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					Pfizer Ltd (PL)                             (CMP – 1368.25)

   Stock Note                                                                                          October 18, 2011
 HDFCSec                                           Recommended
  Scrip ID            Industry           CMP           Action          Averaging Band Sequential Targets Time Horizon
                                                   Buy at CMP and      Rs. 1254 to Rs. Rs. 1520 and Rs.
PFILTDEQNR        Pharmaceuticals      1368.25       add at dips            1292             1596        1-2 quarters

Company Background

Pfizer Ltd (PL) was incorporated in India in 1950 as Dumex Limited with a production facility at Darukhana in Mumbai with
products like Protinex and Isonex. PL is the Indian arm of Pfizer Inc (USA) – the world’s number 1 pharmaceutical and
healthcare major. Pfizer Inc owns ~70.8% of PL, giving PL access to its parent’s product portfolio. In 1965 the company entered
into a license agreement with Pfizer Inc. for the use of Pfizer’s processes, technical know-how, etc to manufacture its existing
products. PL has launched several off-patent products from its parent’s portfolio such as Champix, Cyclokapron, Acupil, and
Trulimax. Some of Pfizer Inc’s leading products include Lipitor, Lyrica, Celebrex, Viagra, Norvasc, Zyvox etc. Apart from the
listed entity, the US parent has two wholly owned subsidiaries operating in India, namely Pfizer Pharmaceuticals India Pvt. Ltd.
& Pfizer Products India Pvt. Ltd.

PL's parent’s medicines library includes about 3 million compounds and the pipeline holds approximately 169 new molecular
entities and 73 enhancement programs for marketed products in development and about 400 compounds in discovery research
across multiple therapeutic areas, which all covers pharmaceutical, animal health and services, it’s three streams of operation.
Pfizer’s diversified product portfolio is spread over six major therapeutic areas encompassing cardiovascular, central nervous
system, respiratory, anti-infective, dermatology and alimentary tract therapeutic segments. Further, the company has a large
portfolio of over-the-counter (OTC) products. The acute segment (contributes ~87% of domestic sales) is growing at 20% while
the chronic segment (contributes ~13% of domestic sales) is growing at ~25%. The launch of insulin products from the tie-up
with Biocon will help aid the growth of the chronic segment. The Company's six key brands (Corex, Becosules, Magnex,
Dolonex, Gelusil and Minipress XL) list among the Top-100 Industry brands of which Corex and Becosules feature among the
Top-10. Viagra was the first global brand launched successfully in December 2005 and was an instant goldmine. Thereafter,
global launches became fairly common.

Due to increasing competition across all therapeutic segments the company undertook several cost-cutting measures which
included shut down of high-cost facilities such as those at Chandigarh, Hyderabad, and Ankleshwar in Gujarat and upgrading its
Thane facility, offering voluntary retirement schemes for employees, etc.

The Animal Health business has a presence in the animal health and poultry market segments and also includes rendering of
marketing services. The Services Clinical Development Operations include conducting clinical trials, new product development
and undertaking data management for new drug development.

Pfizer Inc recently merged with Wyeth globally to optimize operations. It is expected that the Indian arm of Wyeth would be
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merged with the Indian arm of Pfizer however the timeline for this is uncertain. The merged entity will be the 3 largest MNC
pharma company in India after Abbott and Glaxosmithkline. PL’s wholly owned subsidiary, Duchem Laboratories Ltd was also
recently merged with the company.

Ranked in the top 10 companies of the Indian pharmaceutical industry with sales of Rs. 1881 cr (ttm) recording a growth of
13.2% in a Rs. 58,824 cr market, PL boasts a market share (incl Wyeth) of 3.2% as per the June 2011 ORG IMS data.

Shareholding Pattern

             Particulars             No of Shares (In lakhs)                              % Holding
                                           30/09/2011           30/09/2011 30/06/2011     31/03/2011 31/12/2010 30/09/2010
Promoters                                     211.1                    70.8       70.8           70.8       70.8       70.8
Foreign Institutions & Individuals             7.5                      2.5        2.7            2.7        2.5        1.9
Indian Institutions                            21.6                     7.2        6.8            6.4        5.9        6.8
Non Promoter Corporate Holding                 5.5                      1.9        1.9            1.9        2.0        1.8
Public & Others                                52.7                    17.7       17.9           18.2       18.9       18.8
Total                                         298.4                  100.0      100.0          100.0      100.0      100.0

Among institutions, Oriental Insurance Company holds 1.0% as on September 30, 2011. Ownership by Indian institutions has
inched up over the past three quarters while FII holding has dipped slightly over the last quarter.




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Industry

The Indian pharmaceutical industry is estimated to be worth $21.5 billion (including exports) in FY10. The domestic formulations
market contributed only ~1% to the global pharmaceutical market in FY10 in terms of value due to lower penetration of
healthcare and lower drug prices. In FY10, formulations accounted for ~65% of the domestic pharmaceutical sales while bulk
drugs contributed the balance. The domestic formulations industry is highly fragmented with 300-400 organized manufacturers
and over 15,000 unorganised manufacturers. The formulations market is fairly concentrated among the top players. In FY10 the
top 10 players accounted for ~38.1% of total formulation sales.


                                                      Formulations Market Share in FY10


                          6%    5.4%
                                         4.9%
                          5%                         4.3%     4.2%
                                                                         3.7%           3.7%
                          4%                                                                      3.2%       3.0%         2.9%        2.8%
                          3%
                          2%
                          1%
                          0%
                                         Ranbaxy




                                                                                                                          Mankind


                                                                                                                                          Lupin
                                                                          Cadilla H
                                 Cipla




                                                                                        Pharma




                                                                                                                 Pfizer
                                                              Piramal
                                                      GSK




                                                                                                   Alkem
                                                                                         Sun
                                                                 H




                                                                  (Source: ORG IMS)

India spends ~6% of its total GDP on healthcare. The per capita drug expenditure in India is one of the lowest in the world due
to the low penetration of health insurance as compared to most developed economies.

The Indian formulation industry is estimated at Rs. 468 bn as on December 31, 2010. The domestic formulation market clocked
17.9% growth in FY10, which was driven by 20% volume growth across therapeutic categories such as anti-diabetic, neuro/CNS
and respiratory. These categories, along with gynaecology and pain relievers/analgesics, experienced healthy value growth in
FY10 as well.

                                                    FY08        FY09                             FY10                     FY08-FY10               FY12P      FY10 to FY12P
                                                    Sales       Sales                 Sales      Value growth                  CAGR                Sales         CAGR
                                                   (Rs. bn) (Rs. bn) (Rs. bn)                              (%)                      (%)           (Rs. bn)        (%)
Anti diabetic                                          16.0             18.6            23.2                 24.7%                   20.4%            32.0              17.4%
Anti infectives                                        57.3             62.9            72.1                 14.6%                   12.2%            88.9              11.0%
Cardiovascular System (CVS)                            34.8             39.5            47.4                 20.0%                   16.7%            63.9              16.1%
Dermatology                                            17.5             19.3            22.9                 18.7%                   14.4%            28.7              11.9%
Gastro Intestinal                                      35.0             38.3            45.0                 17.5%                   13.4%            54.9              10.5%
Gynaecological                                         18.1             20.4            24.0                 17.6%                   15.2%            31.2              14.0%
Neuro/Central Nervous System (CNS)                     17.6             19.3            23.2                 20.2%                   14.8%            30.7              15.0%
Pain/Analgesics                                        28.4             30.8            36.2                 17.5%                   12.9%            43.8              10.0%
Respiratory                                            28.8             31.1            37.7                 21.2%                   14.4%            47.7              12.5%
Vitamins/Minerals/Nutrients                            26.3             27.6            32.0                 15.9%                   10.3%            39.8              11.5%
Others                                                 57.2             64.5            76.5                 18.6%                   15.6%            67.4              -6.1%
Total                                                 321.0        353.7               417.0                 17.9%                   14.0%           529.0              12.6%
                                                                                                                                                     (Source: ORG IMS, CRISIL)

Global pharmaceutical sales growth has been declining since 2003, largely due to the increasing number of off-patent drugs
across major therapeutic segments, declining research and development and tougher quality and pricing standards. Global
pharmaceutical sales grew 4.5% in 2009 vs 4.8% in 2008 and 6.6% in 2007. Pfizer is the global market leader in
pharmaceuticals with a 7.6% market share in 2009. The top ten global players account for 45.1% of the market.

The pharmaceutical formulations market includes the domestic and the export market. The domestic market accounts for ~61%
of total formulation sales while exports account for 39%. Exports have steadily risen from ~30% in FY06 to ~39% in FY10. The

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domestic formulations market has expanded at a CAGR of ~14% over the last three years and reached a size of Rs. 417 billion
in FY10. This was primarily driven by robust growth witnessed in the anti-diabetic, cardiovascular, respiratory and Neuro/CNS
segments. Acute segments, mainly anti-infectives, have continued to expand at a steady rate due to inadequate sanitary and
hygiene conditions. The domestic market is concentrated at the top with the top ten players controlling ~38% of the total
formulations sales. Within exports, entry barriers are significantly higher in the regulated markets as compared to semi-regulated
markets due to stringent regulatory norms in the regulated market.

Traditionally, the semi-regulated markets (SRM) such as Africa, Asia, CIS and Latin America had been the favoured export
destination among Indian pharmaceutical players. However, over the past decade, generic opportunities opened up in the
regulated markets (RM) such as USA and Europe and large Indian players shifted focus and increased their proportion of
exports to these markets. However, the increase in exports to SRM by medium and small sized Indian players ensured a
gradual shift in export trend toward RM. SRM will continue to draw a substantial share of Indian exports (~60%) and register a
13-15% CAGR between FY09 and FY14. Even large players continue their export to SRM to ensure diversity. Among the SRM,
CIS and Latin American markets fetch higher margins than Asia and Africa. Exports to SRM are expected to be ~57% of the
total exports in FY14. India’s low cost base and well-developed bulk drug industry will be the key growth driver of exports to
SRM. CIS and Latin America could register a CAGR of 16-17% and 15-16% respectively while exports to Asia are expected to
slow down by 10-11% by FY14. Most SRM markets are dependant on formulation imports for the pharmaceutical industries.
India proves to be a relatively low cost API supplier to these nations. India’s penetration is expected to be ~2.1% in the $140 bn
SRM. Indian players tend to enter marketing tie-ups, contract manufacturing deals or acquisitions to enter the SRM. Formulation
exports grew by ~25% from FY04 to FY09 however in FY10, exports grew by only ~2.2% largely on account of a drop in exports
to SRM on the back of EU’s seizure of drug shipments, currency fluctuations and a high base in FY09.

Anti-infective was the only therapeutic category to see a price decline due to high competition and significant restraint by the
Drug Price Control Order (DPCO). The top 15 players launched 2082 new products in the past 24 months for the year ending in
March 2010. PL is in the top 15 players in the Indian pharmaceutical industry with close to 3% market share (incl Wyeth). The
domestic formulations market is expected to grow at a CAGR of 12-14% from FY10 to FY12 to reach a market size of Rs. 525-
535 bn. Increasing healthcare awareness, rising per-capita income, growing population, high stress levels and unhealthy eating
habits due to changing lifestyle will be the growth promoters of the industry. Poor hygiene and sanitary conditions in India will
keep the demand for anti-infectives constant while rural penetration will supplement volume growth for the largest therapeutic
segment.

The Indian Pharmaceutical Market (IPM) reported a 14.2% y-o-y growth in sales in August 2011 vs the 8.9% y-o-y growth
reported in July 2011 and 14.8% y-o-y growth reported in August 2010. Growth was aided by higher growth in anti-infectives due
to and extended monsoon.

Therapeutic Area wise Sales:
                                                 (Rs. Cr)              % Share                        % YoY Growth
Therapeutic Area                                    MAT Jul-11            MAT Jul-11                  MAT Jun-11              Jun-11
Anti diabetic                                                3358                  6%                           22.0             22.1
Anti infective                                               9681                 17%                           11.3              8.0
Cardiac                                                      6597                 12%                           18.2             17.5
Derma                                                        2813                  5%                           13.1             11.9
Gastrointestinal                                             6563                 12%                           13.8              7.9
Gynaecological                                               3538                  6%                           15.8              8.5
Neuro/CNS                                                    3463                  6%                           14.2             12.1
Pain/Analgesics                                              4488                  8%                           14.1             12.2
Respiratory                                                  4469                  8%                           11.4              7.6
Vitamins/Minerals/Nutrients                                  4678                  8%                           13.9             12.4
Total market                                                56483                100%                           14.5             12.1
MAT = Moving annual total                                                                          (Source: AIOCD, HDFC Sec Research)

Company wise Sales:
Company                                  MAT Aug-11                                            Month Aug-11
                              Val (INR bn)      Mkt Sh%         Growth %           Val (INR bn)         Mkt Sh%           Growth %
Cipla                                27.1             4.9               9.4                  2.4               4.6                4.8
Ranbaxy                              26.0             4.7              16.9                  2.3               4.3               11.1
Glaxo                                25.9             4.7              12.3                  2.5               4.7               12.8
Sun Pharma                           24.9             4.5              22.3                  2.2               4.2               18.9


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Piramal                               23.8             4.3               9.2                   2.2              4.3                 8.3
Zydus Cadila                          21.0             3.8              15.2                   1.9              3.6                 8.7
Mankind                               14.6             2.7              22.3                   1.4              2.7               15.8
Lupin                                 17.0             3.1              21.9                   1.7              3.2               25.0
Alkem                                 15.9             2.9              17.7                   1.6              3.1               12.5
Aristo                                12.3             2.2               7.7                   1.2              2.3                 4.5
Intas                                 13.2             2.4              13.9                   1.3              2.4               20.3
Pfizer                                12.6             2.3              21.0                   1.3              2.5               26.8
Macleods                              11.5             2.1              31.0                   1.3              2.4               37.8
Dr. Reddy's                           12.0             2.2               8.9                   1.0              2.0                 1.2
Aventis                               11.7             2.1              24.0                   1.1              2.2               26.5
Wockhardt                             10.8             2.0               6.3                   1.0              2.0               10.7
Micro Labs                             9.7             1.8              10.5                   1.0              1.9               27.8
Glenmark                               9.9             1.8              17.1                   1.0              1.9                 9.4
IPCA Labs                              9.4             1.7              15.7                   0.9              1.8                 7.1
Novartis                               9.4             1.7              17.3                   0.9              1.6               14.8
Total market                        551.6           100.0               13.9                 52.8             100.0               14.2
                                                                                                     (Source: AIOCD, HDFC Sec Research)


Triggers

Strong, multinational parent:
PL has a very powerful parent, Pfizer Inc, which directly or through its global subsidiaries holds 70.8% stake in the company.
Pfizer Inc is the largest pharmaceutical player in the world with business operations in more than 150 countries. Some of its
leading products include Lipitor, Lyrica, Celebrex, Viagra, Norvask and Zyvox. Pfizer Inc has a presence in biopharmaceutical,
animal health, consumer healthcare, capsugel and nutrition.

Pfizer Inc is a research and development power house with one of the strongest and largest product pipelines in the world
spread across most therapeutic segments including but not limited to Oncology, Pain, Inflammation, Alzheimer’s Disease,
Psychoses and Diabetes. The company’s R&D pipeline includes about 500 projects in development ranging from discovery
through registration, of which 133 projects are from Phase 1 through registration. Pfizer invested USD 7,845 mn (15.7% of
Revenues) in Research & Development for the year ended December 2009.

The parent company is confident India will grow and has two unlisted wholly owned subsidiaries besides PL in India as well
namely, Pfizer Pharmaceuticals India Pvt. Ltd. and Pfizer Products India Pvt. Ltd. In April 2009, Pfizer Inc. made an open offer to
acquire a further 33.8% in Pfizer Ltd. through its wholly owned subsidiary – Pfizer Investments Netherlands B.V., on successful
completion of which, it’s holding in Pfizer Ltd. would increase from 41.2% to 75.0%. The repurchase price was set to Rs. 675 per
share but then was revised to Rs. 830 per share in June 2009.Despite the increase in open offer price the parent company could
garner only 29.5% through the open offer, eventually increasing its stake to 70.8% currently.

Pfizer Inc’s global merger with Wyeth in 2009 for $65 billion made it the largest pharmaceutical company in the world (in terms
of revenue) and will make it the 2nd/3rd largest pharma MNC in India after Abbott and Glaxo Smithkline. Wyeth’s major brands
include Mucaine (antacid), Folvite (folic acid), Ovral (oral contraceptive), Wymox (antibiotic), Wysolone (steroid) and Ativan
(sedative). Adding Wyeth's products to its existing product line would give PL a presence in vaccines, certain key antibiotics and
gynecological drugs. Recently Wyeth launched ‘Prevenar 13’ vaccine in the domestic market, which is a 13 variant
pneumococcal vaccine against its earlier marketed version of 7 variant. The probability of merging Wyeth’s Indian business with
PL is high and such a merger would make PL revenue and profit grow significantly. However, the certainty and timing of such a
scenario is unknown and hence had not been included in our calculations. An unfair exchange ratio could also be detrimental.

Recognizing the growing opportunities in the Emerging Markets, the parent company – Pfizer Inc. has created an Emerging
Markets Business Unit to seize opportunities in the fastest-growing biopharmaceutical markets of the world. The pharma major
has made investments in markets where it is in a premier competitive position as a result of its historical presence, the breadth
of its portfolio & strong relationships with local partners. As a result, this business unit reported double-digit revenue growth in
many markets in 2009, including China, India, Brazil & Russia. Pfizer Inc.’s current strategy for emerging markets is driven by a
new business model, which encompasses a strong local presence, addressing the lower end of the market & developing
medicines specifically for emerging markets. Among the 70 emerging markets that Pfizer Inc. operates in, India is one of its
priority markets. The US pharma major has entered into major licensing agreements with three India-based pharmaceutical
companies – Aurobindo Pharma, Claris Lifesciences & Strides Arcolab, strengthening its position in emerging markets &
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expanding its product portfolio under a new business unit named Established Products Business Unit. Pfizer Inc. also entered
into an exclusive collaboration with Kolkata-based TCG Lifesciences, to develop a portfolio of pre-clinical molecules for
discovery of new drugs. PL also entered into a strategic collaboration with Biocon to commercialise Biocon’s bio-similar version
of insulin analogue products such as recombinant human insulin, Glargine, Aspart and Lispro. PL will have the exclusive rights
to commercialise these products globally including co-exclusive rights with Biocon in Germany, India and Malaysia. All these
steps confirm our belief about the parent company’s strong commitment towards the Indian market & consequently, towards the
uninterrupted growth of its Indian subsidiary – Pfizer Ltd.

Steady industry growth expected:
The pharmaceutical industry has grown at 14% CAGR over the past 3 years and is expected to grow at 12-14% CAGR for the
next 2 years to reach a market size of ~Rs. 525-535 cr. Anti-infective, Cardiovascular and Gastro Intestinal therapeutic
categories are the largest categories with steady growth across all segments. The anti-diabetic, cardiovascular, neuro and
gynaecological therapeutic categories are expected to grow the fastest over the next two years. PL has several products across
these segments. The company has ~3% market share (incl Wyeth) in the domestic formulations business with significant market
share in the cardiovascular, central nervous system, respiratory, anti-infective, dermatology and alimentary tract therapeutic
segments.

India’s demographic and lifestyle trends are leading to increasing patterns of non-communicable diseases especially diabetes
and cardiovascular diseases. India has over 51 mn diabetics and over 39 mn cardiovascular patients as estimated by the
International Diabetes Federation in 2009. However, a local Chinese study in the New England Journal of Medicine in March
2010 estimated more than 100 mn diabetics in India. The anti-diabetic and cardiovascular therapeutic areas are among the
fastest growing segments in India and are expected to comprise ~30% of the market share in the next 10 years.

Improvement in PL’s performance:
After sluggish performance till Nov-08, sales growth improved. From 2002 to 2008, the company’s sales varied in the Rs. 500 cr
to Rs. 700 cr range. After Nov-08 the company has performed steadily, which could indicate an increase in the parent’s
concentration on the unit. From sales of Rs. 677.7 cr in the year ending Nov-08, the company reported sales of Rs. 1169.6 cr in
FY11 (normalized to Rs. 877.2 cr). Operating margins appear to be improving gradually. Net margins too improved in FY11. The
improving performance over the past couple years is a good sign and we expect growth to continue going forward as the
company increases its product range, especially for chronic diseases.

Change in patent regime:
India’s patent regime changed from process patent to product patent in 2005. This restricted the launch of several products post
2005 and they would now need to wait for patent expiration. India has only a limited number of patented products at present, a
scenario that is unlikely to change in the near term. Novel combination products continue providing growth for Indian companies.
Generic versions of out-of-patent products are more affordable than newly launched expensive patented products. However, in
the long run, MNCs should gain market share led by strong growth in patented products – a situation similar to those in Brazil
and China where patented products have 14% and 6% market share respectively. PL could be a major beneficiary of in the long
run due to the extensive research and development activities of its parent.

Leading brands:
Six of PL’s brands feature in the top 100 brands in the Indian pharmaceutical industry and are growing at healthy rates. Corex
growth has been subdued due to a high base. The MAT data for July 2011 as reported by ORG IMS for the top 10 brands is as
follows:

Product                      Segment                                      MAT Jul-11                 MAT Jul-10             YoY gr
Corex                        Respiratory                                       209.46                      209.87             -0.2%
Becosule                     Vitamins                                          119.25                      105.14            13.4%
Magnex                       Anti-infective                                     87.55                       68.22            28.3%
Gelusil mps                  Gastro                                             86.28                       72.72            18.6%
Dolonex                      Pain                                               75.06                       63.53            18.1%
Minipress XL                 CVS                                                55.92                       45.84            22.0%
Solu Medrol                  Hormones                                           53.87                       38.65            39.4%
Dalacin c                    Anti-infective                                     37.25                       36.16              3.0%
Claribid                     Leprosy                                            27.30                       18.10            50.8%
Corex dx                     Respiratory                                        26.95                       16.45            63.8%
Total                                                                          778.89                      674.68            15.4%
                                                                                     (Source: ORG IMS, AIOCD, and HDFC Sec Research)

The top 10 brands account for ~63% of the company’s domestic formulation business.



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Research and development and new products:
Pfizer Inc is a research and development powerhouse with one of the strongest and largest product pipelines in the world
spread across most therapeutic segments. PL is a natural heir to the parent company’s research expertise. PL has entered the
OTC market with a bang and plans to penetrate it to a great extent. PL launched 7 products in the branded generics segment in
the quarter ended March 31st 2011 and a total of 29 products in the ttm to July 2011, and plans to launch another 18-20
products in this financial year. Some of the recently launched products include Getex, Getex Suspension and Ladyfee.

New initiatives:
PL recently forayed into the OTC market and intends to grow this business multifold to become a leading player in the market.
Generics represent one of the fastest growth segments in the global pharmaceuticals market. The Indian pharma market, driven
largely by generics, has been growing at 14-15% over the past four years. Pfizer is making an aggressive play in the Indian
generics or off-patent drugs market. The company, which has been in India for at least five decades and is one of the largest
pharma companies in the country in terms of revenue, has expanded its field force aggressively over the past few quarters and
has identified several top-selling Indian generic drugs of which it has or is planning to launch versions. PL launched 8 new
products in the last financial year in Contraceptives, Pain, Anti-infective, Diabetes and other therapeutic segments including
‘Targit’ (Hypertension) & ‘Above 5’ (Gastrointestinal). The products had sales of ~Rs. 4-5 cr in the year and contributed ~4% of
the revenues. In branded generics business, the top 10 brands on the company contributed 60% of the sales. The company
launched 7 branded generics in the quarter ended March 2011 and 29 products in the ttm to July 2011, and plans to launch 18-
20 additional branded generics this year. This year the company plans to launch the insulin products for which they have a
licensing agreement with Biocon. The company is also actively looking at leveraging the growing Indian market opportunity by
offering quality branded value offerings at a competitive price. The company’s aggressive expansion plans, its new product
launch, growth in existing product market share will challenge local rivals such as Ranbaxy, Cipla, Sun Pharma, Piramal
Healthcare, Novartis India etc. and will help it to grow faster than its peers in the local market. PL is also exploring the possibility
of a tie-up with ITC for OTC products.

In order to increase its marketing reach & penetration levels in tier-II & tier-III cities, PL split its field force into Strategic Business
Units (SBU) concentrating on Mass Market & Critical Care segments. The company has also started catering to corporate
hospitals that are expected to become one of the important segments of the Indian pharmaceutical market. The company added
100% field force in the last one and a half years to 2500, which has still to produce the results. This field force will be focused on
tier II and tier III cities where Pfizer has week performance. The company added over 500 employees in the last year, of which
200 were from Wyeth India. It plans to add another 300-400 medical representatives (MR) in the current year as well, which will
help the company to improve its field force productivity in the years to come. PL also has plans to expand its target market by
adding new therapeutic areas and products to its existing therapeutic areas. Accordingly it rolled out the “Branded Value
Offering” strategy focusing on launching products in fast growing therapy areas and also rolled out a retail project (in mid 2008)
with the aim of improving the coverage of retail pharmacies. The company also plans to establish stronger presence in the rural
areas. While competition in the domestic market is certainly gearing up, PL’s access to its parent's product portfolio, its
expanding field force, marketing initiatives and financial muscle will help it to sustain the fierce competition and go ahead with its
expansion plans.

Merger with Wyeth:
Following the global merger of Wyeth Inc. with Pfizer Inc., the local subsidiaries of both the MNC pharmaceutical companies are
expected to merge within different geographies in due course of time, after complying with the regulatory requirements in their
respective countries. Both the companies have listed subsidiaries in India. Mr. Kewal Handa, Managing Director of Pfizer Ltd.,
has been appointed as the Managing Director of Wyeth Ltd. However, due to the lack of clarity related to their integration
process, we have still not incorporated the financials of Wyeth Ltd. with those of Pfizer Ltd.

Wyeth Ltd, a subsidiary of Wyeth, USA is a global leader in pharmaceuticals, consumer healthcare and animal health products.
The company is a market leader in oral contraceptives, hormone Therapy, folic acid and depilatory cream. Wyeth pioneered the
introduction of several new therapies in India. The company was the first to launch hormone therapy. In the field of vaccines, the
company introduced vaccines against HIB and invasive pneumococcal disease in the country. Enbrel, a breakthrough treatment
for rheumatoid arthritis and Rapamune, an immuno suppressant for prevention of rejection after renal transplant, Prevenar, a
pneumococcal conjugate vaccine and Tygacil, the world's first glycilcycline antibiotic, are among internationally known products
launched by Wyeth Ltd in India.
                                                                           nd
Post the merger of Wyeth into Pfizer Ltd., the merged entity would be the 2 largest MNC pharmaceutical company operating in
India in terms of revenues, with 3.2% market share. The combined annual revenue for the trailing twelve months in June 2011
was Rs. 1881 cr as per ORG IMS data. Pfizer and Wyeth together would have a field force of more than 3,000 representatives &
over 12 brands featuring in the top 300 products in the Indian pharmaceutical market. We expect the merger to bring in a lot of
synergies for the resulting company, thereby improving the margins going forward. A snapshot of Wyeth’s financials is shown
below.

(Amount in Rs.Cr.)                                       FY11                   Nov-09                       FY09                     FY08
Net Sales                                                636.5                    286.4                     382.3                     329.7
Operating Profit                                         245.3                     88.8                     149.6                     124.6

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OPM                                                       34.9%                    27.5%                      33.5%                     32.0%
Net Profit                                                 166.8                     59.0                      100.0                      81.5
NPM                                                       26.2%                    20.6%                      26.2%                     24.7%
Equity                                                      22.7                     22.7                       22.7                      22.7
EPS                                                         73.4                     26.0                       44.0                      35.9
                                                                                                   (Source: Company Reports, HDFC Sec Research)

Pfizer Inc could raise its stake in PL:
Pfizer Inc’s stake in PL and Wyeth as on 30th September 2011 was 70.8% and 51.1% respectively. The possible merger with
Wyeth could further dilute Pfizer Inc’s holding in the company, especially due to the lower promoter holding in Wyeth. Being a
global pharmaceutical major with ample capital, the parent is unlikely to accept so much dilution in its holding. Hence we expect
the parent to increase its holding in PL to ~75% either through market purchases or an open offer. Further the improved
prospects could also trigger the above. This could unlock value for investors.

Low gearing ratio and healthy cash balance provides margin of safety:
PL has no debt and hence has a D/E ratio of 0. Cash at the end of March 2011 stood at Rs. 577 cr making Cash per share Rs.
193.3. MNCs tend to have low debt and high cash on books and this provides a good cushion of safety. The company also has
a good Cash Conversion Cycle of –59.7 days, indicating good working capital management.


                                                 Cash Rich and Good WC Management
                                800.0                                                                       0.0

                                600.0
                                                                                                            -40.0
                     (Rs. Cr)




                                                                                                                     (Days)
                                400.0
                                                                                                            -80.0
                                200.0

                                  0.0                                                                       -120.0
                                        Nov-07   Nov-08       Nov-09      Mar-11   Mar-12 (E) Mar-13 (E)

                                                       Cash         Cash Conversion Cycle

                                                 (Source: Company Reports, HDFC Sec Research)

Company growth higher than industry growth rate:
The company is currently growing at a higher rate than the industry. Total growth for the ttm ending June 2011 was 20.8%. The
acute segment accounted for ~87% of the domestic formulation sales and grew at ~20% while the chronic segment accounted
for ~13% of the domestic formulation sales and grew at ~25%. The chronic segment is expected to grow at a healthy rate going
forward due to the company’s recent foray into the Diabetes division from its tie-up with Biocon. Therapeutic segment wise
growth in the domestic market is given in the following table.

                                                  FY11 % contribution                MAT Jun-11                   MAT Jun-10           YoY gr
Respiratory                                                        20.8%                        258.6                          244.9     5.6%
Anti-infective                                                     17.7%                        220.6                          173.7    27.0%
Vitamins                                                           12.1%                        151.0                          130.7    15.5%
CVS                                                                    9.2%                     114.6                           93.4    22.7%
Gastro                                                                 9.0%                     111.7                           90.7    23.2%
Hormones                                                               7.9%                      98.9                           76.0    30.1%
Pain Mgmt                                                              6.9%                      85.8                           68.1    26.0%
Gynaecology                                                            3.9%                      49.1                           40.9    20.0%
CNS                                                                    3.4%                      42.2                           31.0    36.1%
Others                                                                 9.0%                     111.6                           80.6    38.5%
Acute                                                              86.7%                    1078.7                             898.1    20.1%
Chronic                                                            13.3%                        165.4                          131.9    25.4%
Total                                                              100.0%                   1244.1                            1030.0    20.8%
                                                                                                (Source: ORG IMS, AIOCD and HDFC Sec Research)


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Peer Comparison

Company                                   Aventis                   Glaxosmithkline             Novartis                            Pfizer
                                   FY10              FY11          CY09       CY10          FY10        FY11                 Nov-09      Mar-11
Net Sales                          974.4            1085.0         1907.8     2151.1        624.1       708.6                 772.3       1169.6
Operating Profit                   258.9             256.6         700.3      771.9         182.4       221.6                 229.2        359.6
OPM %                             15.2%             13.2%          36.0%      35.4%        21.0%       21.2%                 19.5%        20.7%
PAT                                157.4             230.8         500.5      578.3         116.0       146.7                 136.9        226.3
NPM %                             16.2%             21.3%          26.2%      26.9%        18.6%       20.7%                 17.7%        19.4%
Normalized PAT                     157.4             155.0         507.9      560.6         116.0       146.7                 136.9        226.3
Normalized NPM %                    0.2               0.1          26.6%      26.1%        18.6%       20.7%                 17.7%        19.4%
Equity                             23.0              23.0           84.7       84.7         16.0        16.0                  29.8          29.8
EPS                                68.4              100.2          59.1       68.3         36.3        45.9                  45.9          75.8
Normalized EPS                     68.4              67.3           60.0       66.2         36.3        45.9                  45.9          75.8
Market Cap                        3904.1            4489.9        13637.1    19841.8       1832.0      2076.8                2846.4       3655.6
Mkt Cap/Sales                      4.0                4.1           7.1        9.2             2.9               2.9            3.7            3.1
EV                                3313.0            3834.2        11969.9     17898.9      1775.0              1988.5         2318.5     3078.6
EV/EBITDA                          12.8              14.9           17.1        23.2         9.7                 9.0           10.1        8.6
Cash                               586.0             655.4         1733.9      2002.9       57.2                88.5           527.4      577.0
Cash/share                         254.4             284.6         204.7       236.5        17.9                27.7           176.7      193.3
CMP                                        2302.8                        2076.0                        819.7                        1368.3
P/E (Normalized)                   33.7              34.2           34.6        31.4           22.6             17.9           29.8        18.0

PL is trading at a significant discount to its peers (except Novartis) on a P/E basis. However, the company trades at a discount
to Novartis as well as its other peers on an EV/EBITDA basis due to PL’s high cash balance.

Concerns

Stiff Competition:
The pharmaceutical industry is a highly competitive space with several giants such as Pfizer, Sun Pharmaceuticals, Cipla,
Glaxo, Abbott, Ranbaxy, Dr. Reddy’s Lab and many others. Companies distinguish themselves through research that leads to
exclusive product licenses. Input costs play an important role on margins for generics while patented products have pricing
power. The export market is highly competitive as well as most Indian firms export to semi-regulated markets while a few export
even to regulated markets.

In India, market share in the branded generic market typically changes only in the long run. A couple of decades ago the MNCs
dominated this market but with rising competition from domestic pharmaceutical companies with the introduction of newer
generic products, the MNCs share in the market has been declining. PL’s market share (incl Wyeth) in the domestic formulations
business is close to 3%.

Company                    1976        Company                                          1998          Company                               2010
Sarabhai                   7.1%        Glaxo                                            6.7%          Cipla                                 5.3%
Glaxo                      6.2%        Cipla                                            4.2%          Ranbaxy                               4.9%
Pfizer                     5.9%        Ranbaxy                                          3.5%          Glaxo                                 4.3%
Alembic                    4.2%        Hoechst-Marrion-Roussel**                        3.2%          Piramal*                              4.2%
Hoechst**                  3.6%        Torrent Pharma                                   2.4%          Cadila Healthcare                     3.8%
Lederle                    2.5%        Alembic                                          2.4%          Sun Pharma                            3.7%
Park Davis                 2.3%        Wockhardt-Merind                                 2.3%          Alkem                                 3.2%
Abbott                     2.3%        Lupin Labs                                       2.3%          Pfizer                                3.1%
Cibe-Geigy                 2.3%        Knoll Pharma                                     2.3%          Mankind                               3.0%
Sandoz                     2.2%        Pfizer                                           2.3%          Abbott                                2.7%
* Now a part of Abbott; ** Former names for Aventis Pharma Ltd.                                                Source: Institute of Economic Growth, IMS




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Forex risk:
PL’s export sales are limited due to Pfizer’s global presence. Foreign exchange earnings in the year ended 31st March 2011
were only to the tune of Rs. 38.1 cr, which is less than 5% of the company’s sales. However, foreign exchange used for import
of raw materials, spares and remittance of dividends was to the extent of Rs. 147.5 cr, which is ~12% of the company’s sales.
Hence the company is exposed to foreign exchange fluctuation risk.

Price Control:
Certain drugs in India experience price control by the Drug Price Control Order (DPCO), which is monitored by the National
Pharmaceutical Pricing Authority (NPPA). In CY10, the NPPA increased the price of Avil injections, Novalgin, Baralgan M and
Trental and reduced the price of Combiflam. ~20-25% of PL’s revenue comes from products that fall under the DPCO and the
company could face the risk of an unfavourable DPCO in 2012. The new National Pharmaceutical Policy 2006 proposes to bring
all 354 medicines on the National List of Essential Medicines under the DPCO net, from 74 drugs currently. The pharmaceutical
lobby is causing stiff resistance to the approval of the Policy, which is under consideration by a Group of Ministers since Jan
2007.

Sister Concerns:
Besides the listed Indian entity, Pfizer Inc has two other wholly owned subsidiaries operating in India namely Pfizer
Pharmaceuticals India Pvt. Ltd. & Pfizer Products India Pvt. Ltd. The parent company, in the past, has launched a couple of
products in India through these subsidiaries. More products launches through these subsidiaries could be detrimental to PL’s
growth. The company has also lent Rs. 286.5 cr to Pfizer Pharmaceutical India Pvt Ltd, a sister concern, and the interest rate on
this amount is unknown. If interest on the amount is lower than market interest rates other income could be affected.

Regulatory Concerns:
The pharmaceutical industry is highly regulated everywhere in the world. Most countries have their own regulatory bodies such
as the US Food and Drug Administration (FDA), Central Drugs Standard Control Organization (CDSCO) in India and the
Ministry of Health in several countries. These regulators govern every stage of a drug sale from development to quality testing to
manufacturing. Lack of cGMP (current good manufacturing practices) or any violation of the regulations imposed by the
governing body can lead to significant losses.

Unfavourable merger with Wyeth:
A large part of PL’s future growth depends on the merger of Wyeth’s local business with PL to optimise business. However, if
Pfizer Inc decides not the merge the entity with PL or puts forth an unfavourable share exchange ratio, PL’s valuation could fall.
The expected share swap ratio by the street currently is 0.6:1.

High debtors over 6 months:
PL had debtors over 6 months to the tune of Rs. 22.2 cr and Rs. 20.8 cr was considered doubtful in FY11 for which adequate
provision had been made.

Increase in field force could impact margins temporarily if they take time to become productive.

Performance Overview

Yearly Results
Y-o-Y: PL changed its financial year from November ending to March ending to be in line with most Indian accounting practices.
The numbers reported for FY11 are for 16 months (Dec 2009 to March 2011) and hence need to be adjusted/normalized to
study as a comparison. Values reported in our performance reflect the actual reported numbers, however, the % rise/loss is
taken on a normalized basis. PL’s net sales grew to Rs. 1169.6 cr in FY11 from Rs. 772.3 cr in the year ending Nov-09.
However, on a normalized, comparable basis, sales increased by 13.6%. Operating profit from Rs. 229.2 cr to Rs. 359.6 cr
however, on a normalized, comparable basis, operating profit increased by 17.7%. The total expenditure as a % of net sales
rose from 83.4% to 84.3%. Operating profit margins increased by 120 bps to 20.7% from 19.5%. Depreciation increased by
8.6% on a normalized basis and rose from Rs. 8.3 cr to Rs. 12.0 cr on reporting basis. Net profit increased from Rs. 136.9 cr to
Rs. 226.3 cr but on a comparable basis, it increased 24.0%. The good growth in operating and net profit led to a higher net profit
margin, which increased 170 bps from 17.7% to 19.4%.

Quarterly Results
Y-o-Y: PL’s net sales increased 13.9% from Rs. 212.3 cr in the quarter ending May-10 to Rs. 241.9 cr in Q1FY12. Operating
profit increased by 10.8% from Rs. 57.7 cr to Rs. 63.9 cr resulting in a minor drop in operating profit margins from 16.2% to
16.0%. Drop in operating margins are attributable to a rise in staff expense, other expense and other operating income.
Depreciation expense increased 5.9% but tax rate was lower (33.0% vs 35.2%), resulting in an 18.9% increase in Net Profit (Rs.
41.2 cr vs. Rs. 34.7 cr). Net profit margin increased 80 bps from 16.3% to 17.1%.
                                     st
Q-o-Q: The “quarter” ended March 31 2011 (Q4FY11) had 4 months (Dec 2010 to March 2011). Values mentioned for Q4FY11
are as per the numbers reported, however, the % change is on a normalized basis. Net Sales in Q1FY12 were 10.0% higher
than that in Q4FY11 (Rs. 293.2 cr). Operating profit was 12.9% lower than that in Q4FY11 (Rs. 97.9 cr). Net Profit was 12.9%
lower than that in Q4FY11 (Rs. 63.1 cr) as well.

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Conclusion

Pfizer Ltd (PL) is the Indian arm of the world’s number 1 pharmaceutical and healthcare major. Pfizer Inc (USA). PL’s diversified
product portfolio is spread over six major therapeutic areas encompassing cardiovascular, central nervous system, respiratory,
anti-infective, dermatology and alimentary tract therapeutic segments. The company also has a large portfolio of over-the-
counter (OTC) products. Six of its key brands (Corex, Becosules, Magnex, Dolonex, Gelusil and Minipress XL) list among the
Top-100 industry brands of which Corex and Becosules feature in the Top-10. Ranked in the top 10 companies of the Indian
pharmaceutical industry with sales of Rs. 1881 cr (ttm) recording a growth of 13.2% in a Rs. 58,824 cr market, PL boasts a
market share (incl Wyeth) of 3.2% as per the June ORG IMS data.

Pfizer Inc’s global merger with Wyeth in 2009 for $65 billion made it the largest pharmaceutical company in the world (in terms
of revenue) and will make it the 2nd largest pharma MNC in India after Abbott and Glaxo Smithkline. The probability of merging
Wyeth’s Indian business with PL is high and such a merger would make PL revenue and profit grow significantly. However, the
certainty and timing of such a scenario is unknown. Moreover, the company has still not announced a merger ratio, which, is
negative, could be detrimental to the share value. Pfizer Inc is bullish on the Indian pharmaceutical market and has taken
several measures to expand its presence in the country.

The pharmaceutical market is expected to grow at ~12-14% CAGR over the next 2 years and we expect PL to grow at a faster
rate due to its increase in operations, foray into OTC products and good capital and financial backing. The company plans to
launch insulin products for which it has a licensing agreement with Biocon. The company added 100% field force in the last one
and a half years to 2500 and added over 500 employees in the last year, of which 200 were from Wyeth India. It plans to add
another 300-400 medical representatives (MR) in the current year as well, which will help the company to improve its field force
productivity in the years to come. PL has a strong balance sheet with no debt and Rs. 577 cr in cash as on 31st March 2011. It
has a negative Cash Conversion Cycle, indicating good working capital management.

PL faces stiff competition from global and domestic majors such as Sun Pharmaceuticals, Cipla, Glaxo, Abbott, Ranbaxy, Dr.
Reddy’s Lab and many others. PL’s market share (incl Wyeth) in the domestic formulations business is close to 3% and is
expected to remain at similar levels in the near future. The pharmaceutical industry is very heavily regulated, both, in terms of
research, manufacturing and testing, and in terms of price. The Central Drugs Standard Control Organization (CDSCO) and US
FDA regulate the testing and manufacturing standards while the Drug Price Control Order (DPCO) regulates pricing.

The company is trading at a significant discount to its peers (except Novartis) on a P/E basis. However, the company trades at a
discount to Novartis as well as its other peers on an EV/EBITDA basis due to PL’s high cash balance. We think investors could
look at buying the stock at the CMP of Rs. 1368.25 and averaging in the Rs. 1254 (16.5x FY13 (E) EPS) to Rs. 1292 (17x FY13
(E) EPS) band for sequential targets of Rs. 1520 (20x FY13 (E) EPS) and Rs. 1596 (21x FY13 (E) EPS) in the next 1-2 quarters.

Financials

Quarterly Profit and Loss Account

Particulars (Rs. Cr)                            Jun-11      May-10       %YoY       Mar-11      % QoQ        Nov-10       Aug-10
Net Sales                                        241.9       212.3       13.9%       293.2      -17.5%        235.8        225.6
Other Operating Income                            19.3        11.1       73.9%        17.5       10.6%        25.1          11.1
Other Income                                      22.0        21.5       2.6%         27.5      -19.9%        20.3          15.9
Total Income                                     283.2       244.9       15.6%       338.2      -16.2%        281.3        252.6
Operating Expense                                219.3       187.2       17.1%       240.3       -8.7%        212.7        184.4
Operating Profit                                  63.9        57.7       10.8%        97.9      -34.7%        68.7          68.2
OPM (%)                                          16.0%       16.2%                   22.6%                   18.5%         22.1%
Interest                                          0.0         0.0       #DIV/0!       0.0       #DIV/0!        0.0          0.0
Depreciation                                      2.4         2.2        5.9%         2.6        -9.3%         2.4          2.5
PBT                                               61.6        55.5       11.0%        95.3      -35.3%        66.2          65.7
Exceptional Items                                 0.0         1.2       -100.0%       0.0       #DIV/0!        0.3          1.5
Tax                                               20.4        19.5       4.1%         32.1      -36.6%        22.4          21.8
PAT                                               41.2        34.7       18.9%        63.1      -34.7%        43.6          42.5
NPM (%)                                          17.1%       16.3%                   21.5%                   18.5%         18.8%
EPS                                               13.8        11.6       18.9%        21.2      -34.7%        14.6          14.2
P/E                                               24.8        29.4                    16.2                    23.4          24.0
                                                                                                 (Source: Company Reports, HDFC Sec)




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Annual Profit & Loss Account

Particulars (Rs. Cr)                          Nov-07      Nov-08        Nov-09           Mar-11          %YoY              Mar-12 (E)         Mar-13 (E)
Net Sales                                      672.7       677.7         772.3            1169.6         34.0%              1056.0              1224.5
Other Operating Income                          21.3       21.9           27.5             73.9          62.9%               53.0                62.0
Other Income                                    47.7       71.5           73.3            101.9          28.1%               83.0                91.0
Total Income                                   741.7       771.1         873.0            1345.4         35.1%              1192.0              1377.5
Operating Expense                              538.3       549.3         643.8            985.7          34.7%               883.7              1022.3
% of sales                                     80.0%       81.1%         83.4%            84.3%                              83.7%              83.5%
Operating Profit                               203.4       221.8         229.2            359.6          36.3%               308.3              355.2
OPM %                                          22.4%       21.5%         19.5%            20.7%                              20.3%              20.5%
Interest                                        0.0            0.0        0.0              0.0               -                0.0                 0.0
Depreciation                                    9.6        11.1           8.3              12.0          30.9%               10.3                11.4
PBT                                            193.8       210.7         220.9            347.6          36.5%               298.0              343.8
Exceptional Items                               17.4       -207.9         10.9             3.0           -260.8%              0.0                 0.0
Net Tax                                        111.2       119.4          73.1            118.3          38.2%               98.5               117.0
Effective Tax Rate %                           57.4%       56.7%         33.1%            34.0%                              33.1%              34.0%
PAT                                             65.2       299.1         136.9            226.3          39.5%               199.5              226.8
Normalized NPM %                               9.7%        44.1%         17.7%            19.4%                              18.9%              18.5%
Extraordinary Income                           273.7           0.0        0.0              0.0               -                0.0                 0.0
PAT after extraordinary income                 338.9       299.1         136.9            226.3          39.5%               199.5              226.8
EPS (Normalized)                                21.9       100.2          45.9             75.8          39.5%               66.8                76.0
P/E                                             62.6       13.7           29.8             18.0                              20.5                18.0
                                                                                                                  (Source: Company Reports, HDFC Sec)

Segmental Profit & Loss

                            Pharmaceutical               Animal Health                            Services                              Total
                            Nov-09       Mar-11          Nov-09           Mar-11               Nov-09            Mar-11             Nov-09          Mar-11
Revenue                          666.1   1017.9            106.2              159.2               27.4             73.9              799.7             1251.0
PBIT                             169.7       286.3             20.7            31.9                7.4               7.9             197.7              326.2
PBIT %                       25.5%           28.1%        19.5%               20.1%             26.8%             10.7%             24.7%               26.1%
Segment Assets                   206.9       261.5             35.5            64.5                8.4             44.2              250.8              370.2


                             Jun-11      May-10          Jun-11           May-10                Jun-11           May-10             Jun-11          May-10
Revenue                          210.4       191.4             31.5            27.6               19.0             12.0              260.9              231.0
PBIT                              43.9        47.9              8.7              6.4               1.8               1.4              54.5               55.7
PBIT %                       20.9%           25.0%        27.6%               23.0%               9.7%            11.8%             20.9%               24.1%
Capital Employed                 106.2       154.2             45.0            41.7               39.8               9.3             191.0              205.2
                                                                                                                 (Source: Company Reports, HDFC Sec)

Balance Sheet

Particulars (Rs. Cr)                                   Nov-07         Nov-08           Nov-09       Mar-11           Mar-12 (E)              Mar-13 (E)
SOURCES OF FUNDS
Shareholders' Funds:
 Capital                                                29.8           29.8             29.8         29.8                  29.8                 29.8
 Reserves & Surplus                                    618.8          869.7            964.5        1133.6             1289.5                 1472.6
                                                       648.6          899.6            994.3        1163.4             1319.3                 1502.5


Net Deferred Tax                                       -13.0          -22.7            -27.5         -35.5              -39.0                   -42.0



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Total                                    635.7      876.9     966.8    1127.9             1280.3          1460.5


APPLICATION OF FUNDS
Fixed Assets:
 Gross Block                             141.6      139.9     187.8    169.0              181.9           197.9
 Depreciation                             81.4       89.1      95.3     84.7               95.0           106.4
 Net Block                                60.2       50.8      92.5     84.3               86.9            91.5
 Capital WIP                              10.2       32.3      0.8      1.9                4.0             3.0
                                          70.4       83.1      93.3     86.2               90.9            94.5


Investments                               0.5           0.5    0.5      0.0                0.0             0.0


Current Assets:
 Inventories                              95.1      124.7     113.4    159.3              142.0           187.0
 Sundry Debtors                           61.4       59.7      64.4     98.2               92.0           118.0
 Cash & Bank Balances                    479.8      543.1     527.4    577.0              688.4           752.5
 Other Current Assets                     8.2        14.5      4.8      5.9                7.0             12.0
 Loans & Advances                        135.4      248.0     372.1    421.3              457.0           515.5
                                         779.8      989.9     1082.1   1261.7             1386.4          1585.0


Current Liabilities                      106.3      122.1     132.9    157.2              138.0           157.0
Provisions                               111.7       74.4      76.1     62.8               59.0            62.0
                                         217.9      196.6     209.0    220.0              197.0           219.0


Net Current Assets                       561.8      793.3     873.0    1041.7             1189.4          1366.0


Misc Expenses                             2.9           0.0    0.0      0.0                0.0             0.0


Total                                    635.7      876.9     966.8    1127.9             1280.3          1460.5
                                                                                   (Source: Company Reports, HDFC Sec)

Key Ratios

Particulars             Nov-07   Nov-08          Nov-09       Mar-11            Mar-12 (E)           Mar-13 (E)
RoCE                     13.0     12.1            16.0          21.9              16.6                   16.6
RoA                      53.3     39.6            14.8          21.6              16.6                   16.6
RoE                      52.3     33.3            13.8          19.5              15.1                   15.1
P/E                      62.6     13.7            29.8          18.0              20.5                   18.0
Price/BV                 6.3      4.5             4.1           3.5                3.1                   2.7
Mkt Cap/Sales            2.9      2.1             3.7           3.1                3.9                   3.3
EV/EBITDA                7.1      3.8             10.1          8.6               11.0                   9.4
EV/Sales                 2.2      1.3             3.0           2.6                3.2                   2.7
D/E (Total)              0.0      0.0             0.0           0.0                0.0                   0.0
Inventory (days)         65.6     73.0            67.5          50.5              62.2                   58.7
Debtors (days)           35.4     32.6            29.3          25.4              32.9                   31.3
Creditors (days)        198.1    175.5           161.8         135.6              142.9                 124.6
Cash/Share              160.8    182.0           176.7         193.3              230.7                 252.2
                                                                                   (Source: Company Reports, HDFC Sec)




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Analyst: Kushal Sanghrajka (kushal.sanghrajka@hdfcsec.com)
RETAIL RESEARCH Fax: (022) 30753435
Corporate Office: HDFC Securities Limited, I Think Techno Campus, Building - B, "Alpha", Office Floor 8, Near Kanjurmarg Station,
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Phone: (022) 30753435
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Email: hdfcsecretailresearch@hdfcsec.com

Disclaimer: This document has been prepared by HDFC Securities Limited and is meant for sole use by the recipient and not for circulation.
This document is not to be reported or copied or made available to others. It should not be considered to be taken as an offer to sell or a
solicitation to buy any security. The information contained herein is from sources believed reliable. We do not represent that it is accurate or
complete and it should not be relied upon as such. We may have from time to time positions or options on, and buy and sell securities referred
to herein. We may from time to time solicit from, or perform investment banking, or other services for, any company mentioned in this document.
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Retail Research                                                                                                                            13

				
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