Buy Makers Laboratories, company growing with strong thrust on branded generics #BrokerAdvice http://goo.gl/5xzfQ1

1. CMP 89.85
Target Price 103.00
ISIN: INE987A01010
AUG 10th
2015
MAKERS LABORATORIES LTD
Result Update (PARENT BASIS): Q1 FY16
BUYBUYBUYBUY
Index Details
Stock Data
Sector Pharmaceuticals
BSE Code 506919
Face Value 10.00
52wk. High / Low (Rs.) 89.85/29.25
Volume (2wk. Avg. Q.) 13000
Market Cap (Rs. in mn.) 441.79
Annual Estimated Results (A*: Actual / E*: Estimated)
YEARS FY15A FY16E FY17E
Net Sales 649.14 714.05 771.18
EBITDA 45.94 58.77 63.37
Net Profit 23.53 26.75 29.33
EPS 4.79 5.44 5.96
P/E 18.78 16.52 15.06
Shareholding Pattern (%)
As on June-15 As on March-15
PROMOTER 58.37 58.37
FIIs 0.00 0.00
DIIs 0.00 0.00
OTHERS 41.63 41.63
1 Year Comparative Graph
MAKERS LABORATORIES LTD BSE SENSEX
SYNOPSIS
Makers Laboratories Ltd is a rapidly growing
Indian Pharmaceutical company with a strong
thrust on Branded Generics.
In Q1 FY16, Net profit stood at Rs. 13.16 million
an increase of 135.42% against Rs. 5.59 million in
the corresponding quarter of previous year.
The company’s net sales registered 2.75%
increase in Q1 FY16 and stood at Rs. 174.07
million from Rs. 169.41 million over the
corresponding quarter of previous year.
During the quarter operating profit is Rs. 24.04
million as against Rs. 13.11 million in the
corresponding period of the previous year, an
increase of 83.37%.
The company has reported an EPS of Rs. 2.68 for
the 1st quarter of FY16 as against an EPS of Rs.
1.14 in the corresponding quarter of the previous
year, grew by 135.42%.
Profit before tax (PBT) at Rs. 20.22 million in Q1
FY16 compared to Rs. 8.47 million in Q1 FY15,
registered a growth of 138.72%.
Net Sales and PAT of the company are expected to
grow at a CAGR of 6% and 5% over 2014 to
2017E respectively.
PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND
Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)
Makers Laboratories Ltd 89.85 441.79 4.79 18.78 1.79 10.00
Tyche Industries Ltd 56.45 578.60 1.88 30.03 1.27 5.00
Mangalam Drugs & Organics Ltd 80.35 1058.90 7.24 11.10 3.61 0.00
Granules India Ltd 115.10 23595.70 5.33 21.59 5.54 50.00

2. QUARTERLY HIGHLIGHTS (PARENT BASIS)
Results updates- Q1 FY16,
Makers Laboratories Limited is a rapidly growing
Indian Pharmaceutical company with a strong thrust
on Branded Generics, has reported its financial
results for the quarter ended 30th June, 2015.
The company has achieved a turnover of Rs. 174.07 million for the 1st quarter of the current year 2015-16 as
against Rs. 169.41 million in the corresponding quarter of the previous year. EBITDA of Rs. 24.04 million in Q1
FY16, an increase of 83.37% against the corresponding period of last year. In Q1 FY16, net profit of Rs. 13.16
million against Rs. 5.59 million in the corresponding quarter of the previous year. The company has reported an
EPS of Rs. 2.68 for the 1st quarter as against an EPS of Rs. 1.14 in the corresponding quarter of the previous year.
Break up of Expenditure
Rs. In million June-15 June-14 % CHNG
Net Sales 174.07 169.41 2.75
PAT 13.16 5.59 135.42
EPS 2.68 1.14 135.42
EBITDA 24.04 13.11 83.37
Break up of Expenditure
(Rs in millions)
Q1 FY16 Q1 FY15
%
CHNG
Cost of materials
consumed
53.25 65.70 -19%
Purchases of stock-in-trade 69.40 75.68 -8%
Employee benefit expense 19.26 16.90 14%
Depreciation/Amortization
Expense
3.06 3.74 -18%
Other expenses 33.39 35.48 -6%

3. COMPANY PROFILE
Makers Laboratories Limited is a rapidly growing Indian Pharmaceutical company with a strong thrust on
Branded Generics. The company’s product portfolio covers a wide range of General Health Therapeutic segments.
The company’s top formulation brands are Duramol (Paracetamol), Artemak-AB (α-β Arteether), Loroquin
(Chloroquine), Nimuwin (Nimuselide), Coffwin (Anti cough Range) and Exylin (Amoxycillin range).
Makers Laboratories Limited operate on a PAN India basis with strong distribution network of 20 Consignment
Agents, catering to more than 1500 Stockist, 1,00,000 Doctors and 2,00,000 Retailers. Each of company’s
Consignment Agent has their own stockist network, which expand the reach of company’s products to the
common man. This network of Stockist is enhanced further by strong field staff.
Makers Laboratories Limited fulfills an important Corporate Social Responsibility by offering business
opportunities to young Indian. Makers Laboratories train them to become Business Associates. The company’s
products are propagated in both the urban and rural areas of India by such trained Business Associates.. Makers
Laboratories Limited believes in Quality & ensure that all requisite quality norms are adhered to. Makers
Laboratories Limited makes life easier by offering high quality products at affordable prices.

4. FINANCIAL HIGHLIGHT (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions)
Balance Sheet as at March 31, 2014 -2017E
FY14A FY15A FY16E FY17E
I. EQUITY AND LIABILITIES:
A. Shareholders’ Funds
a) Share Capital 49.17 49.17 49.17 49.17
b) Reserves and Surplus 179.86 197.08 223.83 253.16
Sub-Total-Net worth 229.03 246.25 273.00 302.33
B. Non-Current Liabilities:
a) Deferred Tax Liabilities [Net] 7.52 6.54 6.15 5.84
b) Other Long Term Liabilities 40.03 37.74 39.25 40.43
c) Long Term Provisions 1.28 1.81 2.06 2.27
Sub-Total-Long term liabilities 48.83 46.09 47.46 48.54
C. Current Liabilities:
a) Short-term borrowings 21.19 7.97 7.17 6.60
b) Trade Payables 104.61 75.49 79.26 82.44
c) Other Current Liabilities 3.72 3.79 4.02 4.18
d) Short Term Provisions 2.82 11.37 13.42 15.29
Sub-Total-Current Liabilities 132.34 98.62 103.87 108.51
TOTAL-EQUITY AND LIABILITIES (A+B+C) 410.20 390.96 424.33 459.37
II. ASSETS:
D. Non-Current Assets:
Fixed Assets
i. Tangible Assets 118.37 113.97 125.37 137.81
ii. Intangible Assets 0.98 0.69 0.90 1.08
iii. Capital work-in-progress 19.15 27.10 31.17 34.28
a) Sub-Total Fixed Assets 138.50 141.76 157.43 173.17
b) Non Current Investments 24.97 23.52 24.46 25.93
c) Long Term Loans and Advances 8.15 3.12 3.40 3.67
d) Other non-current assets 2.65 4.06 4.63 5.14
Sub-Total-Non-Current Assets 174.27 172.46 189.92 207.91
E. Current Assets:
a) Inventories 99.19 92.49 100.81 109.28
b) Trade Receivables 125.33 118.35 125.14 132.65
c) Cash and Bank Balances 1.39 0.75 0.90 1.06
d) Short Term Loans and Advances 5.67 4.31 5.11 5.88
e) Other Current Assets 4.35 2.60 2.44 2.59
Sub-Total-Current Assets 235.93 218.50 234.41 251.46
TOTAL-ASSETS (D+E) 410.20 390.96 424.33 459.37

5. Annual Profit & Loss Statement for the period of 2014 to 2017E
Value(Rs.in.mn) FY14A FY15A FY16E FY17E
Description 12m 12m 12m 12m
Net Sales 683.73 649.14 714.05 771.18
Other Income 5.47 4.66 5.22 5.53
Total Income 689.20 653.80 719.27 776.71
Expenditure -663.30 -607.86 -660.50 -713.34
Operating Profit 25.90 45.94 58.77 63.37
Interest -4.29 -3.82 -3.51 -3.69
Gross profit 21.61 42.12 55.26 59.68
Depreciation -9.74 -15.27 -16.49 -17.48
Exceptoional Items 0.00 7.16 0.00 0.00
Profit Before Tax 11.87 34.01 38.77 42.20
Tax -5.92 -10.48 -12.02 -12.87
Net Profit 5.95 23.53 26.75 29.33
Equity capital 49.17 49.17 49.17 49.17
Reserves 179.86 197.08 223.83 253.16
Face value 10.00 10.00 10.00 10.00
EPS 1.21 4.79 5.44 5.96
Quarterly Profit & Loss Statement for the period of 31st Dec, 2014 to 30 Sep, 2015E
Value(Rs.in.mn) 31-Dec-14 31-Mar-15 30-Jun-15 30-Sep-15E
Description 3m 3m 3m 3m
Net sales 151.32 139.05 174.07 193.22
Other income 1.08 1.29 1.46 1.53
Total Income 152.40 140.34 175.53 194.75
Expenditure -145.98 -132.07 -151.49 -178.53
Operating profit 6.42 8.27 24.04 16.22
Interest -0.95 -0.67 -0.76 -0.65
Gross profit 5.47 7.60 23.28 15.57
Depreciation -3.98 -3.65 -3.06 -3.55
Exceptional Items 7.16 0.00 0.00 0.00
Profit Before Tax 8.65 3.95 20.22 12.02
Tax -2.00 -0.97 -7.06 -3.44
Net Profit 6.65 2.98 13.16 8.58
Equity capital 49.17 49.17 49.17 49.17
Face value 10.00 10.00 10.00 10.00
EPS 1.35 0.61 2.68 1.75

6. Ratio Analysis
Particulars FY14A FY15A FY16E FY17E
EPS (Rs.) 1.21 4.79 5.44 5.96
EBITDA Margin (%) 3.79 7.08 8.23 8.22
PBT Margin (%) 1.74 5.24 5.43 5.47
PAT Margin (%) 0.87 3.62 3.75 3.80
P/E Ratio (x) 74.25 18.78 16.52 15.06
ROE (%) 2.60 9.56 9.80 9.70
ROCE (%) 14.24 24.08 26.86 26.17
Debt Equity Ratio 0.09 0.03 0.03 0.02
EV/EBITDA (x) 17.82 9.77 7.62 7.06
Book Value (Rs.) 46.58 50.08 55.52 61.49
P/BV 1.93 1.79 1.62 1.46
Charts

7. OUTLOOK AND CONCLUSION
At the current market price of Rs. 89.85, the stock P/E ratio is at 16.52 x FY16E and 15.06 x FY17E
respectively.
Earning per share (EPS) of the company for the earnings for FY16E and FY17E is seen at Rs.5.44 and Rs.5.96
respectively.
Net Sales and PAT of the company are expected to grow at a CAGR of 6% and 5% over 2014 to 2017E
respectively.
On the basis of EV/EBITDA, the stock trades at 7.62 x for FY16E and 7.06 x for FY17E.
Price to Book Value of the stock is expected to be at 1.62 x and 1.46 x for FY16E and FY17E respectively.
We expect that the company surplus scenario is likely to continue for the next three years, will keep its
growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of
Rs.103.00 for Medium to Long term investment.
INDUSTRY OVERVIEW
The Indian pharmaceuticals market is third largest in terms of volume and thirteen largest in terms of value, as
per a pharmaceuticals sector analysis report by equity master. The market is dominated majorly by branded
generics which constitute nearly 70 to 80 per cent of the market. Considered to be a highly fragmented
industry,consolidation has increasingly become an important feature of the Indian pharmaceutical market.
India has achieved an eminent global position in pharma sector. The country also has a huge pool of scientists
and engineers who have the potential to take the industry to a very high level. The UN-backed Medicines Patents

8. Pool has signed six sub-licences with Aurobindo, Cipla, Desano, Emcure, Hetero Labs and Laurus Labs, allowing
them to make generic anti-AIDS medicine Tenofovir Alafenamide (TAF) for 112 developing countries.
The Indian pharmaceutical industry is estimated to grow at 20 per cent compound annual growth rate (CAGR)
over the next five years, as per India Ratings, a Fitch Group company. Indian pharmaceutical manufacturing
facilities registered with US Food and Drug Administration (FDA) as on March 2014 was the highest at 523 for
any country outside the US.
The Union Cabinet has given its approval to amend the existing FDI policy in the pharmaceutical sector in order
to cover medical devices. The Cabinet has allowed FDI up to 100 per cent under the automatic route for
manufacturing of medical devices subject to specified conditions. The drugs and pharmaceuticals sector attracted
cumulative foreign direct investment (FDI) inflows worth US$ 12,813.02 million between April 2000 and
December 2014, according to data released by the Department of Industrial Policy and Promotion (DIPP).
Outlook
The Indian pharma market size is expected to grow to US$ 85 billion by 2020. The growth in Indian domestic
market will be on back of increasing consumer spending, rapid urbanisation, raising healthcare insurance and so
on. Going forward, better growth in domestic sales will depend on the ability of companies to align their product
portfolio towards chronic therapies for diseases such as such as cardiovascular, anti-diabetes, anti-depressants
and anti-cancers are on the rise.
Moreover, the government has been taking several cost effective measures in order to bring down healthcare
expenses. Thus, governments are focusing on speedy introduction of generic drugs into the market. This too will
benefit Indian pharma companies. In addition, the thrust on rural health programmes, life saving drugs and
preventive vaccines also augurs well for the pharma companies.
Disclaimer:
This document is prepared by our research analysts and it does not constitute an offer or solicitation for the
purchase or sale of any financial instrument or as an official confirmation of any transaction. The information
contained herein is from publicly available data or other sources believed to be reliable but we do not represent that
it is accurate or complete and it should not be relied on as such. Firstcall Research or any of its affiliates shall not be
in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the
information contained in this report. Firstcall Research and/ or its affiliates and/or employees will not be liable for
the recipients’ investment decision based on this document.

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