the FMCG category. The first product launched as

Toothpaste, followed by various other products".

• Kopran has entered into an Agreement with Walt Disney for the best offer in the toothpaste category – Buy a

SPARKLE Family Toothpaste and Get a Disney DVD worth Rs. 399/- FREE with every pack

• Finished Dosage Forms has Manufacturing Facilities built up area of 11,432 sq. mtrs. On a plot of 8 Acres

which is located at Khopoli, Raigad District, Maharashtra.

• Active Pharmaceutical Ingredients has Manufacturing facility which is built up area of 11,600 sq. mtrs. on a

plot of 9 Acres and it is located at Mahad, Raigad District, Maharashtra

COMPANY PROFILE

Kopran is the group company of Parijat Enterprises. Kopran is currently an integrated Pharmaceutical Company

manufacturing a large range of products. It manufactures both Active Pharmaceutical Ingredients and Finished

Dosage Forms.Kopran’s products are registered globally and its facilities match best of international standards

and are approved by various Regulatory authorities.

The Company has successfully registered its products across the African and South East Asian markets. Various

Drug Master Files and Dossiers of Finished Dosage Forms are being filed for the Regulated markets giving an

opportunity to have a balanced business between the Regulated markets and the rest of the world. New markets

are being explored continuously for growth purpose.

"Kopran Ltd. has launched a new brand "SPARKLE" in the FMCG category. The first product launched as

Toothpaste, followed by various other products". The Company has already launched new products in the critical

segments like Oncology and Penems including the Chronic and CNS groups and also moving towards vertically

integrated models of operations, especially in light of oncology products.

Business Units

• Finished Dosage Forms

The company covers the needs of International markets with a range of more than 100 dosage forms

including Tablets, Capsules, Dry Powder, Suspension and Injectables. Many of the APIs are made in house,

thereby providing a competitive edge for both branded and generic formulations. Manufacturing Facilities

has built up area of 11,432 sq. mtrs. on a plot of 8 Acres. Located at Khopoli, Raigad District, Maharashtra.

• Active Pharmaceutical Ingredients

Kopran manufactures a range of APIs including Sterile Cephalosporins in its state of art facility.

Manufacturing of any Sterile API needs excellent facility and quality systems. Kopran has always been a

major player in the manufacturing of Sterile Cephalosporins. Manufacturing facility has built up area of

11,600 sq. mtrs. on a plot of 9 Acres and it is located at Mahad, Raigad District, Maharashtra. Apart from

Sterile API, the company can provide a range of Speciality products which include Macrolides and

Cardiovascular range among others.

• Research & Development

Kopran Research Laboratories Ltd. (KRLL) is an emerging research organisation with particular interests in

the areas of drug discovery, polymer technology and synthesis of new molecules. KRLL is a 100% subsidiary

of Kopran Ltd. KRLL is recognised by the Department of Science and Industrial Research (DSIR), Government

of India. The company is staffed with competent and dedicated team of scientists.

KRLL has focused to maximize opportunities through research at a time when In Creation of intellectual

wealth is critical to knowledge based pharmaceutical business, recognising this KRLL has filed about 35

product & process patents internationally and in India.

• Consumer Healthcare

Kopran Ltd., is proud to announce its foray in the FMCG category with the launch of SPARKLE Family

Toothpaste with ‘World’s Best Offer’ for the consumers. The company plans to launch many more health &

hygiene products with SPARKLE as umbrella brand. Kopran, which is synonymous with quality products,

introduces the SPARKLE Family Toothpaste with this irresistible offer targeted towards the kids. With

approximately 500 movie titles available with Disney, SPARKLE Toothpaste encourages kids to create FREE

DVD library of their own.

Products

1. Finished Dosage Forms

� Anthelmintics � Anti Allergic

� Antibiotic

� Anti Fungal

� Pain Management

� Anti Pyretic

� Respiratory

� Erectile Dysfinction

� Cardiovascular

� Diabetic

� Gastroenrology

� Pain and Anti pyretic

2. Active Pharmaceutical Ingredients

� Cephalosporins (Oral)

� Cephalosporins (Sterile)

� Cardiovascular

� Macrolides

� Shortly Introducing

Meropenem

� Neuromodulator

� Under Development

Metoprolol Succinate.

Metoprolol Tartrate.

Etodola

3. Fast Moving Consumer Goods

Kopran Ltd. is proud to announce its foray in the FMCG category with the launch of SPARKLE Family

Toothpaste with ‘World’s Best Offer’ for the consumers. Which is synonymous with quality products

introduces the SPARKLE Family Toothpaste with this irresistible offer targeted towards the kids. With

approximately 500 movie titles available with Disney, SPARKLE Toothpaste encourages kids to create

FREE DVD library of their own.

Kopran has entered into an Agreement with Walt Disney for the best offer in the toothpaste category –

Buy a SPARKLE Family Toothpaste and Get a Disney DVD worth Rs. 399/- FREE with every pack.

FINANCIAL HIGHLIGHT (STANDALONE)

Balance sheet as at March31, 2013

(A*- Actual, E* -Estimations & Rs. In Millions)

KOPRAN LTD. FY13A FY14E FY15E

(Value in Rs. millions)

EQUITY AND LIABILITIES:

Shareholders’ Funds:

Share Capital 476.30 476.30 476.30

Reserves and Surplus 804.80 885.28 956.10

a) Net worth 1281.10 1361.58 1432.40

Non-Current Liabilities:

Long-term borrowings 694.80 660.06 679.86

Long Term Provisions 35.70 39.27 42.41

b) Long term liabilities 730.50 699.33 722.27

Current Liabilities:

Short-term borrowings 243.70 248.57 251.06

Trade Payables 468.40 515.24 546.15

Other Current Liabilities 205.60 246.72 283.73

Short Term Provisions 1.20 0.97 0.83

c) Current Liabilities 918.90 1011.51 1081.77

Total (a+b+c) 2930.50 3072.41 3236.44

ASSETS:

Non-Current Assets:

Fixed Assets 1071.10 1076.46 1081.84

Non Current Investments 68.70 68.71 68.71

Long Term Loans and Advances 559.70 570.89 583.45

d) Non-Current Assets 1699.50 1716.06 1734.00

Current Assets:

Inventories 367.40 385.77 408.92

Trade Receivables 496.10 594.87 710.63

Cash and Bank Balances 36.30 54.45 68.06

Short Term Loans and Advances 331.20 321.26 314.84

e) Current Assets 1231.00 1356.35 1502.45

Total (d+e) 2930.50 3072.41 3236.44

Annual Profit & Loss Statement for the period of 2012to 2015E

Quarterly Profit & Loss Statement for the period of 31 Dec, 2012 to 30 Sep, 2013E

Value(Rs.in.mn) FY12 FY13 FY14E FY15E

Description 12m 12m 12m 12m

Net Sales 1989.10 2502.20 2827.49 3138.51

Other Income 55.60 17.20 23.74 28.01

Total Income 2044.70 2519.40 2851.22 3166.52

Expenditure -1772.20 -2159.20 -2459.91 -2724.23

Operating Profit 272.50 360.20 391.31 442.29

Interest -96.60 -118.80 -134.24 -158.41

Gross profit 175.90 241.40 257.07 283.88

Depreciation -114.20 -120.80 -124.42 -143.09

Profit Before Tax 61.70 120.60 132.64 140.80

Tax 0.00 0.00 0.00 0.00

Net Profit 61.70 120.60 132.64 140.80

Equity capital 390.50 390.50 390.50 390.50

Reserves 684.20 804.80 885.28 956.10

Face value 10.00 10.00 10.00 10.00

EPS 1.58 3.09 3.40 3.61

Value(Rs.in.mn) 31-Dec-12 31-Mar-13 30-Jun-13 30-Sep-13E

Description 3m 3m 3m 3m

Net sales 577.50 767.40 597.00 632.82

Other income 11.80 3.90 10.60 11.02

Total Income 589.30 771.30 607.60 643.84

Expenditure -507.80 -665.10 -518.70 -548.02

Operating profit 81.50 106.20 88.90 95.82

Interest -28.40 -35.10 -30.70 -31.62

Gross profit 53.10 71.10 58.20 64.20

Depreciation -30.50 -30.50 -30.30 -30.60

Profit Before Tax 22.60 40.60 27.90 33.60

Tax 0.00 0.00 0.00 0.00

Net Profit 22.60 40.60 27.90 33.60

Equity capital 390.50 390.50 390.50 390.50

Face value 10.00 10.00 10.00 10.00

EPS 0.58 1.04 0.71 0.86

Ratio Analysis

Charts

Particulars FY12 FY13 FY14E FY15E

EPS (Rs.) 1.58 3.09 3.40 3.61

EBITDA Margin (%) 13.70 14.40 13.84 14.09

PBT Margin (%) 3.10 4.82 4.69 4.49

PAT Margin (%) 3.10 4.82 4.69 4.49

P/E Ratio (x) 9.18 4.70 4.27 4.02

ROE (%) 5.74 10.09 10.40 10.46

ROCE (%) 19.03 22.54 23.61 25.70

Debt Equity Ratio 0.89 0.79 0.71 0.69

EV/EBITDA (x) 2.08 1.57 1.45 1.28

Book Value (Rs.) 27.52 30.61 32.67 34.48

P/BV 0.53 0.47 0.44 0.42

OUTLOOK AND CONCLUSION

� At the current market price of Rs.14.50, the stock P/E ratio is at 4.27 x FY14E and 4.02 x FY15E respectively.

� Earning per share (EPS) of the company for the earnings for FY14E and FY15E is seen at Rs.3.40 and Rs.3.61

respectively.

� Net Sales and PAT of the company are expected to grow at a CAGR of 16% and 32% over 2012 to 2015E

respectively.

� On the basis of EV/EBITDA, the stock trades at 1.45 x for FY14E and 1.28 x for FY15E.

� Price to Book Value of the stock is expected to be at 0.44 x and 0.42 x respectively for FY14E and FY15E.

� We recommend ‘BUY’ in this particular scrip with a target price of Rs.16.00 for Medium to Long term

investment.

INDUSTRY OVERVIEW

India is now among the top five pharmaceutical emerging markets globally and is a front runner in a wide range

of specialties involving complex drugs' manufacture, development, and technology. The Indian pharmaceutical

industry is a highly knowledge based industry which is growing steadily and plays a major role in the Indian

economy. As a highly organised sector, the numbers of pharmaceutical companies are increasing their operations

in India. The industry is expected to touch US$ 35.9 billion by 2016.

The Department of Pharmaceuticals has prepared a 'Pharma Vision 2020' document for making India one of the

leading destinations for end-to-end drug discovery and innovation. The department provides requisite support

by way of world class infrastructure, internationally competitive scientific manpower for pharma research and

development (R&D), venture fund for research in the public and private domain and such other measures.

Sector Structure/ Market Size

The domestic pharma market has reported total sales of Rs 6,3700.00 mn (US$ 1.03 billion) in the month of May

2013, registering a growth of 6.8 per cent, as per IMS Health. The major factors responsible are increasing sales

of generic medicines, continued growth in chronic therapies and a greater penetration in rural markets.

The cumulative drugs and pharmaceuticals sector has attracted foreign direct investments (FDI) worth US$

11,304.91 million during April 2000 to April 2013, according to the latest data published by Department of

Industrial Policy and Promotion (DIPP).

Growth

The Indian pharmaceutical industry would continue to experience strong growth as structural growth drivers

continue to remain impervious. The industry is expected to revert a growth of 10-12 percent in 2013-14,

according to a study by ICRA. It is also expected that in-organic investments will gain momentum in the medium-

term as companies plan to create stronger presence in emerging markets and build expertise in select therapy

areas.

Among the top 10 companies, Cipla with total sales of Rs 3020.00mn (US$ 49.13 million), Sun Rs 2970.00 (US$

48.32 miliion), Alkem Rs 2220.00 mn (US$ 36.12 million) and Sanofi Rs 1860.00mn (US$ 30.26 million) were the

fastest growing corporations for the month of May 2013.

Exports

• Pharmaceutical exports from the country during 2012-13 stood at US$14.6 billion, up from US$13.2

billion the previous year, as per P V Appaji, Director General, Pharmexcil.

• The Ministry of Commerce has targeted Indian pharma sector exports at US$ 25 billion by 2016. The

Government has also planned a ‘Pharma India’ brand promotion action plan spanning over a three-year

period to give an impetus to generic exports.

• In order to boost the export capability, Export-Import Bank of India (Exim Bank), has decided to expand

the scope of its finance to pharmaceutical companies for extended repayment periods. Eligible export

oriented companies can avail finance from Exim Bank for a maximum repayment period of 10 years with

a moratorium of up to 36 months.

• “Of the export markets, Indian pharma will focus on the US market which presents significant

opportunities for the next two years for generics, due to patent cliffs and recent changes in healthcare

policies,” said the India Ratings report on outlook for Indian pharmaceuticals for 2013.

Generics

Generics will continue to dominate the market while patent-protected products are likely to constitute 10 per

cent of the pie till 2015, according to McKinsey report 'India Pharma 2015- Unlocking the potential of Indian

Pharmaceuticals market'.

Global demand for generic drugs from Indian companies is booming as developed nations battle rising healthcare

costs. As a result, generics companies are increasingly focusing on expanding presence in relatively under-

penetrated markets (i.e. France, Spain & Italy), branded generic markets of East Europe and niche areas like

complex generics, OTCs etc.

Diagnostics Outsourcing/ Clinical Trials

India is fast becoming the preferred destination for high-end pathology and diagnostic services. The highly

fragmented diagnostics and pathology labs market in India is pegged at US$ 3.4 billion, according to a report by

PricewaterhouseCoopers.

An increasing number of hospitals from the UK, US, Middle East and neighbouring countries are tying up with

Indian diagnostic centres to conduct laboratory tests. The Indian diagnostic services market is expected to grow

at a compound annual growth rate (CAGR) of around 26 per cent during 2012-2015 on back of huge investments,

fast expansion into tier II & III cities, and strong government support strengthening the healthcare infrastructure

in the country.

According to RNCOs research report “Booming Clinical Trials Market in India”, the number of clinical studies by

domestic and global players has sharply risen. India, over the last decade, has developed significant capabilities

in clinical trials, along with certain capabilities in project management and data management.According to

RNCOs research report “Booming Clinical Trials Market in India”, the number of clinical studies by domestic and

global players has sharply risen. India, over the last decade, has developed significant capabilities in clinical

trials, along with certain capabilities in project management and data management.

Investments

Some of the investments in the sector are:

Piramal’s healthcare vertical plans to invest US$ 2.5 million to upgrade their antibody drug conjugate (ADC)

manufacturing suites. The upgrade will give Piramal two commercial grade ADC suites at the Grangemouth

facility, while retaining clinical phase manufacturing capacity in other suites on-site

Dr Reddy's Laboratories (DRL) has launched Donepezil Hydrochloride tablets in the US market following the

approval by the United States Food and Drug Administration (USFDA)

US-based drug maker MSD has tied up with Mumbai-based Lupin to market MSD's 23-valent Pneumococcal

Polysaccharide Vaccine in India. Lupin would have a non-exclusive licence to market, promote and distribute the

vaccine under a different brand name

Aurobindo Pharma, Natco Pharma and Glenmark have received approvals from the US Food and Drug

Administration (USFDA) to launch their migraine drugs in the US market

Elder Pharmaceuticals has acquired UK-based Max Healthcare. The acquisition is through Elder's fully-owned UK

subsidiary, NutraHealth, and will mark the re-entry of Elder Pharma into the over-the-counter (OTC)

pharmaceutical category

Zydus Group has launched LipaglynTM (Saroglitazar), a novel drug targeted for treating diabetic dyslipidemia or

hypertriglyceridemia in Type II diabetes. The drug has been approved for launch in India by the Drug Controller

General of India (DCGI)

Government Initiatives

The Foreign Investment Promotion Board (FIPB) has cleared seven FDI proposals for investment in the Indian

pharmaceutical companies. Currently, 100 per cent FDI in pharma sector is permitted through automatic

approval route in the new projects but the foreign investment in the existing pharma companies requires FIPB

approval.

In the Union Budget 2013-14, investment allowance of 15 per cent on new plant and machinery has been

allowed. The allowance is expected to increase investments in new projects while simultaneously providing tax

benefit to the industry.

In order to provide relief to the common man in the area of healthcare, a countrywide campaign in the name of

‘Jan Aushadhi Campaign’ has been initiated by the Department of Pharmaceuticals, Government of India, in

collaboration with the State Governments, by way of opening up of Jan Aushadhi Generic Stores in the

Government Hospitals by way of supply of generic medicines through Central Pharma Public Sector

Undertakings, to make available quality generic medicines at affordable prices to all.

Road Ahead

In spite of some recent adverse developments, with the support of Pharmexcil and the Government in the form of

Brand India Pharma project iPHEX, the sector would continue to grow and meet the healthcare requirements of

the developing world.

The country will see the largest number of merger and acquisitions (M&A) in the pharmaceutical and healthcare

sector, according to consulting firm Grant Thornton. A survey conducted across 100 companies has revealed that

one-fourth of the respondents were optimistic about acquisitions in the pharmaceutical sector.

The pharma companies such as Cipla, Ranbaxy, Dr Reddy's Labs and Lupin might soon be part of the

government's ambitious 'Jan Aushadhi' project. In an attempt to commercialise the project, the Government is

likely to rope in the private sector to bulk-procure generic drugs from them.

Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale of

any financial instrument or as an official confirmation of any transaction. The information contained herein is from

publicly available data or other sources believed to be reliable but do not represent that it is accurate or complete and

it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s affiliates shall not be in any way

responsible for any loss or damage that may arise to any person from any inadvertent error in the information

contained in this report. This document is provide for assistance only and is not intended to be and must not alone be

taken as the basis for an investment decision.

Firstcall India Equity Research: Email – info@firstcallindia.com

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