|Coal Minister Launches Projects Monitoring Portal to Enhance Efficiency, Transparency & Improve Communication Between B2G, G2G & G2B|
|With the view to putting in place an institutional mechanism to track stalled investment projects, both in the public and private sectors and to remove implementation bottlenecks in these projects on a fast-track basis, Shri Piyush Goyal, Union Minister of State ( IC) for Power, Coal , New & Renewable Energy has launched online Coal Projects Monitoring Portal (e-CPMP) for all large projects, both public and private in the Ministry of coal.Speaking on the occasion , Shri Goyal said that the new system will bring in more transparency and responsiveness in the Ministry. Shri Goyal expressed his confidence that each of 30 allottees will successfully mine each piece of coal that is expected from them. The Government will encourage everyone to do more mining so that each one of allottee will not only meet their targets but exceed their targets, Shri Goyal added.
Shri Anil Swarup , Secretary Coal said that this marks a new beginning in making system transparent in the coal ministry.
This article has been authored by Ms.Ms. Sarabjit Kour Nangra
Sun Pharmaceuticals & Ranbaxy Labs Merger approved: Sun Pharmaceutical Industries has informed that it has received all the requisite approvals for Scheme of Arrangement between Ranbaxy Laboratories Limited (“Ranbaxy”) into Sun Pharmaceutical Industries (Sun Pharma) which is in the nature of merger of Ranbaxy into Sun Pharma effective from the appointed date i.e. April 1, 2014.
In terms of market share, the combination of Sun Pharma and Ranbaxy creates the fifth-largest specialty generics company in the world (just behind Teva, Sandoz, Activas and Mylan), the largest pharmaceutical company in India with a market share of 9.2% with a sales of US $1.1bn, and ahead of Abbott which has a market share of 6.5% (which is huge gap in the highly fragmented Indian market. In terms of asset base, the combined entity will have operations in 65 countries, 47 manufacturing facilities across 5 continents, and a significant platform of specialty and generic products marketed globally, including more than 600 ANDAs.
On the profitability front, the company is estimated to OPM of 31.6%, which is still very healthy, given that Ranbaxy is currently operating at a low OPM. The company is confident of turning around the same, given its history of turning around its acquisitions (Caraco, Taro, DUSA and URL) in the past. Sun Pharma is confident of turning around the acquisition. It expects synergies worth US$250mn by the third year of acquisition (i.e. mostly by FY2019). However, in the near term, the acquisition will dilute the reported ROE from 27.9% to 27.5% in FY2016, which is healthy, given the low profitability of the acquired company and it would be at the higher end of its peers, which have an ROE of 17-25%. The operating ROE, which excludes the cash component, will still be higher at around 41%.
We remain neutral on Sun Pharma.
This article has been authored by Ms. Sarabjit Kour Nangra
IPCA Labs-USFDA issues alert against IPCA’s Pithampur and Silvassa unit: The USFDA has imposed import alerts on Silvassa and Indore (formulation facilities for US) for IPCA. However, Hydroxychloroquine Sulfate and Propanolol Hydrochloride, which accounted for around 45% of its total US sales in FY2014, are exempted from the ban. With this all the key US facilities of the company are under USFDA import alert. US which was as on FY2014, contributed sales of `419.6cr (12% of total sales and 20% of exports, with Formulation: API mix of around 61:39).Thus, on back of the ban around `231cr worth of sales will be impacted.
Whilst we are negatively surprised by the import alerts, we believe that now IPCA will have to follow the measures laid out by the US FDA to resolve the issue. In the past, the time taken to resolve by Indian companies has varied from few months to 2-3 years, depending on the company and the kind of issue raised by the USFDA. Currently we are unsure about the timelines for the same.
After the earlier downgrades, we have pruned our estimates further. We have cut the FY2016E EPS numbers by 20.0%. Thus at CMP, the stock trades at 20xFY2016E earnings. Though the timelines of the resolve are uncertain, we believe the size of the company, and low dependence on US, along with Indian geographies outperforming the market growth , we believe the company can easily sustain a 15-18% growth in sales and hence a significant downside is limited, and any downside can be used by investors to buy into the stock, with a long term view on the stock. At CMP, we remain neutral on the stock.
This article has been authored by Ms. Sarabjit Kour Nangra
UPL- Acquires a stake in Brazilian Firm: UPL has agreed to acquire a 40% equity stake in Brazilian firm Sinagro group, which is into distribution of farm inputs in Cerrado region of Brazil, for an undisclosed amount. As per the agreement signed by UPL and Sinagro Produtos Agropecuarios SA (Sinagro), UPL through its step-down wholly-owned subsidiary will be subscribing to 40 per cent shares in Sinagro group. The transaction is, however, subject to necessary approvals.
While the exact details of the transaction are not available, the acquisition will provide company, a strong distribution front in its one of the key Brazilian agricultural product market, and given the comfortable debt: equity the company can easily finance the deal. During FY2014, the Brazilian market contributed 15% to its revenues and UPL had a 2.7% share in the $11.5bn Brazilian market. Currently on lack of details, we retain our numbers and our neutral rating on the stock.
Strong Growth Prospects
Company background: Inox Wind Ltd (IWL), incorporated in 2009 and a part of the Inox Group, is one of the leading manufacturers of wind turbine generators (WTG’s) in India. The company also provides turnkey solutions, and operation and maintenance services for wind power projects. Currently, IWL has an installed capacity of 550 nacelles and hubs, 256 rotor blade sets and a capacity of 150 towers. The company is setting up a new integrated capacity which would take the total nacelles and hubs capacity to 950 units, rotor blades capacity to 800 sets and tower capacity to 600 units.
Strong order book: IWL has shown a strong growth during FY2014 and 9MFY2015 periods, wherein it sold 330MW and 380MW of WTGs during the period; plus, it also has a strong order book (as of December 2014). Currently IWL has an order book of 1,136MW, as against Suzlon’s order book of 1,148MW, and Gamesa India Pvt Ltd’s order inflow of 850MW (as of December 2014). These provide strong revenue visibility for FY2016. IWL has access to wind project sites which have been acquired or are under the acquisition process by its group companies – GFL and IRL – and its subsidiary IWISL. Currently, the wind sites acquired have an aggregate power project capacity of 2,130MW, while the wind sites which are under the acquisition process have a power project capacity of 1,922MW. Thus, it provides healthy revenue visibility for IWL in the medium term.
Government focus on renewable energy: The government has set a target of installed wind power capacity of 60,000MW till FY2022 from the current capacity of 21,150MW. This will create a huge opportunity for the company in the upcoming period. Hence we expect order inflow to increase at a faster pace during the next few years. We expect industry order flow to come in at the run rate of 5,000-6,000MW per annum as against the current run rate of 2,000MW per annum. The government has provided various incentives and framed several rules and regulations to increase demand for renewable energy.
Outlook and Valuation: On EV/sales, the company is valued at 3.3x (at the upper end of the price band) on the basis of 9MFY2015 annualized numbers. Looking at the strong order book of the company and government focus on the sector, we recommend a Subscribe on the issue.
Lupin- Update: Lupin announced that it has entered into an agreement to acquire the balance 40% equity stake in South African generics major, Pharma Dynamics (PD) from its founders. As per the agreement, the founders will exercise their put option before March 31, 2015, for the 40% equity stake it currently holds.
On completion of this transaction, PD will become a wholly owned subsidiary of Lupin, subject to closing conditions. Headquartered in Cape Town, South Africa (SA) Pharma Dynamics was founded in the year 2001 and distributes a range of branded, generic prescription medicines and over-the-counter (OTC) products in SA as well as other key markets across the African continent.
In September 2008, Lupin acquired a strategic 60% equity stake in PD. Today, PD is amongst the fastest growing top 20 pharmaceutical companies in SA and the 3rd largest generic company in the SA prescriptions market. It is the biggest supplier of cardiovascular pharmaceuticals in SA by both value and volumes. Its products also address therapies such as central nervous system (CNS), gastrointestinal, diabetes and gynecological and male health segments. In 2013, it also entered the SA anti-infective market, supplying IV antibiotics to hospitals. Its OTC products portfolio includes antihistamines, cold & flu medication and heartburn treatment.
During FY20I4. Lupin’s South African subsidiary Pharma Dynamics (PD) recorded revenues of ZAR 63.8cr(₹345cr), registering a growth of 28% over the previous year. The additional share in the PD will add around ₹200cr in FY2016. We remain neutral on the stock.
Lupin- Update: Lupin, announced that its US subsidiary, Lupin Pharmaceuticals Inc. (collectively Lupin) has got approval for its generic drug Celebrex®. Earlier in Dec ’2014, the company had launched the authorized generic for G.D. Searle LLC’s (a subsidiary of Pfizer Inc.) Celebrex® Capsules (Celebrex) 50 mg, 100 mg, 200 mg and 400 mg strengths. Lupin had earlier signed a licensing agreement with Pfizer Inc. regarding Celebrex. Celebrex® Capsules had annual U.S sales of US$ 2.54 billion (IMS MAT September, 2014).Currently there is a limited competition for the product and the company can, conservatively garner sales of US $50-60mn in sales for the 50 mg capsules. We remain neutral on the stock.
|IIP rises 2.6% in January 2015|
|Indias Index of industrial production (IIP) increased 2.6% in January 2015, compared with the revised growth of 3.2% recorded in December 2014. The IIP growth for December 2014 has been scaled up sharply to 3.2% at the first revision compared with 1.7% reported provisionally. An upwards revision to the December 2014 IIP growth figure has been mainly driven by steep revision in the growth of basic metal production to 13.2% from 3.9% earlier. Meanwhile, the growth in October 2014 has also been revised sharply upwards to (-) 2.7% at its second and final revision compared with (-) 4.2% at the first revision as well as released provisionally.The mining sector output declined for the second straight month at 2.8% in January 2015, in addition to 2.1% decline in December 2014. Meanwhile, electricity generation growth further slowed down to 15-months low of 2.7% in January 2015. However, the manufacturing sectors output continued to grow at nearly steady pace for third straight month at 3.3% in January 2015.
Sun Pharmaceuticals-Update: US Food and Drug Administration (FDA) have approved SPARC’s new drug application (NDA) for ELEPSIA XR (Levetiracetam extended-release tablets 1000 mg and 1500 mg). The product will be manufactured by Sun Pharmaceutical Industries at its Halol (Gujarat) facility in India. Levetiracetam is a very successful and highly effective antiepileptic drug but more than 80% of epilepsy patients require Levetiracetam in does in range of 1000mg to 3000mg resulting in a significant pill burden. Approval of ELEPSIA XRTM as 1000mg and 1500mg once a day tablets will be very useful for these patients and physicians.
According to SPARC, the Levetiracetam market volume in US is growing at an average annual growth rate of 11% and out of 600mn units sold per year, 400mn units are consumed for daily dosage of 1000mg-3000mg.Given the potential of the drug, the product is expected to be commercialized at significant premium to generics (the generic equivalent in the Tablet form for the same strength priced ~US$1/tablet).Given that the company can fetch a higher premium for the drug, the product can easily on a very conservative basis gross sales of US400mn in US from the product. Also, this first approval for the company from the Halol facility, after the 483, is positive indication. Since the product is expected to be manufactured at the Halol facility, the product will significantly to Sun Pharmaceuticals financials. During the first year itself the product can easily garner US$50-80mn in sales and US$25-40mn in net profit. Thus drug can be easily subscribed a value of ₹30- ₹50 per share. We remain neutral on the stock.
Sun Pharma to buy GSK’s Opiates business in Australia: GlaxoSmithKline (GSK) and Sun Pharmaceutical Industries Ltd. (Sun Pharma) announced that their respective wholly owned subsidiaries have reached an agreement related to GSK’s Opiates business in Australia. The current GSK Opiates business including related manufacturing sites in Latrobe (Tasmania) and Port Fairy (Victoria) along with the inventories will be taken over by the Sun Pharma. The product portfolio consists of poppy-derived opiate raw materials that are primarily used in the manufacture of analgesics for the treatment of moderate to severe pain.
Sun Pharma has an established footprint in this market and believes it is well-placed to take the business forward. The global Opiates market holds good potential and the addition of GSK’s Opiates business will strengthen its positioning further. The financial terms of the transaction are not disclosed. The transaction closure is subject to customary closing conditions and requisite regulatory and other approvals, and is expected to close by August 2015. Thus, the acquisition will fully reflect in FY2017. We remain neutral on the stock.