ANUSH SHARES AND SECURITIES PVT LTD

WEEKLY NEWSLETTER
NOV 26 NOV 30, 2012 EDITION: 02 VOLUME: 30

MARKET DURING THE WEEK

Index Performance The passing holiday shortened week can be called an extraordinary week for the Indian markets, as the major indices not only surged to their highs of the year but within a span of three days gained over 4.5%. The week witnessed the expiry of the November series on a quiet bullish note, after remaining flat for the whole month the indices spurted in the last, supported by huge short covering. There was significant addition of open interest in the last couple of sessions that indicates accumulation of long positions in the December series. The markets made a cautious start of the week and the trade remained in consolidation mood on the first day ahead of an all party meet to break a logjam in the Parliament, as the opposition parties remained adamant to oppose FDI in retail and demanded for vote on the issue. Very next day and the penultimate session of the F&O expiry, the markets went for a massive rally, as the government looked well in control of the situation on getting affirmative tones from its allies and outside supporters. The global cues too aided to the local market mood and a broad based rally was seen. Markets remained closed on Wednesday and escaped the selling that other global markets witnessed. However, the after a day's gap returned with full vigor and surged on F&O expiry day with benchmarks touching their new highs for the year, as the impasse in the Parliament ended after the Speaker fixed the date for a debate and vote on the issue which will take place on December 4 and December 5. Not only this, traders took cues from the report of investment banker Goldman Sachs upgrading India to overweight from market-weight, saying that it expects the country's economic growth to be 'relatively strong' over the next year. The final day of the week too was just an extension to the gaining streak, despite a dismal second quarter GDP numbers, which came much in line to the street expectation of 5.3%. Nifty jumped by 253.25 points or 4.50% to 5879.85 and Sensex rallied 833.33 points or 4.50% to 19339.90 during the week ended November 30, 2012. FIIs were net buyers in equity segment in the week leading to a net inflow of `38.66 Bn. Future Outlook In the coming week, which marks the start of the new 4,900 4,886 4,886 month, investor's would see a lot of economic data 4,880 4,862 4,860 pouring in. Auto and cement stocks will be in the 4,856 4,840 focus as both Indian automobile and cement industry 4,820 4,818 will report their sales number for the month of 4,800 November 2012. India's export data for the month of 26-Nov 27-Nov 28-Nov 29-Nov 30-Nov October 2012 too would be announced next week. CRUDE Meanwhile, a trail of strength over FDI in retail issue will be witnessed in Parliament next week, with the Lok Sabha deciding to have a discussion on December 4 and 5 on the issue under a rule entailing voting. Additionally, shares of private sector bank too will be in focus as the government will table the Banking Laws (Amendment) Bill, 2011 in the ongoing winter session of parliament. Further, India's manufacturing and Services PMI data is also due to be released in next week. On the global front, investor's will eye the release of few major economic data from the world's largest economy, United States (US), Jobless Claim data and the Employment Situation data in the coming week.
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GLOBAL OUTLOOK
US Markets The US markets bounced back in later half of the week to come into green. President Obama stated that he is hopeful of getting budget agreement done before Christmas, while calling on Americans to pressure House Republicans to block scheduled tax hikes on the middle class. Also, House Speaker Boehner told that he remained hopeful Republicans could forge an agreement with the White House to avert austerity measures otherwise set to begin in the New Year. Though, the cautiousness in the market is likely to linger till the last of the year as the Obama administration and House Republicans were still at loggerheads in fiscal cliff talks, as the White House reportedly called for $1.6Tn in new tax revenue and an unlimited debt ceiling on the table. Boehner said he remains hopeful about talks to avert more than $600bn in spending cuts and tax 13,050 13,026 13,022 increases scheduled to begin in January. While, the 13,000 12,967 12,985 Democrats are reluctant to cut entitlement 12,950 spending, the Republicans are firm against the 12,900 12,878 increase in taxes for rich and cut wasteful defense 12,850 spending. The Dow Jones was marginally up by 26-Nov 27-Nov 28-Nov 29-Nov 30-Nov 0.1% for the week. DOW JONES European Markets The European markets remained in jubilant mood in the passing week after lenders and ministers in the euro zone settled their differences to lower debt and offer interest free loans to Greece. European Central Bank Governing Council Member Ewald Nowotny stated that the deal struck by euro zone finance ministers and the IMF is probably a solution that is better than all alternatives. Besides, the European Commission approved the restructuring plans of the four Spanish banks BFA/Bankia, NCG Banco, Catalunya Banc and Banco de Valencia which is in line with EU state aid rules. Separately, the annual growth rate of the broad monetary aggregate M3 in the euro area increased to 3.9% in October from 2.6% in September, the European Central Bank reported. The three-month average of the annual growth rates of M3 in the period from August to October rose to 3.1% compared with 3% in the period from July to September. Asian Markets The Asian markets extended the gaining streak in the 101.0 passing week, on hopes that US will find a solution to 100.5 the fiscal cliff issue and the global economic growth may not get impacted. Also, there was second round 100.0 of stimulus announcement from Japan, which further 99.5 boosted the markets. Japan's cabinet approved a 99.0 second economic stimulus package worth 880 26-Nov 27-Nov 28-Nov 29-Nov 30-Nov billion using budget reserves as Prime Minister YEN NIKKEI Yoshihiko Noda attempts to boost the economy before next month's elections. Industrial production in October increased by 1.8 percent from the previous month signaling a contraction in the world's third-largest economy may be short lived.
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STOCK OF THE WEEK SHASUN PHARMACEUTICALS LTD.

SHASUN PHARMA Shasun Pharma, incorporated in 1976 and listed in 1994, is Stock of the Week PHARMACEUTICALS a leading supplier of active ingredients, intermediates, SECTOR FACE VALUE ` 2.00 formulation, chemistry and analytical services to the BSE CODE 524552 global pharmaceutical industry. Though the company NSE CODE SHASUNPHAR started its operations with sole focus towards the CMP ` 172.60 manufacturing of active pharma ingredients and 52 WEEK HIGH ` 185.60 38.60 intermediates, it expanded its service offerings to contract 52 WEEK LOW ` MARKET CAP ` Cr. 951.37 research, custom synthesis, contract manufacturing and AVG 3M VOLUME 407790.62 contract formulation services through its acquisition of Rhodia Pharma Solutions, UK in 2006. Shasun runs its API and intermediates manufacturing operation from its USFDA approved API facilities at Cuddalore and Pondicherry in South India and Dudley in the UK. Its finished dosage development and manufacturing operation is undertaken from its USFDA/UKMHRA approved formulation facility at Pondicherry. Additionally, it has a state-of-the-art research center (having key MNC customers in Japan, the USA and EU) in Chennai and a biotech facility to manufacture recombinant streptokinase in Pondicherry. Despite Shasuns increased focus towards CRAMS, APIs remain the flagship segment of the company with ~ 55% weight on consolidated revenues.

Company manufactures and markets APIs like Ibuprofen, Gabapentin, Ranitidine, Nizatidene, Olanzapine & Cycloserine across the globe including regulated & semi-regulated markets. Shasun UK is engaged in contract research & contract manufacturing of APIs for emerging pharma companies. In the year FY12, Shasun UK contributed ~31% of companys total revenue. Companys 55% of total revenue contribution was from generic APIs India (while 47% was contributed by three products Ibuprofen, Gabapentin & Ranitidine only) & 6% from CRAMS APIs India. Companys CRAMS formulation facility with annual production capacity ~3.5 billion tablets in Pondicherry contributed ~8% of companys total revenue in FY12. Shasuns Biotech (supply Streptokinase) business contributed ~`34mn in FY12. Shasun is the largest manufacturer of Ibuprofen in the world and one of the leading suppliers of Ibuprofen, Ibuprofen derivatives, Nizatidine, Ranitidine, Gabapentin, Olanzapine and Cycloserine amongst others. Under CRAMS, Shasun offers services both in APIs and formulations development. In API CRAMS, Shasun undertakes collaborative discovery led research and API development projects in its UK-based Subsidiary as well as from Indian base. On the other hand, it offers the services of formulation development and manufacturing to innovator as well as generic companies. Moreover, Shasun has a strong pre-launch projects pipeline of 28 developmental molecules many of which are in the advance stage of phase II & III clinical trials. Any progressive development for any molecule would provide substantial growth to Shasuns CRAMS API revenues. Currently, it is manufacturing and supplying 24 products pertaining to customers ANDA (having 17 other awaiting for regulatory approval) for their regulated market (i.e. the US, Europe and Canada) distribution. From the basket of its own developed ANDA, it has already commercialized 11 products and 21 products are in the pipeline.
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Considering increasing product pipeline and likely new customer additions from Japan, Shasun has already expanded its formulation manufacturing capacity from 1.4bn tablets/capsules in FY10 to 3bn in FY12 and expects to expand capacity to 6bn by FY15. Over the last 5 years, the CRAMS formulation has grown by leaps and bounds from `125mn in FY08 to `841mn in FY12, representing 61% CAGR. Going ahead, we expect Shasuns formulation CRAMS to grow, led by capacity expansion and expanded product basket.

116 111 106 101 96 91

NIFTY

SHASUNPHAR

Approximately 300 experienced people work in Shasuns UK subsidiary. Out of which ~40 are scientists and ~24 hold PhD degree in research. Company deals mainly with emerging pharma companies for custom services and manufacturing of NCE molecules. Shasun UK have product portfolio of ~37 products and another 28 products are in pipeline including 8 products in phase III stage. On the other side in India, Shasun has well established research centre in Kelanbakkam (Chennai) for contract research and custom synthesis services, which have more than 60 scientists. Company has developed portfolio of 9 products from this centre and another 17 products are in pipeline, including 5 products in Phase III stage. Shasun is likely to invest `2.5bn in setting up an API facility in Vizag. This investment is likely to be in phased manner and first phase would be completed by the end of April 2013. Remaining two phases would complete in next one and half year. Accordingly, this facility would require another 6 months for validation trials. Hence, we assume that complete benefit would accrue post FY15E. We believe that increase in capacity is in line with management guidance of robust revenue growth. CONCERNS The company has large dependencies on select products and its planned launches. The company faces regulatory risk. Subject to currency volatility. Companys major revenue contribution (~47%) is from three products Ibuprofen, Ranitidine & Gabapentin. These products being matured may report slowdown in demand or increasing competition may erode the margins. RECOMMENDATION In P/E terms the stock is currently trading at 8.26x its TTM EPS of `20.89, while industry P/E is around 25x, we feel that the stock is undervalued in market terms. We recommend a BUY on the stock purely on fundamental grounds.

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GLOBAL INDEX PERFORMANCE

INDEX NIKKEI HANG SENG DAX FTSE NASDAQ DOWJONES Current 9446.01 22030.39 7405.50 5866.82 3010.24 13025.58 Change 79.21 116.41 96.37 47.68 43.39 15.90 % 0.85 0.53 1.32 0.82 1.46 0.12

CURRENCY AND COMMODITIES

Rate $/` ` $/ MCX CRUDE MCX GOLD MCX SILVER MCX COPPER 54.63 82.48 4862 31459 62547 436.70 Change -0.88 0.07 -24 -869 -845 6.25 % (1.58) 0.09 (0.49) (2.69) (1.33) 1.45

TOP NIFTY GAINERS

SCRIP BHARTIARTL IDFC SESAGOA CIPLA HDFC CMP ` 337.00 173.20 182.20 414.65 843.50 Change 31.55 15.44 16.16 32.94 64.14 % 10.33 9.79 9.73 8.63 8.23

TOP NIFTY LOSERS

SCRIP POWERGRID MARUTI M&M CMP ` 117.90 1473.85 947.00 Change -1.84 -19.41 -7.06 % (1.54) (1.30) (0.74)

INDEX PERFORMANCE
INDEX NIFTY SENSEX BANK NIFTY CNX IT CNX MIDCAP Current 5879.85 19339.90 12158.90 6263.25 8139.80 Change 253.25 833.33 683.10 164.15 352.55 % 4.50 4.50 5.95 2.69 4.53

FII ACTIVITY
Date 26-Nov 27-Nov 28-Nov 29-Nov 30-Nov Net 436.90 206.30 0.00 1170.00 1992.00

in ` Cr.
Nifty 9.30 91.55 0.00 97.55 54.85

NET
*In Stock Exchange

3805.20

253.25

For further queries, contact: ANALYST HARI BASKAR KUMARAPPAN NARAYANI RAVI SATHISH E-MAIL haribaskar@anushshares.com kumarappan@anushshares.com narayani@anushshares.com ravi@anushshares.com sathish@anushshares.com CONTACT NO

044 24616234 044 24616721

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