Syngene International ( SYNINT)

CMP: | 306 Target: | 360 (18%) Target Period: 12 months BUY

January 24, 2020

Discovery services driving growth; outlook upbeat

Revenues grew 11.1% YoY to | 519.1 crore on the back of strong growth in
discovery services business, combined with consistent performances in

Result Update
dedicated R&D centres and development services business. EBITDA
margins remained flat at ~30%. Higher employee cost was largely offset by
increase in gross margins and lower other expenditure. EBITDA grew 9.4% Particulars
YoY to | 153.5 crore. Net profit grew 5.9% YoY to | 91.8 crore. Amount
Particular
Market Capitalisation | 12238 crore
Integrated business model, customer stickiness to the fore | 813 crore
Debt (FY19)
Revenues grew at ~21% CAGR in FY15-19 to | 1826 crore due to new client Cash (FY19) | 437 crore
addition on a regular basis and scaled up revenues from existing clients led EV | 12614 crore
by integrated service offerings, high data integrity ethos and continuous 52 week H/L 369/276
endeavour to move up the value chain. Eight of the top 10 global pharma Equity capital | 400.0 crore
companies have been availing services for the last five years. It owns a pool Face value | 10
of 4060 scientists. As of FY19, the company had a client base of 331. Key Highlights

Global pharma landscape conducive to R&D outsourcing  Revenues grew 11.1% YoY to | 519.1
crore on the back of strong growth in
Global pharma players are facing structural issues from the impending discovery services business,
patent cliff, a shrinking product pipeline, rising R&D costs and growing combined with consistent
competition. To maintain the structural balance and improve profitability, performances in dedicated R&D
they are inclined to outsource a substantial part of the R&D work. Similarly,

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centres and development services
the innovative/virtual companies that are extensively working on new business
products and which may not have the required capital/manpower also tend
to outsource a substantial part of their R&D.  Strong client addition and expansion
of contracts by existing clients
Valuation & Outlook  However, aggressive capex to
As per the management’s own assertion, revenue growth for 9MFY20 has support client addition is likely to
been behind the guidance curve as the order offtake is yet to gain the impact near term margins
expected momentum. That said, the management has guided for decent
 Maintain BUY
traction for FY21 mainly due to continuous client additions, extension of
existing contracts besides increasing manufacturing and biological
contributions. The company remains aggressive on the capex front Research Analyst
(~US$425 million already spent + another US$ 125 million earmarked by Siddhant Khandekar
FY21), attributable to firm growth plans. The asset turnover from this mega siddhant.khandekar@icicisecurities.com
capex will be a significant determinant for future visibility. On the margins
Mitesh Shah, CFA
front, the company is witnessing some pressure due to compliance, safety mitesh.sha@icicisecurities.com
and quality related expenses besides employee addition, which, we believe,
are attributable to increasing scalability and which is likely to persist. The Sudarshan Agarwal
company has recently added some elite clients like Amgen, Zoetis, sudarshan.agarwal@icicisecurities.com
Herbalife, GSK and multiple year extension of BMS and Baxter contracts. In
a nutshell, the company remains well poised to capture opportunities in the
global CRO space on account of strategic outsourcing by global innovators.
We arrive at a target price of | 360 based on ~30x FY22 EPS of | 12.0.

Key Financial Summary

(Year End March) FY19 FY20E FY21E FY22E CAGR (FY19-22E) %
Revenues (| crore) 1825.6 2015.8 2373.2 2743.9 14.5
EBITDA (| crore) 535.8 603.7 740.1 872.3 17.6
EBITDA margins (%) 29.3 29.9 31.2 31.8
Net Profit (| crore) 330.8 418.9 385.9 478.9 13.1
EPS (|) 8.3 8.7 9.6 12.0
P/E (x) 37.0 29.2 31.7 25.6
RoCE (%) 16.8 14.7 14.1 14.9
RoE (x) 14.8 13.7 13.1 15.1
 Result Update | Syngene International ICICI Direct Research

Exhibit 1: Variance Analysis

Q3FY20 Q3FY20E Q3FY19 Q2FY20 YoY (%) QoQ (%) Comments
YoY growth driven by strong growth in discovery services and
Revenue 519.1 537.2 467.1 464.5 11.1 11.8 supported by steady performance in development services and
dedicated R&D centres
A 267 bps YoY improvement in gross margins, mainly due to a change
Raw Material Expenses 144.6 164.0 142.6 125.1 1.4 15.6
in product mix
Increased due to 1) 10-12% of salary hike, 2) 3% of impact due to
Employee Expenses 152.3 134.1 116.6 131.8 30.6 15.6 recruitment in new Hyderabad plant and 3) hiring at senior level
management
Other Expenditure 68.7 77.7 67.6 68.5 1.6 0.3
EBITDA 153.5 161.3 140.3 139.1 9.4 10.4
Increase in employee cost largely offset by improvement in gross
EBITDA (%) 29.6 30.0 30.0 29.9 -47 bps -38 bps
margins and lower other expenditure
Interest 9.8 8.4 8.2 8.4 19.5 16.7
YoY increase mainly due to additional depreciation reported due to
Depreciation 57.0 52.6 42.9 52.6 32.9 8.4
commissioning of Hyderabad plant and expansion of Bangalore
Other Income 20.0 23.8 17.3 20.6 15.6 -2.9
PBT 106.7 124.2 106.5 170.0 0.2 -37.2
Tax 14.9 21.5 19.8 42.0 -24.7 -64.5
PAT before MI 91.8 102.6 86.7 128.0 5.9 -28.3
Delta vis-à-vis EBITDA mainly due to higher depreciation, which was
partially offset by lower tax rate. Miss vis-à-vis I-direct estimates
Adj. Net Profit 91.8 102.6 86.7 82.0 5.9 12.0
mainly due to lower-than-expected operational performance and higher
interest cost
Source: ICICI Direct Research

Exhibit 2: Change in Estimates

FY20E FY21E
(| Crore) Old New % Change Old New % Change
Revenue 2,081.0 2,015.8 -3.1 2,451.1 2,373.2 -3.2 Changed mainly due to lower-than-expected revenues in 9MFY20
EBITDA 623.2 603.7 -3.1 750.2 740.1 -1.3
EBITDA Margin (%) 29.9 29.9 5 bps 30.6 31.2 59 bps
PAT 429.1 418.9 -2.4 399.6 385.9 -3.4 Changed mainly in sync with operational performance
EPS (|) 10.7 10.5 -2.1 10.0 9.6 -3.5
Source: ICICI Direct Research

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 Result Update | Syngene International ICICI Direct Research

Conference Call Highlights

 The company has extended its biologics discovery and preclinical
research capabilities in CAR-T therapy, an innovative cell-based
approach to treat cancer
 The company has received cGMP approval from Russian Ministry of
Health. Also, Syngene’s viral testing facility has received good
laboratory practice (GLP) certification in India
 Capex for 9MFY20 is at US$81 million with API accounting for US$34
million, Discovery services – US$23 million and dedicated centres &
development services – US$24 million
 Cumulative capex as of 9MFY20- US$425 million. The company is
on track to take total asset base to US$550 million by end the of FY21
 Construction of the Mangalore facility is complete and is expected
to be operational by the end of FY20
 The company will file the final/fourth instalment claim for the fire
incidence at the S2 building in Q4FY20 with the claim being likely
fulfilled in FY21. Till date, the company has received | 177 crore
against total loss of | 106 crore
 Breakup of revenue mix – Discovery services – 30%; Development
services – 30%; Dedicated R&D – 30% and manufacturing – 10%
 Cost from the Mangalore facility is likely to hit the P&L from Q1FY21
onwards
 The official launch of Hyderabad facility is slated for February, 2020
 As per the management, Q4FY20 growth is expected to be in low to
mid-teens but better than current quarter. Growth in FY21 is
expected to be propelled by increased demand of discovery and
development services
 Phase 1 capex for the biologics plant has already been completed.
The ramp-up of the biologics segments is a key monitorable for the
next 12 months

Exhibit 3: Trends in quarterly performance

(| Crore) Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 YoY (%) QoQ(%)
Total Operating Income332.1 291.0 291.1 335.2 387.7 409.1 406.0 418.6 467.1 533.9 420.9 464.5 519.1 11.1 11.8
Raw Material Expenses91.1 88.0 69.3 80.0 106.8 125.6 128.8 110.3 142.6 149.6 105.5 125.1 144.6 1.4 15.6
% to revenues 27.4 30.2 23.8 23.9 27.5 30.7 31.7 26.3 30.5 28.0 25.1 26.9 27.9
Gross Profit 241.0 203.0 221.8 255.2 280.9 283.5 277.2 308.3 324.5 384.3 315.4 339.4 374.5 15.4 10.3
Gross Profit Margin (%)72.6 69.8 76.2 76.1 72.5 69.3 68.3 73.7 69.5 72.0 74.9 73.1 72.1 267 bps -92 bps
Employee Expenses 80.1 78.0 86.0 93.7 95.8 104.1 105.6 114.9 116.6 130.2 132.2 131.8 152.3 30.6 15.6
% to revenues 24.1 26.8 29.5 28.0 24.7 25.4 26.0 27.4 25.0 24.4 31.4 28.4 29.3 438 bps 96 bps
Other Manufacturing Expenses
48.1 25.0 39.8 48.0 58.9 50.3 62.4 66.7 67.6 94.5 62.1 68.5 68.7 1.6 0.3
% to revenues 14.5 8.6 13.7 14.3 15.2 12.3 15.4 15.9 14.5 17.7 14.8 14.7 13.2 -124 bps -151 bps
Total Expenditure 219.3 191.0 195.1 221.7 261.5 280.0 296.8 291.9 326.8 374.3 299.8 325.4 365.6 11.9 12.4
% to revenues 66.0 65.6 67.0 66.1 67.4 68.4 73.1 69.7 70.0 70.1 71.2 70.1 70.4
EBIDTA 112.8 100.0 96.0 113.5 126.2 129.1 109.2 126.7 140.3 159.6 121.1 139.1 153.5 9.4 10.4
EBITDA Margin (%) 34.0 34.4 33.0 33.9 32.6 31.6 26.9 30.3 30.0 29.9 28.8 29.9 29.6 -47 bps -38 bps
Depreciation 28.8 31.0 31.9 30.3 35.0 34.2 37.3 39.9 42.9 44.1 47.4 52.6 57.0 32.9 8.4
Interest 6.8 3.0 5.3 5.2 5.1 7.1 7.9 8.2 8.2 8.0 7.1 8.4 9.8 19.5 16.7
Other Income 14.6 24.0 17.2 16.4 11.6 16.6 18.8 18.2 17.3 20.8 20.5 20.6 20.0 15.6 -2.9
PBT 91.8 90.0 76.0 94.4 97.7 104.4 82.8 96.8 106.5 128.3 87.1 98.7 106.7 0.2 8.1
Total Tax 17.4 12.0 14.0 17.5 15.7 19.9 16.8 18.5 19.8 28.5 15.1 42.0 14.9 -24.7 -64.5
PAT 74.4 78.0 62.0 76.9 82.0 84.5 66.0 78.3 86.7 99.8 72.0 56.7 91.8 5.9 61.9
PAT Margin (%) 22.4 26.8 21.3 22.9 21.2 20.7 16.3 18.7 18.6 18.7 17.1 12.2 17.7 -88 bps 548 bps
Source: ICICI Direct Research

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 Result Update | Syngene International ICICI Direct Research

Company Background
Incorporated in 1993 as a subsidiary of Biocon, Syngene International (SIL) Revenue Bifurcation
is a leading contract research organisation (CRO), which supports R&D
programmes of global innovative companies. SIL offers outsourced services
to support discovery and development for organisations across industrial
Develop Dedicat
sectors like pharmaceuticals, biopharmaceuticals, neutraceuticals, animal ed
ment &
health, agro-chemicals, etc. It currently caters to 293 global players including Manufa Centers
Bristol-Myers Squibb (BMS), Abbott, Baxter and Amgen, among others. cturing 33%
38%
SIL derives ~95% of its revenues from exports. In terms of classification on
a contractual basis, it derives ~30% of revenues from long term dedicated Discove
ry
contracts with a contractual commitment of five years and more. In this case, Service
the company offers a dedicated, customised and ring-fenced infrastructure s
in line with client’s requirements. These dedicated centres are generally 29%
multi-disciplinary, full time engagements, which support the R&D
requirements of clients. Source: ICICI Direct Research; Company

The remaining comes from 1) discovery services (29% of revenues; full time
equipment (FTE)) and 2) development & manufacturing services [38% of
revenues; fee for service (FFS)].
The discovery services vertical consists of multiple client engagements
across discovery chemistry and discovery biology based service offerings.
It entails an in-depth understanding of discovery chemistry and discovery
biology pertaining to small and large molecules.
The development and manufacturing segment encompasses the services,
which support a molecule once it moves beyond in-vivo testing to preclinical
studies and clinical development. It also includes manufacturing of
molecules for clinical supplies and commercialisation.
In FTE contracts, the company does billing based on the number of scientists
deployed. In this case, there is an agreement with clients for minimum
utilisation of a specific number of scientists dedicated to their work. The
scope of services and deliverables under FTE contracts generally evolves
over time. FTE contracts are generally renewable annually. FFS contracts are
mostly short-term in nature. In FFS contracts, the agreement is for fixed price
for agreed services within a defined scope.
The company has developed long-term relationships with many clients,
including four long-duration multi-disciplinary partnerships, each with a
dedicated research centre, with four of the world’s leading global healthcare
organisations Bristol-Myers Squibb Company (BMS), Abbott Laboratories
(Singapore) Pte Ltd (Abbott), Baxter International Inc. (Baxter) and Amgen.
BMS – The first dedicated centre was set up for BMS in 2009 and engages
over 400 of scientists. Under the new agreement in Q3FY18, Syngene will
set up an additional new facility. It will put up a dedicated team of Syngene
scientists within that and support the future R&D requirements of BMS. The
duration of the collaboration has been extended to 2026.
Baxter – Dedicated centre developed in 2013. The Baxter Global Research
Centre has a multidisciplinary team of about 150 of scientists who work on
product and analytical development, preclinical evaluation in parenteral
nutrition and renal therapy. The company has recently expanded its contract
with Baxter till 2024. Under the new extension of contract, Syngene will set
up additional infrastructure as well as increase the size of its scientific team.
Amgen– In Q2FY17, the company announced the establishment of a
dedicated centre for Amgen, Inc. in Bengaluru. This centre, named Syngene
Amgen Research and Development Centre (SARC), will be Syngene’s fourth
such exclusive R&D centre and first for a biologics company. SARC will be
staffed by a team of more than 100 Syngene scientists, working with Amgen
researchers around the world on the discovery and development of
innovative medicines. In Q1FY18, the company expanded its SARC
collaboration to 50000 square feet floor space and ~185 Syngene scientists

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 Result Update | Syngene International ICICI Direct Research

Herbalife - In Q3FY17, Herbalife announced the opening of its first R&D

centre in India in Partnership with Syngene. The 3000 sq ft facility will be
located inside the Syngene Bengaluru campus.
The company owns the largest CRO facility in India, spread over 1,300,000
sq ft, in Bengaluru. The facility has been accredited with major regulatory
compliance. It operates laboratory and manufacturing facilities to standards
that are consistent with the requirements of its large global clients. In the
last three years, the USFDA has cleared five audits without 483 observations.
Apart from this, it is in the process of establishing a new commercial-scale
facility in Mangaluru (SEZ) to manufacture novel small molecules for
innovator companies as it plans to foray into commercial manufacturing for
customers.
The company has signed commercial contracts for late stage products with
existing clients. Of this, two molecules have already been commercialised
and the company has started supply of intermediaries for these products.
The company’s existing facility at Bengaluru would initially support SIL’s
CMO business. This novel CMO business would extend the company’s
services to existing customers. The CMO business is expected to start
meaningful contribution from FY18E. In addition, the company is in the
process of setting up a new unit for biologic manufacturing in Bengaluru.
We believe the CMO business would be an add-on driver for the company
over medium to long term.
The company intends to evolve from a CRO into a contract research and
manufacturing services (CRAMS) organisation with commercial-scale
manufacturing capabilities. This is in keeping with SIL’s plan to leverage its
existing relationships with clients and provide forward integration on the
discovery and development continuum.

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 Result Update | Syngene International ICICI Direct Research

Key Metrics

Exhibit 4: Revenues to grow at CAGR of 14% over FY19-22E Exhibit 5: EBITDA and EBITDA margins trend
1000 872.3 35
3000 CAGR 14.5% 2743.9 900 34.4
33.9
800 740.1 33
2373.2 32.7 32.6
2500 700 603.7
CAGR 20.7% 2015.8 31.8
1825.6 600 535.8 31.2 31
2000 464.4
500 380.4 407.6

(| crore)
(| crore)

29.9
1423.1 29.3

(%)
1500 400 29
1107.0 1200.9 300
281.1
859.9
1000 200 27
100
500
0 25
0 FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E
FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E
Revenues EBITDA EBITDA Margins (%)

Source: ICICI Direct Research, Company Source: ICICI Direct Research, Company

Exhibit 6: Net profit & profit margins trend Exhibit 7: Return ratios trend
600 30.0 26
478.9 23.5
500 25.0 24 20.7
23.9
21.8 21.4 385.9 22 20.3
400 20.4 347.6
330.818.1 20.0
287.3 305.1 17.2 17.5 20
16.3 19.5
300 15.0
(| crore)

240.8 18 17.716.8
175.0
(%)

200 10.0 16 16.0 14.7 15.1

15.1 14.8 14.1
14 14.6 14.9
100 5.0 13.7 13.1
12
0 0.0
10
FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E
FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E
Net Profit NPM (%) RoCE (%) RoNW (%)

Source: ICICI Direct Research, Company Source: ICICI Direct Research, Company

Exhibit 8: Valuation
Revenues Growth Adj. EPS Growth P/E EV/EBITDA RoE RoCE
(| crore) (%) (|) (%) (x) (X) (%) (%)
FY19 1826 28.3 8.3 8.4 37.0 22.2 16.8 14.8
FY20E 2016 10.4 8.7 26.6 29.2 20.4 14.7 13.7
FY21E 2373 17.7 9.6 -7.9 31.7 16.7 14.1 13.1
FY22E 2744 15.6 12.0 24.1 25.6 13.7 14.9 15.1
Source: ICICI Direct Research

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 Result Update | Syngene International ICICI Direct Research

Exhibit 9: Recommendation history vs Consensus

450 90.0
400 80.0
350 70.0
300 60.0
250 50.0
(|)

(%)
200 40.0
150 30.0
100 20.0
50 10.0
0 0.0
Mar-17

Oct-17

Oct-18

Oct-19
May-17

Nov-17

Mar-18

May-18

Nov-18
Aug-18

Mar-19

May-19

Nov-19
Jun-17

Jun-18

Jun-19
Jan-17
Feb-17

Aug-17
Sep-17

Aug-18

Dec-19
Jul-17

Dec-17
Jan-18
Feb-18

Jul-18

Dec-18
Jan-19
Jan-19
Feb-19

Aug-19
Sep-19
Jul-19

Jan-20
Apr-17

Apr-18

Apr-19
Price Idirect target Consensus Target Mean % Consensus with BUY

Source: ICICI Direct Research; Bloomberg

Exhibit 10: Top 10 Shareholders

Rank Investor Name Filing Date % O/S Position (m) Change
1 Biocon Ltd 30-Jun-19 70.2 280.97m 0.0m
2 Camas Investments 30-Jun-19 2.4 9.57m 0.0m
3 Standard Life Aberdeen Plc 31-Dec-19 2.1 8.57m 0.2m
4 Mirae Asset Global Investments Co 31-Dec-19 2.0 7.93m 1.4m
5 UTI Asset Management Co Ltd 30-Nov-19 1.6 6.46m 0.2m
6 Matthews International Capital Man 30-Sep-19 1.5 5.92m 0.2m
7 Reliance Capital Trustee Co Ltd 30-Nov-19 1.4 5.52m (0.2)m
8 Aberdeen Asset Manageme 30-Jun-19 1.1 4.56m 4.6m
9 Hillhouse Capital Advisors Ltd 30-Jun-19 1.0 4.04m (0.3)m
10 Biocon Employee Welfare Trust 30-Jun-19 0.8 3.10m 3.1m
Source: ICICI Direct Research, Bloomberg

Exhibit 11: Shareholding Pattern

(in %) Dec-18 Mar-19 Jun-19 Sep-19 Dec-19
Promoter 71.1 71.1 71.0 70.8 70.7
Public 27.9 27.9 27.9 28.3 28.4
Others 1.1 1.1 1.1 0.9 0.9
Source: ICICI Direct Research, Company

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 Result Update | Syngene International ICICI Direct Research

Financial Summary

Exhibit 12: Profit and loss statement | crore Exhibit 13: Cash Flow Statement | crore
(Year-end March) FY19 FY20E FY21E FY22E (Year-end March) FY19 FY20E FY21E FY22E
Total Operating Income 1,825.6 2,015.8 2,373.2 2,743.9 Profit/(Loss) after taxation 235.5 418.9 385.9 478.9
Growth (%) 28.3 10.4 17.7 15.6 Add: Depreciation & Amortization 164.2 214.0 294.5 334.4
Raw Material Expenses 531.3 585.7 688.3 794.4 Other operating activities 18.7 0.0 0.0 0.0
Gross Profit 1,294.3 1,430.2 1,684.9 1,949.5 Net Increase in Current Assets -40.4 -79.5 -106.3 -93.4
Gross Profit Margins (%) 70.9 70.9 71.0 71.0 Net Increase in Current Liabilities 222.5 84.5 100.8 72.7
Employee Expenses 467.3 504.0 565.0 638.1 CF from operating activities 630.4 666.3 703.4 810.6
Other Expenditure 535.8 603.7 740.1 872.3 (Inc)/dec in Fixed Assets -583.3 -1,029.5 -674.5 -355.0
Total Operating Expenditure 1,534.4 1,693.3 1,993.4 2,304.9 (Inc)/dec in Investments 98.5 300.0 0.0 -100.0
Operating Profit (EBITDA) 535.8 603.7 740.1 872.3 Other Investing Activities -479.0 -12.6 -9.2 6.1
Growth (%) 15.4 12.7 22.6 17.9 CF from investing activities -963.8 -742.1 -683.7 -448.9
Interest 32.3 28.5 28.5 18.0 Inc / (Dec) in Equity Capital 1.9 0.0 0.0 0.0
Depreciation 164.2 214.0 294.5 334.4 Inc / (Dec) in Loan funds -20.3 0.0 0.0 -300.0
Other Income 75.1 84.7 59.3 71.3 Dividend & Dividend Tax -24.1 -15.0 -13.8 -17.1
PBT after Exceptional Items 414.4 517.2 476.5 591.3 Others -29.9 -28.5 -28.5 -18.0
Total Tax 83.6 98.3 90.5 112.3 CF from financing activities -72.4 -43.5 -42.3 -335.1
PAT before MI 330.8 418.9 385.9 478.9 Net Cash flow -405.8 -119.2 -22.5 26.6
Minority Interest 0.0 0.0 0.0 0.0 Opening Cash 842.7 436.9 317.7 295.1
PAT 330.8 418.9 385.9 478.9 Closing Cash 436.9 317.7 295.1 321.7
Growth (%) 8.4 26.6 -7.9 24.1 Free Cash Flow 47.1 -363.2 28.9 455.6
EPS (Adjusted) 8.3 8.7 9.6 12.0 Source: ICICI Direct Research
Source: ICICI Direct Research

Exhibit 14: Balance Sheet | crore Exhibit 15: Ratio Analysis | crore
(Year-end March) FY19 FY20E FY21E FY22E (Year-end March) FY19 FY20E FY21E FY22E
Equity Capital 200.0 200.0 200.0 200.0 Per share data (|)
Reserve and Surplus 1,768.4 2,172.3 2,544.4 3,006.2 EPS 8.3 8.7 9.6 12.0
Total Shareholders funds 1,968.4 2,372.3 2,744.4 3,206.2 BV 49.2 59.3 68.6 80.2
Total Debt 813.3 813.3 813.3 513.3 DPS 0.3 0.4 0.3 0.4
Long Term Provisions 37.4 41.1 45.3 49.8 Cash Per Share 10.9 7.9 7.4 8.0
Other Non Current Liabilities 207.4 228.1 251.0 276.0 Operating Ratios (%)
Source of Funds 3,026.5 3,454.9 3,853.9 4,045.4 Gross Profit Margins 70.9 70.9 71.0 71.0
Gross Block 2,121.2 2,618.2 3,825.2 4,180.2 EBITDA margins 29.3 29.9 31.2 31.8
Accumulated Depreciation 784.4 998.4 1,292.9 1,627.4 Net Profit margins 18.1 17.2 16.3 17.5
Net Block 1,336.8 1,619.8 2,532.3 2,552.8 Inventory days 8.7 10.0 10.0 10.0
Capital WIP 273.7 806.2 273.7 273.7 Debtor days 67.7 67.7 67.7 67.7
Fixed Assets 1,610.5 2,426.0 2,806.0 2,826.5 Creditor days 44.7 44.7 44.7 44.7
Investments 756.0 456.0 456.0 556.0 EBITDA Conversion Rate 117.7 110.4 95.0 92.9
Other Non current asets 197.4 225.3 251.4 263.9 Return Ratios (%)
Inventory 43.4 55.2 65.0 75.2 RoE 16.8 14.7 14.1 14.9
Debtors 338.7 374.0 440.3 509.1 RoCE 14.8 13.7 13.1 15.1
Loans and Advances 0.0 0.0 0.0 0.0 RoIC 28.3 24.5 17.8 21.1
Other Current Assets 229.1 261.5 291.7 306.2 Valuation Ratios (x)
Cash 436.9 317.7 295.1 321.7 P/E 37.0 29.2 31.7 25.6
Total Current Assets 1,048.1 1,008.4 1,092.2 1,212.2 EV / EBITDA 22.2 20.4 16.7 13.7
Creditors 223.5 246.8 290.5 335.9 EV / Revenues 6.5 6.1 5.2 4.3
Provisions 21.0 21.0 21.0 21.0 Market Cap / Revenues 6.7 6.1 5.2 4.5
Deferred tax assets 91.5 100.65 110.7 121.8 Price to Book Value 6.2 5.2 4.5 3.8
Other Current Liabilities 432.5 493.7 550.7 578.1 Solvency Ratios (x)
Total Current Liabilities 677.0 761.5 862.3 935.0 Debt / Equity 0.4 0.3 0.3 0.2
Net Current Assets 371.1 246.9 229.9 277.2 Debt / EBITDA 1.5 1.3 1.1 0.6
Application of Funds 3,026.5 3,454.9 3,853.9 4,045.4 Current Ratio 0.9 0.9 0.9 1.0
Source: ICICI Direct Research Source: ICICI Direct Research

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 Result Update | Syngene International ICICI Direct Research

Exhibit 16: ICICI Direct coverage universe (Healthcare)

Company I-Direct CMP TP Rating M Cap EPS (|) PE(x) RoCE (%) RoE (%)
Code (|) (|) (| cr) FY19 FY20E FY21E FY22E FY19 FY20E FY21E FY22E FY19 FY20E FY21E FY22E FY19FY20EFY21EFY22E
Ajanta Pharma AJAPHA 1176 1,180 Buy 10262 43.5 43.5 52.3 64.4 27.0 27.0 22.5 18.3 21.8 21.8 20.8 21.9 17.1 17.1 16.0 17.2
Alembic Pharma
ALEMPHA 598 620 Hold 11273 31.4 31.4 26.6 31.0 19.0 19.0 22.5 19.3 19.6 19.6 13.4 14.9 21.8 21.8 13.3 13.8
Apollo Hospitals APOHOS 1659 1,800 Buy 23076 17.0 17.0 43.7 68.1 97.8 97.8 37.9 24.3 8.8 8.8 14.8 17.5 7.1 7.1 14.9 19.6
Aurobindo Pharma
AURPHA 496 475 Hold 29080 42.1 42.1 55.4 59.5 11.8 11.8 9.0 8.3 15.9 15.9 15.7 16.1 17.7 17.7 16.7 15.4
Biocon BIOCON 295 310 Buy 35370 6.2 6.2 10.6 15.6 47.5 47.5 27.8 18.9 10.9 10.9 16.7 20.9 12.2 12.2 15.7 19.1
Cadila HealthcareCADHEA 271 260 Hold 27774 18.1 18.1 16.6 18.7 15.0 15.0 16.4 14.5 13.0 13.0 11.7 12.4 17.8 17.8 13.5 13.6
Cipla CIPLA 461 520 Hold 37139 18.6 18.6 25.3 30.0 24.8 24.8 18.2 15.4 10.9 10.9 13.6 14.8 10.0 10.0 11.2 11.9
Divi's Lab DIVLAB 1910 1,850 Hold 50699 51.0 51.0 59.1 71.2 37.5 37.5 32.3 26.8 25.5 25.5 22.1 22.8 19.4 19.4 17.0 17.6
Dr Reddy's LabsDRREDD 3039 3,000 Hold 50488 114.8 114.8 140.0 166.7 26.5 26.5 21.7 18.2 11.1 11.1 13.9 16.9 13.6 13.6 12.7 13.5
Glenmark PharmaGLEPHA 353 410 Hold 9961 26.9 26.9 36.7 46.1 13.1 13.1 9.6 7.7 15.3 15.3 15.0 17.0 13.5 13.5 14.0 15.1
Hikal HIKCHE 132 140 Buy 1255 6.3 8.4 9.7 11.7 21.1 15.8 13.6 11.4 12.2 14.3 13.0 14.2 11.5 13.6 14.2 14.8
Ipca Laboratories IPCLAB 1230 1,355 Buy 15541 35.1 35.1 60.7 75.3 35.1 35.1 20.3 16.3 15.0 15.0 19.9 21.2 14.2 14.2 18.0 18.9
Lupin LUPIN 740 810 Hold 33517 16.5 16.5 35.0 37.1 44.7 44.7 21.1 20.0 9.4 9.4 9.9 12.1 5.4 5.4 8.4 8.3
Narayana Hrudalaya
NARHRU 356 360 Buy 7276 2.9 2.9 9.8 13.3 122.6 122.6 36.4 26.7 7.7 7.7 13.9 16.5 5.5 5.5 14.5 16.7
Natco Pharma NATPHA 658 595 Hold 11974 34.9 34.9 23.7 22.0 18.8 18.8 27.8 29.9 21.3 21.3 12.2 10.5 18.5 18.5 10.0 8.6
Sun Pharma SUNPHA 452 470 Hold 108543 15.9 15.9 20.2 24.7 28.5 28.5 22.4 18.3 10.3 10.3 11.3 12.5 9.2 9.2 9.9 11.3
Syngene Int. SYNINT 306 360 Buy 12238 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 Pharma TORPHA 2050 2,020 Buy 34696 48.9 48.9 74.0 91.8 41.9 41.9 27.7 22.3 14.2 14.2 18.7 21.2 17.5 17.5 19.6 20.6
Source: ICICI Direct Research, Bloomberg

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 Result Update | Syngene International ICICI Direct Research

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 pankaj.pandey@icicisecurities.com

ICICI Direct Research Desk,

ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
research@icicidirect.com

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 Result Update | Syngene International ICICI Direct Research

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ICICI Securities | Retail Research 11