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1、Healthcare in India:Developments andOpportunities to look atResearchReinventedSmartkarma is a globalinvestment research networkthat brings togetherindependent Insight Providers,institutional investors,andcorporate investor relationsprofessionals and management.At Smartkarma,We Do Things DifferentlyW
2、e leverage the online economy,applying this innovative mindset to capitalmarkets.For a single subscription,Smartkarma users can consume all theresearch they need,just like NetIix enables viewers to watch unlimited hoursof content on its platform.At the same time,we address a growing need fora modern
3、 approach to corporate access.In 2019,we launched CorporateSolutions,which allows company executives and investor relations personnelto connect seamlessly to investors and analysts,all within a single network.In this effort,we work closely with global exchanges such as SingaporeExchange,which became
4、 our investor,to provide such services to listedcompanies worldwide.Our model ensures that the research on our platform is objective andunbiased,independent and free from conIicts of interest.The platformdetermines appropriate pricing according to the quality and value of eachresearch piece.This hel
5、ps independent Insight Providers monetise theirresearch and incentivises them to produce truly quality,differentiated workthat stands out from the rest of the market.A commitment to quality is alsowhy we carefully vet and select our Insight Providers.Less than 10 percent ofthe independent analysts w
6、ho apply are approved as Insight Providers onSmartkarma.We currently have over 100 such curated Insight Providerspublishing on the platform,ranging from one-person operations to teams ofmultiple members around the world.In the following pages,you will be able to see for yourself the result of oureff
7、orts.In the meantime,we will be busy bringing you more excitingdevelopments over the course of the year!2Table of Contents1.Max Healthcare Placement-Well Flagged but a Large One to Process.42.HCG:Scaling Up Well.113.Dr.Reddys Laboratories(DRRD IN):India Business Still the Brightest Spot;Slow Recover
8、y in the US.154.Ajanta Pharma(AJP IN):Branded Generics Focus Ensures Consistent Growth.225.Rainbow Childrens Hospital(RAINBOW IN):Flying High Backed by Niche Focus and BusinessRecovery.293Clarence ChuAPAC IPOs&PlacementsMax Healthcare Institute|Equity Capital MarketsMax HealthcarePlacement-WellFlagg
9、ed but a Large Oneto ProcessBy Clarence Chu|15 Aug 2022EXECUTIVE SUMMARYKayak Investments Holding,an afVliate of KKR&Co Inc(KKR US),isplanning to raise US$1.18bn from trimming the majority of its stake inMax Healthcare Institute(MAXHEALT IN).The deal is a large one and assuming the upsized option is
10、 exercised,the offer size would represent 26.83%of outstanding shares and 414.9days of three month ADV.The Vrms Vnancial prospects are decent with analysts in generalbullish on the stock.However,the large deal is offered at a tight 0-3.3%discount to last close.DETAILDeal TermsMax Healthcare Placemen
11、t-Well Flagged but a Large One to ProcessClarence Chu4The base deal offered are 193.93m shares,with an upsize option of66.3m shares.Our take on the dealHas been selling down for some timenowIn late 2018,KKR,along with its Mumbai Headquartered Radiant,hadinitially bought their 49.7%stake in Max Healt
12、hcare from Life HealthcareGroup Holdings,see here.Since Max Healthcare was listed in Aug 2020,KKR has then come to marketstwice to trim a portion of its stake in the former,once in Sept 2021 andanother as a block in Mar 2022.Both the deals had a 90 day lock up on them.Now,KKR,through Kayak Investmen
13、ts,is looking to trim almost its entirestake in Max Healthcare.The total shares offered,assuming the upsizedoption is exercised,would represent 26.83%of outstanding shares,andwould trim Kayak Investments holding to just 0.71%of outstanding post-deal(locked up for 18 months).The deal has been very we
14、ll Wagged,with media reports having earliercovered the potential clean-up sale by KKR,see here.Overall,with the PElooking to sell almost its entire stake,the deal would be a large one todigest,representing 414.9 days of three month of ADV and 25.9%of currentmcap,assuming the deal is upsized.Financia
15、l performanceMax Healthcare had reported its 1Q23 Vnancials on 10th Aug 22.In it,grossrevenue for the quarter grew 17.8%YoY and 13.5%QoQ.Operating EBITDAhad similarly jumped 23%YoY and 21.5%on a QoQ basis.Max Healthcare Placement-Well Flagged but a Large One to ProcessClarence Chu5Looking at the Vrm
16、s reported operating metrics,while average inpatientoccupancy was still down 6.8 ppt on a YoY basis,overall revenue had beenpulled up by a jump in average revenue per occupied bed(ARPOB),at 28.3%YoY.On a QoQ basis,average inpatient occupancy had grown 6.1ppt andARPOB had inched up 4%as well.Outpatie
17、nt consults had also grown 42%YoY,and on a QoQ basis,had produced a decent 8.5%gain as well.As of the time of writing,the Vrm had nine buy calls with an average targetprice of INR440.88/share,or 21.8%upside potential from last close.Whileshare price performance had been lackluster on a YTD basis,dow
18、n 16.7%,the share price is currently trading 3.23x above its IPO price.Max Healthcare Placement-Well Flagged but a Large One to ProcessClarence Chu6Scores on our frameworkIn terms of short term price momentum against peers,the Vrms share priceperformance hasnt been all that great in the past six mon
19、ths,lagging peersand the index by quite a bit.Over the past six months,peers such as Apollo Hospitals Enterprise(APHSIN)and Rainbow Childrens Hospital(RAINBOW IN)had both gained+14.5%and+9.7%,respectively,while Max Healthcare had produced a Wattish-0.45%change.Analysts have been rerating the Vrms ea
20、rnings estimates downwards overthe past three months as well.However,one bright spot would be theconsistent upward rerating on Max Healthcares target price over the pastthree months;we didnt discuss the Vrms track record given its short listinghistory.Max Healthcare Placement-Well Flagged but a Larg
21、e One to ProcessClarence Chu7For its past deals,the Vrm has had two past deals in its history,a QIP in Mar2021 and a share sale by Kayak Investments in Sept 2021.In both deals,thedeal size had been around 6.36%and 9.27%of outstanding shares and hadboth been offered at a tight 1.83%and 1.42%discount
22、to their respective lastclose.Average returns had been decent,returning+3.18%and+4.78%on aone week and one month basis,respectively.Zooming down to the latest Sept 2021 share sale by KKR,the latter had thensimilarly sold at a tight discount,1.42%to last close.Shares held onto dealprice for the most
23、part of the week post-deal,ultimately closing+0.73%bythe end of the Vrst week;had returned-4.2%on a one month basis.Most recently in Mar 2022,KKR had again come to sell a portion of its stakein Max Healthcare.The deal was done as an upsized block,where KKR raisedUS$435m from selling 8%of existing ca
24、pital at a wider 5.8%discount to thelast close.Shares held onto deal price and closed around+6%by the end ofthe Vrst week.Max Healthcare Placement-Well Flagged but a Large One to ProcessClarence Chu8While the deal scored well on price/earnings momentum and valuations,ithad been dragged by placing pr
25、operties,owing to it being a large one todigest.Aequitas Research employs a proprietary framework to provide independent,unbiased,data-driven analysis on ECM placements and IPOs.We call thisour Aequitas Momentum-Adjusted Deal Stag Framework(MADS).For eachdeal,we look at sixty factors which are then
26、aggregated into the followingcategories:deal terms,book-building,momentumindex and peers,momentumprevious deals,relative valuation,corporate governance,andcompany Vnancials.The scores are normalized for each category,and thenassigned weights that correspond to two-prominent strategies employed byinv
27、estors:Momentum/Liquidity(short-term)and Value/Long-DurationMax Healthcare Placement-Well Flagged but a Large One to ProcessClarence Chu9(long-term).We adopt a uniform approach to score deals across sectors,countries and capital structures.Our ultimate objective is to provide a usefuland timely over
28、lay to the bottom-up research work investors do in-house.Concluding thoughtsThe Vrms Vnancial prospects are decent with performance improving bothon a YoY and on a sequential basis.Analysts continue to remain bullish onthe stock as well.The selldown by KKR is also a very well Wagged one,havingbeen c
29、overed by media reports,coupled with earlier selldowns of the same.However,our main gripe would be the large deal size,with the dealrepresenting 414.9 days of three month ADV.In general,past deals have held up well even despite being offered at a tightdiscount and in the wider discount observed in t
30、he Mar 2022 block,shareshad done well by the end of the Vrst week.We would take the deal towardsthe wider end of the discount.Disclosure&CertiCcationI/We have no position(s)in the any of securities referenced in this insightViews expressed in this insight accurately reWects my/our personal opinion(s
31、)about the referenced securities and issuers and/orother subject matter as appropriate.This insight does not contain and is not based on any non-public,material information.To the best of my/our knowledge,the views expressed in this insight comply with Singapore law as well as applicable law in thec
32、ountry from which it is postedI/We have not been commissioned to write this insight or hold any speciVc opinion on the securities referenced thereinI/We have signed the Insight Provider Agreement and this insight does not violate any of the terms speciVed therein.Clarence Chu(15 Aug 2022)Max Healthc
33、are Placement-Well Flagged but a Large One to ProcessClarence Chu10Ankit Agrawal,CFAEquity L/S Analyst|ForensicAccounting|IndiaHealthCare Global Enterprises|Equity Bottom-UpHCG:Scaling Up WellBy Ankit Agrawal,CFA|24 Aug 2022EXECUTIVE SUMMARYOver the last 5Y,HCG had been in expansion mode.However,sin
34、ce thelast year or so,HCG has been consolidating its presence.As a result,revenues and proVtability are scaling up as new centers areinching towards maturity.FY23 is poised to be a strong year.While HCG has been consolidating,it is not compromising on growth.Aided by technology upgradation,growing b
35、rand awareness and digitalinitiatives,mature centers continue to see robust growth.DETAILScaling Up WellOver the last 5Y,HCG had been in expansion mode.However,since the lastyear or so,HCG started consolidating its presence with no new centersinitiated.This is helping HCG to scale up its revenues an
36、d proVtability asnew centers are inching towards maturity.HCG reported strong Q1FY23earnings with QoQ growth of 12%,aided equally by both the existing and thenew centers.New centers are ramping up with vintage and saw revenuesgrew by 12.5%QoQ.Existing centers are beneVtting from increased footfallsl
37、ed by growing brand awareness of HCG and digital initiatives to enhancebrand building and servicing capabilities.Existing centers revenue grew by11.9%QoQ.Technology upgradation and improving case mix is also drivinggrowth.EBITDA grew by 14.1%QoQ aided by revenue growth and marginexpansion to 17.7%vs
38、 17.4%QoQ.The below charts demonstrate how HCG isscaling up well.HCG is now on track to be proVtable consistently goingforward.HCG:Scaling Up WellAnkit Agrawal,CFA11Source:HCG Investor Presentation;Note:PBT excludes exceptional itemsStrategic Initiatives to Aid Growth andMargin ExpansionHCG has been
39、 working on four key areas to aid growth and marginexpansion:1)Digital transformation to increase digitally inWuenced footfallsand improve processes to enhance patient experience,2)Cost optimizationand efVciency enhancement through optimized stafVng and improvedworkforce productivity,3)Re-casted int
40、ernational business strategy toenhance its geographic and channel distribution presence,including newinformation centers which has already enhanced the footfalls by 1.4x vs pre-COVID-HCG currently derives just 4%revenues from international patientsbut has room to grow signiVcantly;its Bangalore cent
41、er derives 15%revenues from international footfalls and its new centers like Mumbai andKolkata are expected to see signiVcant growth from international footfalls,4)Inorganic acquisition where value accretive.HCG has been alsostrengthening its senior management and clinical team and also upgradingtec
42、hnology continuously.With operational leverage and savings from cost optimization initiatives,HCG is on track for further margin expansion.HCG has also taken structuredpricing hikes at the Bangalore center and is now rolling out the same tomore centers.HCG is guiding for margin expansion of 100-200b
43、p from thecurrent levels over the next 12-18 months suggesting that around 8-10%growth could come just from margin expansion.Capex DisciplineSince the onboarding of PE investor,CVC Capital,as a majority shareholder,HCG has become quite disciplined around capital allocation.It has scrappedits plans f
44、or opening new centers in new cities like Gurgaon and Kochi.Instead,it has been focusing on expanding its existing centers where thecapacity is full and demand is being under-served.HCG is currently inprocess of expanding its Wagship center in Bangalore,which is also theCenter of Excellence for HCG.
45、HCG is also expanding its Ahmedabad centerto serve the unmet demand.Both these centers generate 25%+ROCE and areHCG:Scaling Up WellAnkit Agrawal,CFA12likely to be value accretive both in terms of growth and ROCE.HCG is alsoactively pursuing inorganic acquisitions where there is opportunity to scaleu
46、p and add value.ValuationWith projected PAT of INR 170cr+by FY25 as highlighted in our prior notes,we estimate that HCG can have a market cap of INR 7800cr+by FY25 vscurrent market cap of INR 3800cr+.This suggests that HCG has potential togenerate 30%+IRR through a holding period until FY25.FY25 Exi
47、t ValuationAssumptions-Cost of EquityRisk Free Rate(RFR)7.0%Equity Risk Premium(ERP)5.0%Assumptions-High Growth PeriodGrowth Rate(G)13.0%ROE17%Payout Ratio(K)24%Excess Growth Period(N)10COE10.0%Assumptions-Terminal Growth PeriodTerminal Growth(Gt)7.0%ROE13%Payout Ratio(K)46%COE8.5%P/E High Growth Pe
48、riod2.7P/E Terminal Growth43.1P/E45.8ConclusionCancer care remains a secular growth market in India.Every year,15-20 lakhnew people get affected by cancer,whereas HCG has footfalls of just one lakhpatients,suggesting that HCG has signiVcant room to gain market share.HCG with its strong brand positio
49、ning,focused and tech-driven approach,iswell positioned to capture this growth.At current valuations,an investmentin HCG offers an attractive IRR of 30%+through a holding period until FY25.HCG:Scaling Up WellAnkit Agrawal,CFA13Disclosure&CertiCcationDisclosures and Disclaimer for Research Report:Thi
50、s Report is published by Ankit Agrawal and his research associates/employees,if any,for private circulation.Note that Ankit Agrawal is a SEBI registered Research Analyst(Registration No.:INH000007216).-Ankit Agrawaland his research associates/employees,have not been debarred/suspended by SEBI or any
51、 other regulatory authority for accessing/dealing in securities Market.-Ankit Agrawal and his research associates/employees,do not hold beneVcial ownership of 1%or more inthe subject company at the end of the month immediately preceding the date of publication of this research report.-Ankit Agrawal
52、andhis research associates/employees,do not have any conWict or material conWict of interest at the time of publication of the researchreport with the company covered by the Analyst(s).-Ankit Agrawal and his research associates/employees,has not received anycompensation/managed or comanaged public o
53、ffering of securities of the company covered by Analyst during the past twelve months.Analyst has not served as an ofVcer,director or employee of subject company and Ankit Agrawal and his research associates/employees,ifany,have not been engaged in market making activity of the subject company.-Anki
54、t Agrawal and his research associates/employeeshave exercised due diligence in checking correctness of details and opinion expressed herein is unbiased.-This report is meant forpersonal informational purposes and is not to be construed as a solicitation or Vnancial advice or an offer to buy or sell
55、any securities orrelated Vnancial instruments.While utmost care has been taken in preparing this report,we claim no responsibility for its accuracy.Recipients should not regard the report as a substitute for the exercise of their own judgment.Any opinions expressed in this report aresubject to chang
56、e without any notice and this report is not under any obligation to update or keep current the information containedherein.-Past performance is not necessarily indicative of future results.This report accepts no liability whatsoever for any loss ordamage of any kind arising out of the use of all or
57、any part of this report.Any allocation suggested herein for an individual investment/company/security is just an indication of our conviction level.It should not be construed as a capital allocation recommendation.Eachrecipient of this document should make such investigations as they deem necessary
58、to arrive at an independent evaluation of aninvestment in the securities of the companies referred to in this document(including the merits and risks involved),and should consulttheir own advisors to determine the merits and risks of such an investment.-The information in this document has been prin
59、ted on thebasis of publicly available information,internal data and other reliable sources believed to be true,but we do not represent that it isaccurate or complete and it should not be relied on as such,as this document is for general guidance only.Ankit Agrawal and his researchassociates/employee
60、s,if any,shall not be in any way responsible for any loss or damage that may arise to any person from anyinadvertent error in the information contained in this report.-Ankit Agrawal and his research associates/employees,if any,has notindependently veriVed all the information contained within this do
61、cument.Accordingly,we cannot testify,nor make any representationor warranty,express or implied,to the accuracy,contents or data contained within this document.While Ankit Agrawal and his researchassociates/employees,if any,endeavor to update on a reasonable basis the information discussed in this ma
62、terial,there may beregulatory,compliance,or other reasons that prevent us from doing so.Neither Ankit Agrawal nor his research associates/employees,ifany,shall be liable for any loss or damage that may arise from or in connection with the use of this information.Sign:Ankit AgrawalI/We have position(
63、s)in one or more of the securities referenced in this insightViews expressed in this insight accurately reWects my/our personal opinion(s)about the referenced securities and issuers and/orother subject matter as appropriate.This insight does not contain and is not based on any non-public,material in
64、formation.To the best of my/our knowledge,the views expressed in this insight comply with Singapore law as well as applicable law in thecountry from which it is postedI/We have not been commissioned to write this insight or hold any speciVc opinion on the securities referenced thereinI/We have signe
65、d the Insight Provider Agreement and this insight does not violate any of the terms speciVed therein.Ankit Agrawal,CFA(12 Aug 2022)HCG:Scaling Up WellAnkit Agrawal,CFA14Tina BanerjeeGlobal Healthcare AnalystDr.Reddys Laboratories|Equity Bottom-UpDr.Reddys Laboratories(DRRD IN):IndiaBusiness Still th
66、eBrightest Spot;SlowRecovery in the USBy Tina Banerjee|08 Sep 2022EXECUTIVE SUMMARYDr.Reddys Laboratories(DRRD IN)reported Q1FY23 results,withrevenue growing 6%and 108%y/y,mainly driven by a 26%y/y growthin India business.Despite price erosion and increasing competition in some of the keyproducts,No
67、rth America revenue grew 2%y/y,driven by launch of newproducts and favorable forex rates.Bottom line got beneVtted from one-off items including settlementincome and non-core brand divestment proceeds.Net proVt surged108%y/y.DETAILDr.Reddys Laboratories(DRRD IN),a leading integrated Indian genericpha
68、rmaceutical company,with therapeutic focus on oncology,gastroenterology,cardiovascular,anti-diabetic,dermatology,and painmanagement,continues to report stellar performance in India business.Even upon the absence of COVID-related product sales,India revenue surged26%y/y and 38%q/q during Q1 FY23,and
69、contributed 26%of total revenue,up from 22%in Q1 FY22 and 18%in Q4FY22.Strong Q1FY23 ResultsOn July 28,Dr.Reddys Laboratories reported Q1FY23 results,with revenueand net proVt growing 6%and 108%,y/y,respectively.Bottom line gotbeneVtted from one-off items including settlement income and non-corebran
70、d divestment proceeds.Adjusting for one-off items,net proVt wouldDr.Reddys Laboratories(DRRD IN):India Business Still the Brightest Spot;Slow Recovery in the USTina Banerjee15have grown by 12%y/y.As of June 30,2022,the company has cash and cashequivalents of INR35.4 billion,against loans and borrowi
71、ngs of INR24.7billion.Commenting on the results,Co-Chairman&MD,G V Prasad said“Ourunderlying business revenues adjusted for covid products contributionduring last year have grown well.The pro2ts were aided by a few non-recurring incomes,offsetting the near term headwinds.We continue toimprove the he
72、alth of our core businesses through productivityimprovement and robust product pipelines”.Q1FY23 Results-SnapshotSource:CompanyTotal revenue:Q1 revenue is up 6%y/y and down 4%q/q to INR52 billion,mainly driven by a 26%y/y growth in India business.Total revenue fromglobal generics(85%of total revenue
73、)grew 8%y/y,driven by new productlaunches across most of the business lines and divestment of a few non-corebrands in India,partly offset by price erosion in generic markets,and higherbase due to covid product sales in previous year.Q1 revenue mix by segment(y/y growth):North America,34%(+2%);India,
74、26%(+26%);emergingmarkets,17%(-1%);pharmaceutical services and active ingredients(PSAI),14%(-6%);Europe,8%(+4%);others,1%(+37%).“Dr.Reddys Laboratories(DRRD IN):India Business Still the Brightest Spot;Slow Recovery in the USTina Banerjee16Source:CompanyNorth America:Revenue from North America grew 2
75、%y/y,driven by launchof new products and favorable forex rates,which was offset by price erosionin some of the key molecules.However,North America revenue declined11%q/q,primarily on account of price erosion and decline in volumes forfew products(such as Suboxone and Icosapent)due to incrementalcomp
76、etition.The QoQ decline was also driven by high base for a Vrst-to-Vlelaunch of Vasopressin injectable with normalized volumes and pricingadjustments due to impending entry of competition on day-181.The priceerosion for the base business has been within the normal trend seen in overthe last few quar
77、ters.However,new launches showed a revival.The companyhas launched 7 new products,up from just 3 in previous quarter and 6 inyear-ago quarter.Number of new launches is the highest over the last sevenquarters and some of them should ramp up in the coming quarters.Q1 newlaunches include anti-inWammato
78、ry drug Ketorolac,OTC nicotine lozengesOriginal,IV corticosteroid Methylprednisolone Sodium Succinate,oncologydrug Pemetrexed Injection,antifungal medicines Posaconazole tablets,andoncology drug Sorafenib in the U.S.and Pemetrexed injection in Canada.The company expects strong launch momentum to con
79、tinue during the year.Dr.Reddys has Vled three ANDAs during the quarter.As of June 30,2022,cumulatively 86 generic Vlings are pending for approval with the FDA.Out ofthese,44 are Para IVs and 24 are believed to have First to File status.Dr.Reddys believes that North America business should continue
80、to growbacked by new product launches,while there will be volatility on a quarter-on-quarter basis.On September 7,the company launched multiple myelomadrug Lenalidomide(brand name:Revlimid)in the U.S.With this volume-limited launch,Dr.Reddys is eligible for Vrst-to-market,180 days of genericdrug exc
81、lusivity for Lenalidomide capsules.Revlimid fetched$12.8 billionrevenue in 2021.Dr.Reddys is also licensed to sell generic lenalidomidecapsules in the U.S.without volume limitation beginning on January 31,2026.Dr.Reddys Laboratories(DRRD IN):India Business Still the Brightest Spot;Slow Recovery in t
82、he USTina Banerjee17Source:CompanySource:CompanyIndia:Revenue from India grew 26%y/y and 38%q/q,driven by contributionfrom the products acquired/in-licensed from Novartis,growth in basebusiness and new products contribution.Growth was partially offset by theabsence of Covid product sales,which were
83、there in in Q1 FY22.Adjusted forthe brand divestment income in the current quarter and the covid productsales during Q1 FY22,India business has grown at a healthy double-digit.The company has launched Vve new products during the quarter.As per theIQVIA report of June 2022,Dr.Reddys is ranked at#10 i
84、n India pharmamarket in terms of value.For India business,the company is focusing ongrowing big brands,acquisition/partnerships for focus therapy areas,anddivesting non-core brands.Dr.Reddys Laboratories(DRRD IN):India Business Still the Brightest Spot;Slow Recovery in the USTina Banerjee18Source:Co
85、mpanyRussia:Revenue from Russia declined 9%y/y and 53%q/q,primarily due tochannel inventory normalization post stocking up in Q4 FY22.Russiabusiness declined by 14%on year-on-year basis and 60%on quarter-to-quarter basis in constant currency.Russia accounts for just 6%of totalrevenue.Pro1tability:Gr
86、oss proVt margin deteriorated 230bps over the year-agoquarter and 300bps over the previous quarter,mainly on account of highercommodity prices,adverse leverage on manufacturing overheads,priceerosion and forex related impact.Gross proVt margin for global generics andPSAI business segments are at 55.
87、0%and 15.7%,respectively.Goingforward,the company expects inWation pressure to ease and forex rate toimprove.In Q1FY23,Dr.Reddys has launched cardiovascular brand,Cidmusin India,which is currently procured externally and have a lower grossmargin.The company plans to transition this to in-house manuf
88、acturingafter the expiry of patent,which would lead to an improvement in margin.With normalization of one-offs and launch of few meaningful products,gross margin is expected to be within the normal range in coming quarters.Operating and net proVt beneVtted from non-recurring item.In Q1FY23,thecompan
89、y reported other operating income of INR6.0 billion versus INR0.5billion in Q1 FY22.The increase was mainly on account of recognition ofincome from settlement agreement,with Indivior,resolving all claimsbetween the parties relating to the generic buprenorphine and naloxonesublingual Vlm.Operating pr
90、oVt surged 85%y/y and 704%q/q to INR12.2billion.Net proVt jumped 108%y/y and 1,257%q/q to INR11.9 billion,leading to net proVt margin of 22.8%.Dr.Reddys Laboratories(DRRD IN):India Business Still the Brightest Spot;Slow Recovery in the USTina Banerjee19Source:CompanyCash 2ow:The free cash Wow during
91、 this quarter was a net outWow ofINR2.32 billion($29 million)after payment of INR5.09 billion for theacquisition of Cidmus brand in India and the injectable portfolio from EtonPharma in the U.S.Consequently,the company has a net cash surplus ofINR12.75 billion($161 million)as on June 30,2022.New Pro
92、duct AcquisitionOn July 29,Dr.Reddys Laboratories entered into a licensing agreement withSlayback Pharma to obtain exclusive rights in latters Brimonidine Tartrateophthalmic solution,which is the private label equivalent of Lumify in theU.S.Lumify is an over-the-counter eyedrop that can be used to r
93、elieveredness of the eye due to minor eye irritations.The agreement also providesDr.Reddys exclusive rights to the product outside the U.S.Slayback Pharmais the Vrst company to Vle an ANDA for the private label equivalent forLumify with the FDA under Para IV certiVcation.The ANDA is currentlyunder F
94、DA review.The value of total addressable annual market for thisproduct in the U.S.is approximately$130 million.“We are pleased to license this important OTC ophthalmic product forthe U.S.market,”says Marc Kikuchi,Chief Executive O3cer,NorthAmerica Generics,Dr.Reddys.“This product complements Dr.Redd
95、ysgrowing OTC product portfolio in the eyecare category that includesthe private label versions of Pataday Once Daily Relief and PatadayTwice Daily Relief.”“Dr.Reddys Laboratories(DRRD IN):India Business Still the Brightest Spot;Slow Recovery in the USTina Banerjee20ConclusionDr.Reddys is progressin
96、g well on product pipeline across small moleculegenerics,biosimilars,and differentiated products/NCEs,which shoulddeliver on its long-term growth aspirations.Acquisition of cardiovascularbrand,Cidmus in India and injectable portfolio from Eton Pharma in the U.S.are the recent examples of portfolio e
97、xpansion.During Q1 FY22,FDA hascompleted inspection of its new sterile injectable manufacturing facility,referred as FTO-11,leading to subsequent approval of a product from thesite.This enables the company to commission this plant and bring on streamadditional capacities and capabilities to grow its
98、 injectable business.Dr.Reddys has been awarded Abiraterone(prostate cancer drug;brand name:Zytiga)tender in China,which will be its second product through GPOmodel.Overall,Dr.Reddys Laboratories remains an attractive valueinvestment for long-term.The shares are trading at a forward P/E of 23.6x,che
99、aper than peers such as Sun Pharmaceutical Industries(SUNP IN)(28.8x)and Cipla Ltd(CIPLA IN)(28.4x).Recent pullback caused by proVt bookingmay be an ideal entry point.Disclosure&CertiCcationI/We have no position(s)in the any of securities referenced in this insightViews expressed in this insight acc
100、urately reWects my/our personal opinion(s)about the referenced securities and issuers and/orother subject matter as appropriate.This insight does not contain and is not based on any non-public,material information.To the best of my/our knowledge,the views expressed in this insight comply with Singap
101、ore law as well as applicable law in thecountry from which it is postedI/We have not been commissioned to write this insight or hold any speciVc opinion on the securities referenced thereinI/We have signed the Insight Provider Agreement and this insight does not violate any of the terms speciVed the
102、rein.Tina Banerjee(07 Sep 2022)Dr.Reddys Laboratories(DRRD IN):India Business Still the Brightest Spot;Slow Recovery in the USTina Banerjee21Tina BanerjeeGlobal Healthcare AnalystAjanta Pharma|Equity Bottom-UpAjanta Pharma(AJPIN):Branded GenericsFocus EnsuresConsistent GrowthBy Tina Banerjee|16 Sep
103、2022EXECUTIVE SUMMARYAjanta Pharma(AJP IN)has a well-diversiVed business model in termsof markets and therapies.The companys largest revenue contributingsegment,branded generics is seeing healthy double-digit revenuegrowth.Ajanta focuses on limited competition product in US.Going forward,the US busi
104、ness will see accelerated growth,driven by new launches.Ajanta plans to Vle 1012 ANDAs during FY23.Ajanta has taken 1%price increase across all its market,which shoulddrive margin improvement in coming quarters.The company hasguided for EBITDA margin of 2627%for FY23.DETAILBrief BackgroundAjanta Pha
105、rma(AJP IN)is a specialty generic pharmaceutical company,withmajor focus on branded generics in emerging markets of Asia and Africa.The branded generics business is also spread in India,with presence in highgrowth specialty segments of cardiology,dermatology,ophthalmology,andpain management.Over the
106、 last 10 years,150+products launched by Ajantaare Vrst to market products and are leading in their sub-therapeuticsegments in India.Branded generics business(India and emerging markets)now contributes 73%of total revenue,up from 67%in FY21.With selectedcomplex technology products,the company has pre
107、sence in the U.S.genericdrug market.The companys institutional business comprises of supplies tovarious government bodies in India and supply of anti-Malarial productsunder WHO approved programs in Africa.Ajanta spends around 6%of totalrevenue on R&D.Ajanta Pharma(AJP IN):Branded Generics Focus Ensu
108、res Consistent GrowthTina Banerjee22Diversi1ed Revenue StreamsSource:Ajanta Pharma Q1FY23 ResultsSturdy India Business-ConsistentAbove-market GrowthIndia business is focused on four large specialty therapeutic segments.Cardiology is the largest revenue generating segment,contributing 41%ofIndia reve
109、nue,followed by ophthalmology(31%),dermatology(20%),andpain management(8%).The company has been able to grow faster than theindustry in all segments in Q1FY23.In pain management,the growth wasthe highest at 23%vs.15%for industry segment,followed by ophthalmologywith growth of 21%vs.20%,Dermatology w
110、ith 20%vs 5%,and cardiologywith 10%vs.6%.On overall basis,Ajanta grew at 16%outpacing Indianpharmaceutical markets(IPM)growth rate of 8%,as per IQVIA,June MAT2022.Since FY19,Ajanta has been consistently outperforming IPM.Ajanta isthird fastest growing company among top 30 in IPM.Ajanta launched 16 n
111、ew products in FY22,including four Vrst-to-marketproducts in the country.Three of the companys brands appear in the top500 in IPM now.Ajanta has 300+products in India,with 50%+being Vrst-to-market products.As per IQVIA,June MAT 2022,Ajanta is ranked 28thinIPM,up from 28thin March 2022.The company is
112、 ranked 2ndinophthalmology,one of its major revenue contributing segment.Ajanta Pharma(AJP IN):Branded Generics Focus Ensures Consistent GrowthTina Banerjee23During Q1FY23,revenue from India business grew 22%y/y to INR2.79billion on the back of new product launches,market share gain,and priceincreas
113、e.Source:CompanyIndia RankingTherapiesMarch 2013June 2022Ophthalmology5th2ndCardiology28th17thDermatology15th14thPain ManagementNA30thAjanta Pharma45th28thSource:Ajanta Pharma Q1 Investor PresentationAjanta Pharma(AJP IN):Branded Generics Focus Ensures Consistent GrowthTina Banerjee24Strengthening P
114、resence in EmergingMarket Branded Generic SpaceDeeper market penetration and product portfolio expansion have led tohealthy revenue growth from emerging markets of Asian and Africa.Ajantahas a large range of specialty and general practitioner product portfolio of200+products for emerging markets.The
115、 company continues to registermore products in every market it is present in.Revenue from Africa brandedgenerics surged 42%y/y in FY22,driven by market share gain of existingproduct,new product launch and successive market share gain,expandingsales force.In Q1FY23,revenue from Africa and Asia brande
116、d generic business surged bywhopping 34%and 45%,y/y to INR1.68 billion and INR2.4 billion,respectively.However,growth rate of branded generics business beneVttedfrom a low base in Q1FY22,which was impacted because of the second waveof the COVID-19.Excluding COVID-19 impact,the growth During thequart
117、er,the company has launched 10 new products in Asia and Africaacross various countries.Going forward,the company expects mid-teensgrowth from its Africa branded generic business.Ajanta Pharma(AJP IN):Branded Generics Focus Ensures Consistent GrowthTina Banerjee25Source:CompanyU.S.Generics-Slow but S
118、teadyAjanta is seeing decelerating revenue growth from its U.S.generic businessas increased competitive intensity is leading to higher than anticipated priceerosion on the base business.Thus far,out of 42 Vnal ANDA approvals,Ajanta has commercialized 39 products.In terms of new product launch,Ajanta
119、 remained far behind most of its Indian peers.During FY22,thecompany launched just three products and Vled eight ANDAs.In Q1FY23,there was no new launch,while Ajanta Vled one ANDA.Although FY23 hasbeen started on a slower rate,the company remains conVdent to Vle 1012ANDAs during FY23 as multiple pro
120、ducts are at the advanced stage of Vling.At the end of Q1FY23,there are 20 ANDAs awaiting approval from FDA.Ajanta has chosen the strategy of selective play in the U.S.market,with thelaunch of limited competition product.This should yield result in long haul,once the pace of product Vling and launch
121、 picks up.In Q1FY23,despitesevere price erosion and absence of any new product launch,revenue fromthe U.S.business grew 6%y/y to INR1.79 crore.The company is seeingdecelerating price erosion in the U.S.and estimates that price erosion tocome back to the more normalized level of 58%.Ajanta Pharma(AJP
122、 IN):Branded Generics Focus Ensures Consistent GrowthTina Banerjee26Source:CompanyConclusionAjanta holds a unique position having 73%business contribution fromBranded Generics,and especially getting it from diversiVed 30+countries inemerging markets of Asia and Africa.Ajantas major focus on brandedg
123、eneric pharmaceutical has differentiated it from the other major genericpharmaceutical companies in India,which mainly focuses on the U.S.generic business.Moreover,the companys selected therapeutic focus on fastgrowing chronic segments is accelerating revenue growth and marginimprovement.Despite bei
124、ng a late entrant in the U.S.market(compared toother large Indian generic pharmaceutical companies),Ajanta is gainingtraction through selected complex therapeutic products.Although currentmarket condition in the U.S.is not attractive due to rising competition andprice erosion,Ajanta is expected to r
125、eport accelerated double-digit growthfrom the U.S.business with the resumption of product Vling,approval,andlaunch.The company has taken 1%price increase across all its market,which should drive margin improvement in coming quarters.The companyhas guided for EBITDA margin of 2627%for FY23,up from 23
126、%reported inQ1FY23.The company has a strong balance sheet,with cash balance of INR2billion as of March 2022 against negligible borrowing.Ajanta shares aretrading at a forward P/E of 23.0 x,cheaper than peers including AlkemLaboratories Ltd(ALKEM IN)(25.3x),Torrent Pharmaceuticals(TRP IN)(31.5x),and
127、Ipca Laboratories(IPCA IN)(25.3x).Recent pullback in Ajantashares caused by issuance of form 483 by the FDA for one of itsmanufacturing facilities,provides an attractive entry point for the investors.Peer ComparisonCompanyMarket Cap(INR Bn)NTMP/ELTM EBITDAMarginFY24E RevenueGrowthFY24E EPSGrowthAjan
128、ta Pharma(AJP IN)173.9123.0 x26%12%18%Ajanta Pharma(AJP IN):Branded Generics Focus Ensures Consistent GrowthTina Banerjee27Alkem Laboratories Ltd(ALKEM IN)384.5225.3x16%11%31%Glenmark Pharmaceuticals(GNP IN)109.589.3x20%10%18%Ipca Laboratories(IPCA IN)222.5725.3x19%14%35%Torrent Pharmaceuticals(TRP
129、IN)508.7531.5x28%12%26%Source:KoyVnDisclosure&CertiCcationI/We have no position(s)in the any of securities referenced in this insightViews expressed in this insight accurately reWects my/our personal opinion(s)about the referenced securities and issuers and/orother subject matter as appropriate.This
130、 insight does not contain and is not based on any non-public,material information.To the best of my/our knowledge,the views expressed in this insight comply with Singapore law as well as applicable law in thecountry from which it is postedI/We have not been commissioned to write this insight or hold
131、 any speciVc opinion on the securities referenced thereinI/We have signed the Insight Provider Agreement and this insight does not violate any of the terms speciVed therein.Tina Banerjee(15 Sep 2022)Ajanta Pharma(AJP IN):Branded Generics Focus Ensures Consistent GrowthTina Banerjee28Tina BanerjeeGlo
132、bal Healthcare AnalystRainbow Childrens Hospital|Equity Bottom-UpRainbow ChildrensHospital(RAINBOW IN):Flying High Backed byNiche Focus andBusiness RecoveryBy Tina Banerjee|12 Oct 2022EXECUTIVE SUMMARYRainbow Childrens Hospital(RAINBOW IN)is Indias largest pediatricmulti-specialty healthcare chain,o
133、perating 15 hospitals and 3 clinics in6 cities,with a total bed capacity of 1,550+.Due to its presence in the afWuent cities of India,the company hassuperior ARPOB.With the normalization of business occupancy andoutpatient volume improved signiVcantly.The company plans to add 100 beds by the end of
134、FY23.Higheroccupancy and greater scale of operation are the biggest margin driverfor the company.DETAILRainbow Childrens Hospital(RAINBOW IN)(RCML)is a chain of multi-specialty pediatric,and OB/GYN hospitals in India,operating 15 hospitalsand 3 clinics in 6 cities(predominantly in Southern India),wi
135、th a total bedcapacity of 1,550+.Pediatric services are offered under“Rainbow ChildrensHospital”,whereas the women care services are provided under“Birthrightby Rainbow”.Niche Business Focus and UniqueOperating ModelRCML is Indias largest pediatric multi-specialty healthcare chain.As afocused child-
136、centric healthcare network,the company has the widest suiteof pediatric and perinatal care specialties,which include neonatal intensivecare,pediatric intensive care,pediatric multi-specialty and pediatricquaternary care.Birthright by Rainbow is one of the largest obstetrics andRainbow Childrens Hosp
137、ital(RAINBOW IN):Flying High Backed by Niche Focus and Business RecoveryTina Banerjee29gynecology service provider,which includes normal and complex obstetriccare,multi-disciplinary fetal care,perinatal genetic,and fertility care.RCMLs focus area is niche,however has large addressable marketopportun
138、ities due to favorable demographics of India.India has nearly 240million females in the reproductive age of 25-49 years as of 2020 and rankedsecond after China.Over the next 30 years India is expected to still continueto have a higher number of young and mid-age people,with thedemographic proVle exp
139、ected to change to nearly equally distributed agegroups and population expected to increase from 1.3 billion in 2020 to 1.7billion in 2050.India reports roughly 70,000 live births per day,representingone sixth of the worlds child births.This translates to 25-26 million livebirths per year.Pediatric
140、healthcare market in India is growing at a faster rate than thebroader market.Increasing pregnancy complication mainly due to highermaternity age and increasing urban population with better spending powerare the main growth drivers of pediatric healthcare market.The pediatricmarket is growing at a C
141、AGR of 14%and obstetrics(maternity)is growing ata 12%CAGR as opposed to 8%of the adult multispecialty care.In the last 10years,RCML has been growing at the rate of 18-20%,and the companyexpects to maintain the growth rate,going forward.Among the players inthe maternity and pediatric healthcare deliv
142、ery sector,RCML operates thelargest number of hospitals,has the highest bed capacity,and has thehighest OPBIT/bed ratio.While“Birthright by Rainbow”offerings are to some extent is elective innature,“Rainbow Childrens Hospital”are resilient operation.Around 70%revenue comes from pediatric care,while
143、rest 30%comes from womenscare.Though healthcare is considered a non-discretionary expense,considering low per capital income of India,affordability of qualityhealthcare facilities remains a major constraint.RCML is currently presentin 6 Indian cities,which have afWuent population with better afforda
144、bility.This is reWected in superior average revenue per operating bed(ARPOB).InQ1FY23,RCML reported ARPOB of INR52,603 per day,higher than Indiaslargest hospital operator Apollo Hospitals Enterprise(APHS IN)s INR51,999per day(Apollo has pan-India presence).Another Southern India focusedmulti-special
145、ty hospital Krishna Institute of Medical Sciences(KIMS IN)reported ARPOB of INR30,192 in Q1FY23.RCML follows a hub-and-spoke operating model where the hub hospitalprovides comprehensive outpatient,inpatient care,with a focus on tertiaryand quaternary services while the spokes provide emergency care
146、inpediatrics and obstetrics,large outpatient services and comprehensiveobstetrics,pediatric and level 3 NICU services.This model is successfullyoperational at Hyderabad and is gaining traction in Bengaluru.RCMLendeavors to replicate this approach in Chennai and across the NationalCapital Region.Subs
147、equently the company intends to expand into tier-2cities of Southern India.Hub-and-spoke model enables wider city coverage.Rainbow Childrens Hospital(RAINBOW IN):Flying High Backed by Niche Focus and Business RecoveryTina Banerjee30Source:Rainbow Q1FY23 Earnings PresentationBusiness RecoveryRCML kic
148、kstarted FY23 on a healthy note,despite seasonality associatedwith the business model,wherein business during the Vrst quarter of theVnancial year is relatively lower.The operating environment has largelynormalized to pre-covid levels.In Q1FY23,revenue declined 4%y/y andincreased 12%q/q to INR2,372
149、million.However,adjusting for the COVID-19vaccine revenue of INR440 million in the Q1FY22,the revenue for Q1FY23has grown at 17%y/y.Occupancy has improved to 43.08%in Q1FY23,compared to 39.64%in Q4FY22 and 40.33%in Q1FY22.However,occupancyis still lower than pre-COVID level of 56.27%reported in FY20
150、,therebyleaving further scope of improvement.RCML expects 55%occupancy inFY23.Normalization of business environment is best reWected by a massive52%y/y growth in outpatient volume to 248,251.For context,RCMLreported outpatient volume of 941,049 in FY20.EBITDA margin hasexpanded 285bps y/y and 1,196b
151、ps q/q to 34.62%.Rainbow Childrens Hospital(RAINBOW IN):Flying High Backed by Niche Focus and Business RecoveryTina Banerjee31Source:Rainbow Q1FY23 Earnings PresentationExpansion PlansRCML has expanded hospital network and increased bed capacity to 1,500beds as of December 31,2021 from 1,162 beds as
152、 of March 2019.Over thesame period,the number of hospitals increased from 10 to 14.The Vrstspoke hospital in Chennai with 55 beds became operational in Q2FY23 andanother spoke hospital in Hyderabad with 90 beds is expected to commenceoperations in Q4FY23,thereby adding a total of 145 beds(10%of bedc
153、apacity addition)in FY23.The project works for hospitals at Hyderabad andChennai are progressing well and are expected to commence operationsduring Q1FY24.RCML has signed agreements for a third spoke hospital atBangalore and a regional spoke hospital at Rajahmundry,Andhra Pradesh.RCML plans to add 1
154、40 beds in FY24.The company has cash balance ofINR4 billion.ConclusionRCML is trading at a forward EV/EBITDA of 21.9x,higher than its mid-sizedregional peers,including HealthCare Global Enterprises(HCG IN)(15.4x)and Krishna Institute of Medical Sciences(KIMS IN)(18.8x).However,RCMLs niche focus and
155、superior proVt margin justiVes the premiumvaluation.In most of its hospitals,the company has started with newincreased insurance tariff from June 1.Full impact of tariff rise is expected incoming quarters.With business recovery,improved occupancy,and greaterscale of operation,RCML is expected to exp
156、and its margin further.RCML hasindustry leading EBITDA,PAT and ROCE margins.Consensus expects 26%EPS growth on 22%revenue growth in FY24.Consensus is also looking forRainbow Childrens Hospital(RAINBOW IN):Flying High Backed by Niche Focus and Business RecoveryTina Banerjee32revenue and EPS growth of
157、 21%and 25%,respectively in FY25.DespiteRCML shares gained 45%since its debut in May 2022,we think furtherstream is still left.Peer ComparisonCompanyMarket Cap($Mn)NTMP/ENTM EV/EBITDATTM EBITDAMarginFY23E SalesGrowthFY23E EPSGrowthRainbow Childrens Hospital(RAINBOW IN)801 39.9x21.9x33%11%9%HealthCar
158、e Global Enterprises(HCG IN)511 64.7x15.4x18%18%343%Shalby Ltd(SHALBY IN)175 16.3x9.5x17%-62%Krishna Institute of MedicalSciences(KIMS IN)1,403 34.6x18.8x30%34%-2%Fortis Healthcare(FORH IN)2,518 40.1x19.1x-9%15%Narayana Hrudayalaya Ltd(NARH IN)1,759 38.3x17.6x18%15%25%Source:KoyVnDisclosure&CertiCca
159、tionI/We have no position(s)in the any of securities referenced in this insightViews expressed in this insight accurately reWects my/our personal opinion(s)about the referenced securities and issuers and/orother subject matter as appropriate.This insight does not contain and is not based on any non-
160、public,material information.To the best of my/our knowledge,the views expressed in this insight comply with Singapore law as well as applicable law in thecountry from which it is postedI/We have not been commissioned to write this insight or hold any speciVc opinion on the securities referenced ther
161、einI/We have signed the Insight Provider Agreement and this insight does not violate any of the terms speciVed therein.Tina Banerjee(11 Oct 2022)Rainbow Childrens Hospital(RAINBOW IN):Flying High Backed by Niche Focus and Business RecoveryTina Banerjee33SMARTKARMA RESEARCH:This publication is publis
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