Ranbaxy_200313

Sector: Pharmaceutical

Sector view: Positive

Sensex: 19,428

52 Week h/l (Rs): 578/371

Market cap (Rscr) : 18,323

6m Avg vol (‘000Nos): 890

Bloomberg code: RBXY IN

BSE code: 500359

NSE code: RANBAXY

FV (Rs): 5

Price as on Mar 19, 2013

Company rating grid

Low High

1 2 3 4 5

Earnings Growth

Cash Flow

B/S Strength

Valuation appeal

Risk

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Mar‐12 Aug‐12 Jan‐13

Ranbaxy Sensex

Share holding pattern

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Mar‐12 Jun‐12 Sep‐12 Dec‐12

Promoters Institutions Others%

Rating: BUY Target (9‐12 months): Rs500

CMP: Rs439

Upside: 13.9%

Company ReportMarch 20, 2013

Research Analyst: Bhavika Thakker

[email protected]

Ranbaxy Laboratories

Initiating Coverage

Set to get back lost sheen

Ranbaxy after witnessing the worst time is now set to get back the lost sheen. We believe the worst may be over for the company. We expect core business to improve and better cash flow from visible FTF opportunities to aid Ranbaxy in setting the clock back again to the 2008 level. Stronger now: Post signing a consent decree with the US FDA to resolve issues regarding the Paonta Sahib and Dewas plants, and its disclosure of potential penalties to the US Dept. of Justice of US$500m, we believe the fundamentals are improving. The base business has so far struggled with poor performance across segments. However, with renewed focus and restructuring activities at full swing, growth and margins for Ranbaxy’s base business will see a gradual improvement. The re‐launch of Lipitor, approvals of new NDAs‐Absorica and Ximino and partnership with Alembic for Pristiq NDA, will aid in improving core business in US. As the benefits of restructuring activities creep in, we expect even the domestic business to get stronger.

Rich pipeline: Ranbaxy has a rich pipeline of Para‐IV filings. We expect sustainable cash‐flows from these products till CY15. The company had over 40% market share in Lipitor, ahead of street estimates but batch recall put a pause to its growth. We expect Diovan exclusivity and Valcyte exclusivity in 2013. Absorica and Desvenlafaxine are interesting opportunities too and the developments so far have been better than expected. We are confident the company will monetize the opportunity in Nexium. We believe evolving synergistic‐hybrid model would also prove beneficial in long term. We also cannot rule out the probability of many more AG launches like Evoxac, branded drug of Daiichi Sankyo (DS).

Value BUY: We expect the core business operating margin to improve and also better cash flow stream from visible FTF opportunities. Margin recovery in medium term and visibly sustainable growth makes current valuations attractive. We rate Ranbaxy BUY with a price target of Rs500.

Financial summary Y/e 31 Mar (Rs m) CY11 CY12 CY13E CY14E

Revenues 102,295 124,597 113,424 136,612

yoy growth (%) 9.0 21.8 (9.0) 20.4

Operating profit 16,041 18,227 18,278 29,920

OPM (%) 15.7 14.6 16.1 21.9

Reported PAT (28,996) 9,227 12,798 21,878

*Adj PAT 16,912 22,844 12,954 22,066

yoy growth (%) 62.4 35.1 (43.3) 70.3

*Adj EPS (Rs) 40.0 53.7 30.5 51.9

P/E (x) 11.0 8.2 14.4 8.5

Price/Book (x) 6.5 4.6 3.5 2.5

EV/EBITDA (x) 11.4 9.5 9.3 4.8

Debt/Equity (x) 1.0 0.8 0.6 0.3

RoE (%) (68.4) 26.5 27.1 33.9

RoCE(%) 27.2 36.6 29.8 38.5 Source: Company, India Infoline Research (*adjusted for forex and exceptional not for one‐offs)

Ranbaxy

2

Base business improvement; key trigger As the patent cliff nears an end (CY15), the conventional business model of most generic pharma companies will not remain very lucrative. Even for Ranbaxy, the concern is what after CY15? Hence, we believe improvement at base business is a key trigger. The company’s base business now >US$400mn is set to improve with various growth levers. Re‐launch of Lipitor, approvals of new NDAs‐Absorica and Ximino and partnership with Alembic for Pristiq NDA, will aid in improving core business in US. Strong OTC business will further aid in growth (top five products are Loratadine D and Loratadine, Ibuprofen + Pseudoephedrine, Cetirizine and Acetaminophen). Innovation along with Generic Innovation will help gain momentum We believe innovation, along with generic innovation, will help gain momentum for the base business be it in US or in emerging markets. Ranbaxy has proved its capability in innovation. The company developed the first new drug in the country (India) called Synriam (Malarial drug: A new age cure‐ arterolanemaleate 150 mg + piperaquinephosphate 750 mg). After its successful launch in India, Ranbaxy plans to introduce the drug in other malaria endemic zones, predominantly in the African and South‐East Asian markets. In Generic innovation, the innovative streak is evident in the recent launch of Absorica (Isotretinoin) in the US for severe recalcitrant nodular acne. It’s an innovation as the product is not a substitute of any existing product. This drug doesn’t need to be taken with high‐fat meals and hence it has an edge over existing competing product. The company had developed a brand similar to this (Sotret) in 2003, which enjoyed good market position. But the FDA issues in 2008 took a toll on the same; else the derma portfolio would have taken off in the US.

The company’s strategy is to spend on Innovation in the generics space that improves patient convenience, patient compliance, safety and efficacy.

As per the management there is massive business opportunity in generic innovation.

Base business in the US has stabilized Growth in the base business and one‐offs in the US to keep the momentum going

0

100

200

300

400

500

600

Q1CY10

Q2CY10

Q3CY10

Q4CY10

Q1CY11

Q2CY11

Q3CY11

Q4CY11

Q1CY12

Q2CY12

Q3CY12

Q4CY12

(US$ mn)Base Bus iness Tota l

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400

800

1,200

1,600

2,000

CY08

CY09

CY10

CY11

CY12

CY13E

CY14E

CY15E

(US$ mn)One‐Offs Tota l

Source: Company, India Infoline Research

Ranbaxy

3

Emerging business model: integration at front-end and back-end The front‐end and back‐end integration between the two firms (Daiichi Sankyo and Ranbaxy) is now evident. As per the strategy, Daiichi Sankyo would essentially, but not only, operate in the discovery space and Ranbaxy would operate in the generics and generic innovation space. At the front‐end, it would be a hybrid‐business model, i.e. whichever company has a stronghold in any geography, would become the face for both the companies. For instance, in India, Ranbaxy would market all the products of both the companies. And in Mexico, where Daiichi Sankyo is strong, it would market Ranbaxy’s products in addition to its own. In markets where Ranbaxy and Daiichi are equally strong or equally weak, both companies would go their own way (quite evident from the US market operation). We believe, the strategy would be value assertive for both the companies. The evolving synergistic‐hybrid model would prove beneficial in long term. Hence, we cannot rule out the probability of many more AG launches like Evoxac, the branded drug of Daiichi Sankyo. Hybrid model will prove value assertive


Ranbaxy

4

Key products under Hybrid model Products Country Promoted/marketed by

Olmesartan India Ranbaxy

Olmesartan+Amlodipine Besylate

Singapore, GCC, Myanmar, Russia & CIS, Romania, Africa, Africa, LatAm,

Ranbaxy

France, Italy

Levofloxacin India, Malaysia Ranbaxy

Prasugrel MEA, Australia, LatAm, Germany, Ranbaxy

Pravastatin France, Italy, Poland, Portugal, UK Ranbaxy

Bisoprolol Italy Ranbaxy

Metoprolol Italy Ranbaxy

Raloxifene Romania Ranbaxy

Ofloxacin Singapore Ranbaxy Source: Company, India Infoline Research

Rich pipeline: Ranbaxy has a rich pipeline of Para‐IV filings. We expect sustainable cash‐flows from these products till CY15. The company had secured over 40% market share in Lipitor, ahead of street estimates but a recall caused a pause. The Company reacted very fast and corrective measures put Lipitor back on track. Ranbaxy restarted production of Lipitor in Feb 2013 post its withdrawal of the drug in November 2012. We expect Ranbaxy to gain back 15%‐20% market share in US$200mn market of Lipitor. The company started manufacturing in Ohm Labs, US, and plans to gradually shift production to its Mohali plant in the near to medium term to gain market share with profitable operating margins. After the big ticket launch of Lipitor in 2012, we believe 2013 again would be a big launch year for Ranbaxy. We expect Diovan exclusivity and Valcyte exclusivity in 2013. Absorica and Desvenlafaxine are interesting opportunities too and the developments so far have been better than expected. We are confident the company would be able to monetize the opportunity in Nexium too. We cannot rule out the probability of many more AG launches like Evoxac, the branded drug of Daiichi Sankyo. We believe the evolving synergistic‐hybrid model would also prove to be beneficial in the long term.

The company had secured over 40% market share in Lipitor, ahead of street estimates

Nexium would be next big ticket launch in 2014

Ranbaxy withdrew 41 lots of generic Lipitor in US post identification of glass particles in formulations. While the particles originated due to splinters in glass container during production of Atorvastatin at Tonasa API plant, Ranbaxy withdrew current inventory to mitigate any possibility of consumption of contaminated drugs. The drugs were recalled at distributors’ level and posed no major threat to

the end consumers.

Ranbaxy

5


Key Molecules (revenue contribution):

Brand Type Brand Size (US$mn) Date Innovator

CY13 (US$mn)

CY14 (US$mn)

CY15 (US$mn) Comment

Evoxac AG 62 Launched Daiichi Sankyo 7 5 3

Severe genericization expected post exclusivity

Valcyte Sole FTF 300 Sep 13E Roche’s 10 8 0

May be pushed to Sep from March expected earlier

Diovan Sole FTF 1900 H2 CY13E Novartis 200 0 0 The drug went off patent in Sep 2013

Nexium Sole FTF 2675 July 14E AstraZeneca 0 400 200

Exclusivity ends Nov 2014; expect severe genericization

Oxycodone P‐IV on 30/40/60/80mg 2930 Uncertain

Purdue Pharma ‐ ‐ ‐

No TA (tentative approval) yet. Not considered in Valuation as uncertain launch period


Consent Decree defined: Ranbaxy signed a Consent Decree with the US FDA in January 2012 to draw resolutions on its plants in Dewas, Paonta Sahib, Batamandi and Gloversville. The company made a provision of US$500mn for eventual penalties that the Department of Justice (DOJ) may levy. Under the Consent Decree, the company agreed with the FDA to further strengthen policies and procedures in order to continue to ensure the integrity of our data and compliance with current good manufacturing practices. The Consent Decree identified several Ranbaxy ANDAs by a non‐descriptive label that might be subject to forfeiture if certain conditions detailed in the Decree were not met within certain timeframes. While deadline for submitting all additional information on ANDA—1, 2, 4, 5 were to submitted by a specific timeline, the decree alerted that ANDA‐3 would be forfeited in case approval for 180‐day exclusivity are not received by March 25, 2013. Few market participants expect that the ANDA 3 could be Diovan. We feel, the probability of it being Diovan is very low. But still the risk remains till the clarity emerges on this counter.

Ranbaxy

6

Update on launched NDAs: gaining strength Absorica: It is an NDA brand of Cipher’s Isotretinoin developed in partnership with Ranbaxy (for the US market). Absorica caters to external nodular anti‐acne market. The product faces limited competition from Teva (Claravis), Mylan (Amnesteem) and Douglas Pharma (Myorisan). The clinical data shows substantial efficacy over competitive brands including Sotret and also Absorica has better absorption profile vis‐à‐vis reference product Accutane (Roche’s innovator brand). Ranbaxy was market leader in Isotretinoin with its brand Sotret in 2008 (after the FDA issue it stooped marketing). We believe the Sotret franchise would be leveraged by the company to market Absorica. We expect present value of potential business from Absorica to be ~US$200mn over a period. As per the agreement with Cipher, there is a milestone payment + Royalty on sales for the Absorice drug. The company launched the drug in Q4CY12 and market share ramp‐up has been satisfactory. The company currently enjoys 8% of the Isotretinoin market. Ximino: It’s an NDA of Minocycline Hcl to address inflammatory lesions of non‐nodular severe to moderate acne vulgaris. Ranbaxy plans to launch Ximino in H2 2013. Ximino addresses internal acne in subcutaneous area while Absorica caters to external nodular anti‐acne market. We expect the company to extract synergy in marketing with the Ximino launch. Minocycline’s original branded product Solodyne went off‐patent in 2012; Ranbaxy expects Ximino to gain sizeable market share as the drug is only extended‐release (ER) Minocycline in capsule form. We expect ~US$5mn from the product as it is a small size less competitive market with seven substitute competitions from ER tabs segment (six generics and Solodyne; branded product). Desvenlafaxine: Ranbax in‐licensed Desvenlafaxine (NDA) from Alembic in Q1 2013. Ranbaxy was also involved in the development of the product. The product is bioequivalent but not therapeutically substitutable to Pfizer’s depression drug Pristiq (US$590mn in MAT January 2013). We expect Ranbaxy to ramp up its market share gradually over the next two years implying opportunity worth ~US$50mn. But risk to our assumption would be approval of AB rated generic drug. On a positive side, it can also be extended limited competition opportunity (31‐08‐2015). Alembic also has FTF in Pristiq with Breckenridge; Mylan and Watson are other filers.

Potential business from Absorica to be ~US$200mn over a period

Ranbaxy expects Ximino to gain sizeable market share as the drug is only extended‐release (ER) Minocycline in capsule form

Risk to our assumption would be approval of AB rated generic drug

Pay‐offs of key product (revenue contribution)

Brand Type Brand Size (US$ mn)

CY13 (US$ mn)

CY14 (US$ mn)

CY15 (US$ mn) Comment

Abscorbia Branded Limited competition 800 60 80 100 licensed from Cipher

Ximino Branded,NDA 400 5 5 5 7 Player market

Pristiq Branded,NDA 900 10 20 20 Alembic partnership ; limited competition opportunity


Ranbaxy

7

Domestic business stabilising.. .. expect moderate growth

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1,000

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(Rs mn)


Top 9 Brands

Revital

MoX

Storvas

Volini

Cifran

Zanocin

Cepoderm

Moxclav Source: Company, India Infoline Research

Domestic business is still a key focus market The company underperformed the market in last few years. But with renewed strategy and restructuring activity, the company aims to strengthen under‐represented market segments. After Project Viraat, which aimed at capitalising on the growing opportunities in the rural areas and the hospital market, the company is now working towards consolidation of products launched and improving productivity. Post this, company is hopeful of regaining its lost sheen in the domestic market. Even leveraging synergies from the hybrid‐business model (launched two innovator products of Daiichi Sankyo, Olvance and Prasita in 2010 and 2009 respectively) will help Ranbaxy to accelerate growth. Biotech and Vaccines are also two new growth areas which can add momentum to domestic business. The lead vehicle for these will be Zenotech (Biotech) and Ranbaxy Biologics (Vaccines).

As a part of a renewed strategy the company also has hired Mr Rajiv Sibal for the India business (from Glenmark). Current therapy mix reflects the IPM with Acute therapy contributing ~70%+ of total business. Company is aiming to strengthen its chronic portfolio. While chronic segment is growing at a higher pace than acute, we believe consolidation of acute portfolio and increasing reach of chronic drugs will work for the company. Ranbaxy already has one of the largest distribution networks that comprises over 5000 field force. The company has dedicated task forces for specialised & chronic therapies. The company’s 9 brands feature in industry Top 100. Key therapeutic areas are Anti‐infectives, Cardiovascular, Gastrointestinal, Nutritionals, Dermatologicals, Orthopedics, Urology, Central Nervous system and Asthmatics. The company has 9 product ranked in top 100 prodcts in the domestic market. Revital with ~US$41mn revenue has 90% market share in its segment followed by Volini (~US$20mn) which has market share of 45%. The anti‐infective drug Mox has market share of 42% in its category. Impact would be higher but short lived The impact of price control under NPPP will be higher for Ranbaxy, given that Ranbaxy’s products are priced at a premium and the domestic market share at 4.6%. We believe the impact can be in the range of ~Rs500mn for next two years.

In 2011, Olvance moved from rank 6 to rank 4,Prasita has moved up 6 ranks to occupy the No. 2 slot in its therapy Sales force productivity improvement and brand building are the key factors for domestic growth Tilt towards Acute portfolio is a key concern

Ranbaxy

8

Western Europe stabilising and Eastern Europe and CIS improving

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(US$ mn)

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($US mn)


Europe; the third largest revenue contributor is out of the woods now The company has now evolved a robust model for troubled European region wherein the emphasis will be on the branded markets for Eastern Europe while continuing to serve the commoditised Western European markets. To achieve the necessary focus, the region has been segmented into Western Europe and Eastern Europe. We expect 18% CAGR in CY12‐15E

20% CAGR expected in Europe in CY12‐14E

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35,000

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CY09

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(Rs mn)


Ranbaxy

9

Asia Pacific and Middle East expected to register 14% CAGR over CY12‐14E

Moderate growth in Africa

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(Rs mn)


Expect 15%+ growth in Asia Pac and Middle East and Africa expected to grow in higher single digit The company has completed its major restructuring process in APAC. Company has setup greenfield manufacturing facility in Malaysia; the branded business in Russia is also robust. We expect 11% growth in APAC and Middle East. Africa we expect 10% CAGR in CY12‐15E. We believe unstable political scenario is impacting Africa despite setting up of a new plant at Morocco. Trend in various geographies

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(US$ mn)Africa As ia paci fic & Middle East Latin America


Ranbaxy

10

Adj base margin improvement imminent Adj consolidate margin to fluctuate with FTF

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(%)

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Source: Company, India Infoline Research (Adj‐Adjusted for Forex)

Base business to witness 11% CAGR Growth in Total revenue (5% CAGR)

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Base margin improvement imminent Dismal Q4CY13 was a big disappointment. The Q4 margins were suppressed on account of approx Rs1bn in non‐recurring costs and suppressed gross margins. The gross margins were suppressed on higher inventory write‐offs, greater contribution from tender business and consumption of high‐cost inventory. The overhead cost for Ranbaxy is significantly higher. Additionally, the costs associated with resolution of the FDA issues made margin look worst. Though FDA related expenses will continue till next 2 years, others being non‐recurring. We think it’s the bottom for the operating margin and there is enough scope for improvement. The management strongly believes with the growing base business, EBITDA margins will return to initial ~20% over the next 3‐4 years. In addition, there are organizational and productivity‐related inefficiencies, which are now being addressed through various productivity improvement initiatives kick‐started in CY12.

Base revenues to clock CAGR of 11% in CY12-14E We expect 11% CAGR in CY12‐14E in base revenue and 5% CAGR in total revenues. We believe the growth is achievable even at higher base of FY12, with FTF opportunities, growth in the US base business and consistent growth in domestic formulations.

FDA related expenses will remain till next two years

Ranbaxy

11

Forex liability to dampen net performance with Rupee depreciation; but most of it is capped now Rupee depreciation has resulted in incremental forex losses of Rs19bn and Rs13bn for Ranbaxy in CY11 in CY12. The derivative exposure is now down to ~US$1.07bn as on Dec 31, 2012 from ~US$1.27bn in Q3 CY12. Ranbaxy’s outstanding currency positions include US$655m of structured currency options at 2‐2.5 times, maturing in a gradual manner till 2016 (US$40mn/month). Concerns Delay in the conversion of Diovan ANDA

Unfavorable forex movement

Company takes more than expected time to come out of US FDA issues

There would be margin pressure if base business improvement does not take place in the same pace as expected by us

Losing more front‐end or margin accretive business to Daiichi

Ranbaxy

12

1 year Forward Adj PE band Improving fundamentals led re‐rating

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Apr‐09 Jan‐10 Oct‐10 Jul‐11 Apr‐12 Jan‐13

(Rs)

5.7x

32.3

23.5x

14.6x

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16.0

24.0

32.0

40.0

48.0

Apr‐09 Jan‐10 Oct‐10 Jul‐11 Apr‐12 Jan‐13

1yr fwd PE Mean fwd PE(x)


Outlook & Valuation The stock corrected around 25% in last quarter post Q4 CY12 poor results. We believe the compounded effect of delay in Diovan, Lipitor recall and poor Q4CY12 together contributed to the fall. But, the stock bounced back quickly post the up‐gradation by many brokerage houses. We believe the current valuation coupled with the clarity over organisation structure makes Ranbaxy still a value buy. We expect the core business operating margin to improve and better cash flow from visible FTF opportunities to aid Ranbaxy in setting the clock back again to the 2008 level. Higher probability of growth and clarity of monetizing FTF opportunity will limit the downside from hereon. We rate Ranbaxy BUY with a price target of Rs500 which values base business at Rs442 and FTF at Rs58.

Ranbaxy

13

Revenue break up Key acquisitions & alliances since 2006

37%

21%

14%

5%

4%

9%

3%7% North America

India+ME+Srilanka

Europe

CIS

Asia Pacific

Africa

Latin America

API & Others

Acquired Year

Terapia(Romania) 2006

Be‐Tabs (South Africa) 2006

Allen (Italy) 2006

Mundogen(Spain) 2006

Zenotech (India) 2009

Cardinal Drugs(India) 2007

Biovel* (India) 2010 *Acquired product rights and manufacturing facility from biovel


Company Background Ranbaxy is India’s largest pharmaceutical company. Ranbaxy is a member of the Daiichi Sankyo Group. Ranbaxy & Daiichi Sankyo combined rank among the top 20 global pharmaceutical companies. The company has ground presence in 40 countries, products sold in over 150 countries and manufacturing locations in 8 countries. The company has strong presence in multiple markets viz. North America, Europe, Latin America, Africa, Asia including Middle East. It is one of the leading Indian companies in the US with a combination of plain vanilla generics and large ticket patent challenge pipeline. Additionally, through strategic in‐licensing opportunities and its hybrid business model with Daiichi Sankyo, a leading global pharma innovator headquartered in Tokyo, Japan, Ranbaxy is introducing many innovator products in markets around the world, where it has a strong presence. In 2008 Its US business got affected due to regulatory issues at two of its manufacturing facilities in India. The company is now in Consent Decree in addressing these issues. Manufacturing Strengths: The company has cGMP compliant world‐class API & Dosage forms manufacturing facilities across the globe. It has 8 manufacturing locations worldwide Viz. USA (Ohm Labs) Ireland, Romania, Nigeria, India, South Africa, Morocco and Malaysia.

Ranbaxy

14

Financials Income statement Y/e 31 Mar (Rs mn) CY11 CY12 CY13E CY14E

Revenues 102,295 124,597 113,424 136,612

Base Revenue 102,295 91,161 100,157 113,206

Operating profit 16,041 18,227 18,278 29,920

Depreciation (3,940) (3,202) (3,341) (4,036)

Interest expense (3,064) (3,036) (1208) (808)

Other income 1,444 2,732 2,068 2,068

Profit before tax 10,481 14,720 16,076 27,124

Taxes (1,969) (2,939) (2,844) (4,844)

Minorities and other (37,508) (2,554) (156) (188)

Reported PAT (28,996) 9,227 12,798 21,878

Adjuted PAT 16,912 22,844 12,954 22,066

Base PAT 4,529 4,789 5,790 9,427

Balance sheet Y/e 31 Mar (Rs mn) CY11 CY12 CY13E CY14E

Equity capital 2,117 2,126 2,126 2,126

Reserves 26,577 38,717 51,515 73,393

Net worth 28,694 40,843 53,641 75,519

Minority interest 810 890 1,045 1,234

Debt 28,317 33,133 30,195 26,031

Deferred tax liab (net) (375) (357) (357) (357)

Total liabilities 57,446 74,508 84,525 102,427

Tangible assets 34,193 35,761 37,420 38,384

Intangible assets 16,380 16,395 16,395 16,395

Investments 956 770 770 770

Long term Assets 10,108 11,114 11,114 11,114

Net working capital (34,827) (35,536) (27,505) (33,232)

Inventories 26,107 27,314 24,832 30,003

Sundry debtors 30,053 20,368 18,596 22,469

Other current assets 8,316 6,438 6,681 8,073

Sundry creditors (70,998) (59,834) (54,331) (65,644)

Other current liabilities (28,305) (29,820) (23,285) (28,133)

Cash 30,637 46,004 46,330 68,996

Total assets 57,446 74,508 84,525 102,427

Cash flow statement

Y/e 31 Mar (Rs mn) CY11 CY12 CY13E CY14E

Profit before tax 10,481 14,720 15,797 26,910

Depreciation 3,940 3,202 3,341 4,036

Tax paid (1,969) (2,939) (2,844) (4,844)

Working capital ∆ 47,716 709 (8,031) 5,727

Operating cashflow 60,168 15,692 8,264 31,830

Capital expenditure (5,216) (4,786) (5,000) (5,000)

Free cash flow 54,952 10,907 3,264 26,830

Equity raised (44,262) (10,695) ‐ ‐

Investments 4,029 186 ‐ ‐

Debt financing/ disposal (15,179) 4,834 (2,938) (4,164)

Dividends paid (4) ‐ ‐ ‐

Other items (1,544) 10,136 ‐ ‐

Net ∆ in cash (2,007) 15,367 326 22,666

Key ratios Y/e 31 Mar CY11 CY12 CY13E CY14E

Growth matrix (%)

Revenue growth 9.0 21.8 (9.0) 20.4

Op profit growth (12.8) 13.6 0.3 63.7

EBIT growth (18.6) 12.8 (2.0) 52.1

Net profit growth ‐ ‐ 38.7 70.9

Profitability ratios (%)

OPM 15.7 14.6 16.1 21.9

EBIT margin 20.9 19.4 20.9 26.4

Net profit margin (28.3) 7.4 11.3 16.0

RoCE 27.2 36.6 29.8 38.5

RoNW (68.4) 26.5 27.1 33.9

RoA (20.1) 6.2 8.4 13.0

Per share ratios

Reported EPS (68.5) 21.7 30.1 51.5

Dividend per share ‐ ‐ ‐ ‐

Cash EPS (77.8) 14.2 22.2 42.0

Book value per share 67.8 96.1 126.2 177.6

Valuation ratios

Adj P/E 11.0 8.2 14.4 8.5

P/CEPS ‐ 31.0 19.7 10.5

P/B 6.5 4.6 3.5 2.5

EV/EBIDTA 11.4 9.5 9.3 4.8

Payout (%)

Dividend payout ‐ ‐ ‐ ‐

Tax payout 18.8 20.0 18.0 18.0

Liquidity ratios

Debtor days 107 60 60 60

Inventory days 93 80 80 80

Creditor days 253 175 175 175

Leverage ratios

Interest coverage 7.0 8.0 19.6 34.6

Net debt / equity (0.1) (0.3) (0.3) (0.6)

Net debt / op. profit (0.2) (0.7) (0.9) (1.5)

Du‐Pont Analysis Y/e 31 Mar CY11 CY12 CY13E CY14E

Tax burden (x) (2.77) 0.63 0.81 0.81

Interest burden (x) 0.49 0.61 0.67 0.75

EBIT margin (x) 0.21 0.19 0.21 0.26

Asset turnover (x) 0.71 0.83 0.75 0.81

Financial leverage (x) 3.40 4.31 3.22 2.60

RoE (%) (68.4) 26.5 27.1 33.9

Recommendation parameters for fundamental reports:

Buy – Absolute return of over +10%

Market Performer – Absolute return between ‐10% to +10%

Sell – Absolute return below ‐10%

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