Equity Research July 12, 2021

ICICI Securities Limited Pharmaceuticals & Healthcare is the author and distributor of this report India business to witness strong growth

We expect pharma and healthcare companies under our coverage to report strong Q1FY22 result preview growth during the quarter ended Jun'21. This will be mainly driven by India business on a low base and strong recovery seen in acute categories including COVID-19 related treatments. US revenues likely to remain stable QoQ with improvement in volumes of injectables and new launches offset by price erosion. We estimate India Recommendations business to grow in high double digit as per secondary sales data. We forecast the Abbott India (BUY) EBITDA margin of covered companies at 22.5% (+70bps YoY) led by revenue growth Alembic Pharma (HOLD) and cost control measures. Hospitals would continue to report recovery in occupancy levels while Diagnostics will report healthy YoY rise on a low base. Overall, we expect Alkem (BUY) our coverage universe to report 16.6% revenue and 20.2% EBITDA growth. Apollo Hospital (ADD)  India secondary sales: The Indian pharma market witnessed a growth of 37.2% in value Aster DM (BUY) terms for Q1FY22 (source: AWACS), partly aided by COVID-19 portfolio. Volumes grew Aurobindo (ADD) 23.0%, while prices and new introductions grew 6.5% and 7.7%, respectively. We expect (ADD) primary sales YoY growth for under coverage companies to be strong during the quarter.  US generics: We expect US sales to remain flat QoQ in Q1FY22. We expect Alkem, (SELL) Cadila, Dr Reddy’s and Aurobindo to show QoQ growth in US sales led by injectables (BUY) and new launches. Other companies would post flattish to marginal decline in a stable Divis Labs (ADD) environment due to lack of new launches.  Dr Lal Pathlabs (ADD) Companies to watch: We expect relatively better results from: 1) Cipla as key products in US grow and benefit from COVID-19 drugs in India; 2) Alkem with strong recovery in Dr Reddy’s (ADD) acute portfolio; 3) Glenmark with strong favipiravir sales and 4) Divis lab led by strong (BUY) demand for APIs from India. Diagnostic companies would report strong growth on low base and high number of COVID-19 tests. Glenmark (ADD)  Key factors to watch out during management commentary: i) Growth outlook in India GSK Pharma (ADD) for the industry and respective companies, ii) update on restart of USFDA inspections, iii) Healthcare Global (ADD) price scenario in base US business and traction in specialty products, iv) growth in JB Chemicals (BUY) emerging markets with demand outlook and v) sustainability of recovery in diagnostics and hospitals. Jubilant Pharmova  Key risks: Adverse outcome of USFDA inspections, currency volatility, and inclusion of (HOLD) more products under NLEM in India. Lupin (REDUCE) Quarterly summary Metropolis (ADD) Company Sales EBITDA Adj. PAT Natco (HOLD) % Chg % Chg % Chg (HOLD) (Rs mn) Q1FY22E (YoY) (QoQ) Q1FY22E (YoY) (QoQ) Q1FY22E (YoY) (QoQ) Abbott India 12,239 15.0 11.7 2,448 4.9 19.1 1,932 7.1 26.7 Sanofi India (ADD) Alembic Pharma 12,808 (4.5) 0.0 3,202 (21.4) (6.3) 2,209 (26.7) (11.9) Shilpa Medicare (SELL) Alkem 22,065 10.1 0.7 4,358 (18.3) 17.4 3,246 (23.1) 2.3 Apollo Hospital 31,433 44.8 9.6 4,558 1,184.6 10.7 1,490 (171.6) 4.5 Solara Active (BUY) Aster DM 22,881 30.0 (4.3) 2,746 92.4 (18.2) 531 (164.0) (55.5) Strides Pharma Science Aurobindo 61,367 3.6 2.3 12,734 1.3 (0.1) 7,761 1.5 (1.8) Biocon 17,439 4.3 (5.2) 4,360 5.5 0.0 1,173 (21.5) 20.9 (ADD) Cadila 38,041 4.9 (1.1) 8,076 0.6 (5.4) 4,822 9.3 19.0 (ADD) Cipla 48,798 12.3 5.9 12,964 23.6 62.8 7,642 32.2 84.9 Thyrocare Technologies Divis Labs 20,091 16.1 12.4 8,267 18.1 15.4 5,819 18.3 15.9 Dr Lal Pathlabs 4,441 67.0 3.0 1,270 162.9 4.1 892 213.9 6.9 (HOLD) Dr Reddy's 50,241 13.7 6.3 11,681 5.0 14.8 6,929 19.6 25.0 Torrent Pharma (ADD) Fortis Health. 13,401 121.2 7.0 2,178 (310.8) 10.4 753 (212.3) 75.0 Glenmark 29,465 25.7 3.0 5,597 17.1 5.8 2,464 19.8 3.6 GSK 8,756 35.0 7.6 1,970 72.7 15.3 1,474 86.3 256.1 HCG 2,812 45.3 (5.7) 394 103.2 0.0 (156) (60.7) (10.5) JB Chemicals 5,716 9.4 8.2 1,529 (1.6) 23.4 1,101 (7.9) 28.8

Jubilant Pharmo 16,516 42.9 4.5 4,088 128.0 9.1 1,993 463.4 8.7 Lupin 41,768 18.4 10.4 7,936 62.6 12.2 4,143 287.6 (10.0) Metropolis 2,899 102.6 (0.6) 908 649.8 (5.8) 558 1,823.8 (9.0) 4,611 (18.2) 39.2 1,249 (27.0) 63.9 928 (24.4) 75.1 Research Analysts: Pfizer 7,208 40.0 34.8 1,946 4.5 54.8 1,383 11.2 73.8 Sanofi India** 8,171 15.0 12.7 2,124 19.9 12.2 1,572 16.0 7.7 Sriraam Rathi Shilpa Medicare 2,453 10.1 17.9 503 (23.5) 91.9 292 (28.5) 273.3 [email protected] Solara Active 4,251 22.0 (4.3) 999 19.2 0.8 533 26.0 (5.9) +91 22 6637 7574 Strides Pharma 9,147 17.0 0.7 1,738 15.1 9.2 632 15.9 28.5 Vinay Bafna Sun Pharma 87,600 15.5 2.8 20,148 9.3 (1.6) 13,573 18.4 1.1 [email protected] Thyrocare 1,602 184.7 9.1 585 591.1 13.5 402 17,369.1 6.4 +91 22 6637 7339 Torrent Pharma 21,833 6.2 12.7 6,768 2.4 16.3 3,519 9.6 8.6 Source: I-Sec research. Note: Q2CY21 estimates for Sanofi India Please refer to important disclosures at the end of this report

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Domestic market trends: Secondary data

AWACS data for Jun’21 shows India Pharma Market (IPM) had a growth rate of 11.7% in value terms over the year (MAT Jun’21). Adjusting for seasonality and free samples, industry grew at similar levels 11.5% for the 12 months ended Jun’21. Chronic products portfolio grew at a heathy pace of 11.2%, while acute portfolio grew 8.3% over the year in MAT terms.

Top-growing categories (MAT Jun’21):  Anti-infectives grew 17.9%, while respiratory grew 1.6%, YoY.  Chronic products segment continued to drive sales in the markets growing at an overall 11.2% rate with 14.3% YoY growth in cardiovascular and 7.1% YoY growth in anti-diabetic segments.  Gastro-intestinal and derma sales grew 16.0% and 9.7% YoY, respectively, while VMN and Neuro/CNS grew 21.1% and 7.4%, respectively.  Pain/Analgesics, anti-neoplastics and gynaec grew 9.3%, 6.8% and 9.0% YoY, respectively.  Urology grew 16.5%, while ophthalmology grew 1.2% YoY, respectively. Winners in domestic sales growth (top 20 companies in the Indian market) with MAT in excess of 14% (with bonus units): Cipla, Macleods, Emcure, Aristo, Glenmark and Ipca. Losers in domestic sales growth (sales growth less than 10%): Sun, Mankind, Torrent, Glaxo and USV. Table 1: Domestic growth rate of key companies YoY Growth (%)

Apr'21 May'21 Jun'21 Avg. Apr-Jun'21 MAT Jun'21

Industry 51.5 47.8 14.1 37.2 11.7 Sun + Ranbaxy 32.8 32.5 15.8 27.0 8.9 Abbott + Abbott HC + Novo 43.5 43.4 15.0 34.0 12.4 Cipla 73.5 73.3 8.7 51.8 19.9 Zydus 45.0 41.6 12.2 32.9 12.5 Mankind 38.9 23.1 13.4 25.1 8.2 Lupin 38.3 45.5 16.3 33.4 10.5 Alkem + Cachet + Indchemie 63.7 67.3 14.3 48.4 13.9 Torrent 27.4 30.4 13.8 23.9 9.5 Intas 45.1 31.4 18.0 31.5 12.4 Macleods 69.9 72.8 22.7 55.1 14.5 Dr. Reddys 60.3 51.0 20.6 44.0 11.2 Emcure + Zuventus 94.2 85.3 26.9 68.8 24.9 Aristo 70.9 90.3 24.7 62.0 19.8 Glenmark 181.0 143.5 4.6 109.7 38.8 Glaxo 46.2 32.6 8.5 29.1 3.9 Pfizer 52.1 59.9 8.9 40.3 12.8 Sanofi India 39.7 35.7 8.8 28.1 10.2 USV 20.5 22.2 1.4 14.7 8.8 Micro 58.5 57.0 15.3 43.6 12.6 Ipca 57.2 52.9 21.5 43.9 18.9 Note: Abbott includes Novo, Cadila includes Biochem, Alkem includes Cachet and Indchemine and Emcure includes Zuventus Source: AWACS data, I-Sec research

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Chart 1: Quarterly growth drivers (YoY)

Vol growth Price growth New product growth 7.7

6.5

23.0 2.8 2.9 2.9 3.4 (%) 5.3 1.5 4.5 4.5 (1.9) 4.9 1.9 (11.2) (6.4) (2.4) 4.9

Qtr Mar'20 Qtr Jun'20 Qtr Sep'20 Qtr Dec'20 Qtr Mar'21 Qtr Jun'21

Source: AIOCD AWACS data, I-Sec research

Table 2: Estimates for Q1FY22 (Rs mn) Q1FY21 Q2FY21 Q3FY21 Q4FY21 Q1FY22E % YoY % QoQ Comments Abbott India 1) Growth to be 15% led by growth Revenue 10,643 10,549 10,954 10,194 12,239 15.0 20.1 across segments and price hike EBITDA 2,334 2,407 2,418 1,875 2,448 4.9 (22.5) taken in Duphaston EBITDA Margin (%) 21.9 22.8 22.1 18.4 20.0 (190)bps 160bps 2) EBITDA margin to improve QoQ PAT 1,804 1,807 1,771 1,494 1,932 7.1 (15.7) led by higher growth and operating EPS (Rs) 84.9 85.1 83.4 70.3 90.9 7.1 (15.7) leverage. 3) Employee cost should increase QoQ with more field activity. Alembic Pharma 1) India to grow 15% led by the Revenue 13,413 14,571 13,143 12,804 12,808 (4.5) 0.0 chronic segment and some EBITDA 4,074 4,434 3,651 3,417 3,202 (21.4) (6.4) recovery in the acute segment. EBITDA Margin (%) 30.4 30.4 27.8 26.7 25.0 (540)bps (170)bps 2) US will decline 17.3% YoY due to loss of sales in sartans and PAT 3,015 3,334 2,926 2,507 2,209 (26.7) (14.3) decline 2.3% QoQ without EPS (Rs) meaningful launches to $62mn. 3) API to remain flat YoY on 15.3 17.0 14.9 12.8 11.2 (26.7) (14.3) account of high base. 4) EBITDA margin will decline due to higher cost and on a high base. Alkem 1) India to grow 26.7% with Revenue 20,035 23,628 23,181 21,922 22,065 10.1 0.7 recovery in the acute segment and EBITDA 5,332 6,005 5,291 3,711 4,358 (18.3) (29.9) on a low base of last year. EBITDA Margin (%) 26.6 25.4 22.8 16.9 19.8 (680)bps 290bps 2) US to decline 12.8% YoY due to price erosion but grow 5.4% QoQ PAT 4,220 4,721 4,210 3,172 3,246 (23.1) (24.7) led by new launches. EPS (Rs) 3) EBITDA margin will decline YoY 35.3 39.5 35.2 26.5 27.1 (23.1) (24.7) due to high base but will improve QoQ led by higher growth in India and resultant operating leverage. Apollo Hospital 1) Average occupancy to Revenue 21,715 27,607 27,599 28,680 31,433 44.8 9.6 marginally improve QoQ from 63%. EBITDA 355 2,998 3,903 4,118 4,558 1,184.6 5.5 2) ARPOB may decline due to rise EBITDA Margin (%) 1.6 10.9 14.1 14.4 14.5 1290bps 10bps in COVID-19 cases. PAT (2,082) 248 1,305 1,427 1,490 (171.6) 9.4 3) AHLL revenue to grow at a EPS (Rs) healthy double digit pace supported by its 24/7 (online connect) format. 4) Pharmacy revenue will grow 12.9% QoQ. 5) Gleneagles will start (15.0) 1.8 9.4 10.3 10.7 (171.6) 9.4 consolidating from current quarter so revenue growth will appear higher. 5) EBITDA margin to be higher on a very low base of last year.

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(Rs mn) Q1FY21 Q2FY21 Q3FY21 Q4FY21 Q1FY22E % YoY % QoQ Comments Aster DM 1) Hospital business will grow YoY Revenue 17,606 22,677 22,276 23,909 22,881 30.0 (4.3) on a low base of last year. EBITDA 1,427 2,711 3,279 3,356 2,746 92.4 2.3 2) ARPOB will grow YoY with EBITDA Margin (%) 8.1 12.0 14.7 14.0 12.0 390bps (200)bps higher outpatient volume but QoQ may decline due to rise in COVID- PAT (829) 329 924 1,193 531 (164.0) 29.1 19 cases. EPS (Rs) (1.6) 0.7 1.8 2.4 1.1 (164.0) 29.1 3) India hospitals will be supported by improving footfalls and higher surgeries. 4) GCC clinics will continue to see traction with reducing COVID-19 cases. 5) GCC Pharmacies will witness a YoY growth on account of lower base. 6) EBITDA margin will improve YoY on a low base. Aurobindo 1) US will decline by 3.6% YoY to Revenue 59,248 64,834 63,649 60,015 61,367 3.6 2.3 $397mn with Natrol divestment and EBITDA 12,574 14,328 13,686 12,747 12,734 1.3 (6.9) price erosion but grow by 1.0% EBITDA Margin (%) 21.2 22.1 21.5 21.2 20.8 (40)bps (40)bps QoQ led by new launches. Injectables will improve QoQ to PAT 7,646 8,018 8,365 7,903 7,761 1.5 (5.5) $72mn. EPS (Rs) 13.0 13.7 14.3 13.5 13.2 1.5 (5.5) 2) EU is expected to grow YoY on a low base. 3) EM, ARV and API should grow with steady demand. 4) Higher R&D expenses would keep EBITDA margin in check. Biocon 1) Biosimilars will grow 2.7% YoY Revenue 16,713 17,448 18,510 18,387 17,439 4.3 (5.2) (+7.0% QoQ) with improving EBITDA 4,133 3,914 3,995 4,358 4,360 5.5 9.1 demand in the developed market EBITDA Margin (%) 24.7 22.4 21.6 23.7 25.0 30bps 130bps post COVID-19. 2) Generics would grow 2.0% YoY PAT 1,494 1,693 1,686 970 1,173 (21.5) (42.5) with low API demand. EPS (Rs) 1.2 1.4 1.4 0.8 1.0 (21.5) (42.5) 3) Syngene will grow 10.0% YoY with steady demand in the segment, 4) EBITDA margin be largely stable YoY due to high R&D expenses but would improve QoQ with growing biosmilar revenues. Cadila 1) India would grow 25.7% YoY led Revenue 36,273 38,326 37,956 38,467 38,041 4.9 (1.1) by the chronic segments on a low EBITDA 8,027 8,786 8,124 8,536 8,076 0.6 5.1 base of last year and recovery in EBITDA Margin (%) 22.1 22.9 21.4 22.2 21.2 (90)bps (100)bps the acute segment. 2) Consumer business would grow PAT 4,413 5,871 5,321 4,052 4,822 9.3 (23.9) 18.0% YoY led by strong demand. EPS (Rs) 4.3 5.7 5.2 4.0 4.7 9.3 (23.9) 3) US will decline 2.9% YoY (+3.0% QoQ) to US$210mn due to lack of one time sales. 4) EBITDA margin will fall on higher R&D expenses. Cipla 1) India to grow 18.0% YoY on a Revenue 43,462 50,383 51,687 46,065 48,798 12.3 5.9 low base and supported by COVID- EBITDA 10,487 11,766 12,309 7,962 12,964 23.6 (35.3) 19 drugs. EBITDA Margin (%) 24.1 23.4 23.8 17.3 26.6 250bps 930bps 2) US sales to grow 3.7% YoY and 1.4% QoQ to US$140mn led by PAT 5,779 6,654 7,482 4,134 7,642 32.2 (44.7) Albuterol. EPS (Rs) 7.2 8.3 9.3 5.1 9.5 32.2 (44.7) 3) SAGA sales to grow 18.0% with improving demand, new tenders and a low base. 4) EBITDA margin to improve with higher India and US sales. Divis Labs 1) Strong revenue growth led by Revenue 17,305 17,493 17,014 17,882 20,091 16.1 12.4 mid to high teen growth in the EBITDA 7,001 7,411 6,912 7,163 8,267 18.1 3.6 Custom Synthesis and Generic API EBITDA Margin (%) 40.5 42.4 40.6 40.1 41.2 70bps 110bps business. 2) Carotenoids (Nutraceuticals) to PAT 4,921 5,196 4,706 5,020 5,819 18.3 6.7 grow by 30.0% YoY on a low base. EPS (Rs) 18.5 19.6 17.7 18.9 21.9 18.3 6.7 3) EBITDA margin improvement led

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(Rs mn) Q1FY21 Q2FY21 Q3FY21 Q4FY21 Q1FY22E % YoY % QoQ Comments by strong growth in the Generic API business. Dr Lal Pathlabs 1) Vol to grow 77.7% YoY on a low Revenue 2,660 4,319 4,524 4,310 4,441 67.0 3.0 base and 5.4% QoQ due to rise in EBITDA 483 1,272 1,388 1,220 1,270 162.9 (12.1) COVID-19 tests. EBITDA Margin (%) 18.2 29.5 30.7 28.3 28.6 1030bps 30bps 2) Avg realisation to be lower YoY due to high base due to COVID-19 PAT 284 853 945 834 892 213.9 (11.7) tests but will remain flattish QoQ. EPS (Rs) 3.4 10.2 11.3 10.0 10.7 213.9 (11.7) 3) EBITDA margin to improve sharply YoY on a low base but remain stable QoQ with growing costs with increasing ground activity. Dr Reddy's 1) India to grow 30.5% YoY on a Revenue 44,175 48,967 49,296 47,284 50,241 13.7 6.3 low base and partial impact from EBITDA 11,129 12,215 11,260 10,171 11,681 5.0 (9.7) Wockhardt integration. EBITDA Margin (%) 25.2 24.9 22.8 21.5 23.3 (190)bps 180bps 2) US to grow 2.5% QoQ to US$245mn led by new launches. PAT 5,793 8,314 6,170 5,545 6,929 19.6 (10.1) 3) Russia+CIS+ROW to grow in EPS (Rs) 34.9 50.1 37.2 33.4 41.7 19.6 (10.1) high double digits on a low base and stable currency. 4) PSAI to grow 15.0% YoY on steady demand in the API business. 5) EBITDA margin to reduce YoY on a high base but improve QoQ with growing revenue and resulting operating leverage. Fortis 1) Occupancy would marginally Revenue 6,060 9,947 11,770 12,524 13,401 121.2 7.0 improve QoQ from 64% with rise in EBITDA (1,033) 1,200 1,905 1,973 2,178 (310.8) 3.6 COVID-19 cases. EBITDA Margin (%) (17.0) 12.1 16.2 15.8 16.3 3330bps 50bps 2) ARPOB may marginally decline with fall in outpatients due to rise in PAT (1,793) (42) 299 430 753 (142.0) 43.9 COVID-19. EPS (Rs) (2.4) (0.1) 0.4 0.6 1.0 (142.0) 43.9 3) SRL to grow 186% YoY on a low base, COVID-19 testing and consolidation of DDRC Kerala. 4) EBITDA margin to improve on a low base and improving hospital and diagnostic business. Glenmark 1) India to grow 54.9% YoY led by Revenue 23,448 29,525 27,868 28,599 29,465 25.7 3.0 respiratory portfolio including EBITDA 4,781 5,699 5,831 5,292 5,597 17.1 (9.2) COVID-19 drugs. EBITDA Margin (%) 20.4 19.3 20.9 18.5 19.0 400bps (370)bps 2) US to remain flat QoQ at $110mn but grow 11% YoY with PAT 2,057 2,712 2,764 2,379 2,464 19.8 (13.9) new launches offsetting the price EPS (Rs) 7.3 9.6 9.8 8.4 8.7 19.8 (13.9) erosion. 3) EU and ROW to grow with steady demand and stable currency. 4) HIgher R&D costs and reversal of some cost control measures would keep EBITDA margin in check. GSK 1) Growth to be strong at 35.0% led Revenue 6,486 8,793 8,572 8,138 8,756 35.0 7.6 by recovery in the acute portfolio, EBITDA 1,141 2,049 2,055 1,709 1,970 72.7 (16.8) especially the anti-infectives EBITDA Margin (%) 17.6 23.3 24.0 21.0 22.5 490bps 150bps (Augmentin). 2) EBITDA margin to improve YoY PAT 791 1,151 1,503 414 1,474 86.3 (72.5) and QoQ with growing revenue and EPS (Rs) 4.7 6.8 8.9 2.4 8.7 86.3 (72.5) resultant operating leverage. 3) S,G&A costs should increase YoY with growing ad spends and low base. HCG 1) Revenue to grow YoY on a very Revenue 1,935 2,479 2,740 2,981 2,812 45.3 (5.7) weak base with higher occupancy EBITDA 194 300 378 394 394 103.2 4.0 and footfalls. EBITDA Margin (%) 10.0 12.1 13.8 13.2 14.0 400bps 80bps 2) ARPOB to be higher YoY with the rise in outpatients. PAT (398) (223) (207) (175) (156) (60.7) (15.5) 3) Milann to double YoY on a very EPS (Rs) (4.7) (2.6) (2.4) (2.0) (1.8) (60.7) (16.1) weak base and rising demand

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(Rs mn) Q1FY21 Q2FY21 Q3FY21 Q4FY21 Q1FY22E % YoY % QoQ Comments however it still remains lower than pre-COVID levels. 4) EBITDA margin would improve with all round growth and cost control measures. JB Chemicals 1) India to grow 9.4% driven largely Revenue 5,223 4,436 5,482 5,285 5,716 9.4 8.2 by its chronic products. EBITDA 1,554 1,101 1,710 1,239 1,529 (1.6) (27.5) 2) Exports to growat 12% with EBITDA Margin (%) 29.8 24.8 31.2 23.4 26.8 (300)bps 340bps steady demand and currency. 3) EBITDA margin to decline YoY PAT 1,195 738 1,292 855 1,101 (7.9) (33.8) on a high base with costs EPS (Rs) 15.5 9.6 16.7 11.1 14.2 (7.9) (33.8) normalising. Jubilant Pharmova 1) Pharma revenue to grow strong Revenue 11,561 15,914 17,713 15,798 16,516 42.9 4.5 on a very weak base but EBITDA 1,793 3,498 4,928 3,746 4,088 128.0 (24.0) divestment of LSI segment would EBITDA Margin (%) 15.5 22.0 27.8 23.7 24.8 930bps 110bps result in decline of reported growth. 2) Specialty pharma to grow 15.0% PAT 354 1,468 2,299 1,833 1,993 463.4 (20.3) YoY with increased traction in US. EPS (Rs) 2.2 9.2 14.4 11.5 12.5 463.4 (20.3) 3) EBITDA margin to improve with growing revenue and resultant operating leverage. Lupin 1) India to grow 20% YoY led by Revenue 35,279 38,350 39,474 37,831 41,768 18.4 10.4 chronic segment and strong EBITDA 4,881 5,812 7,087 7,076 7,936 62.6 (0.2) recovery in the acute segment. EBITDA Margin (%) 13.8 15.2 18.0 18.7 19.0 520bps 30bps 2) US to grow 2.6% QoQ to US$200mn led by Albuterol and PAT 1,069 2,110 3,811 4,604 4,143 287.6 20.8 Glumetza. EPS (Rs) 2.4 4.7 8.4 10.1 9.1 287.0 20.7 3) EMEA and growth markets to grow with steady demand and stable currency. 4) EBITDA margin to improve YoY on a low base. Metropolis 1) Vol to more than double YoY on Revenue 1,431 2,884 2,748 2,917 2,899 102.6 (0.6) a low base and grow QoQ with rise EBITDA 121 909 866 964 908 649.8 11.3 in COVID-19 tests. EBITDA Margin (%) 8.5 31.5 31.5 33.0 31.3 2280bps (170)bps 2) Avg realisation will sharply decline YoY with reduced rates of PAT 29 603 586 613 558 1,823.8 4.7 COVID-19 testing. EPS (Rs) 0.6 11.8 11.7 12.2 11.0 1,823.8 4.7 3) EBITDA margin to improve sharply YoY on a low base but QoQ decline due to sharp correction in COVID-19 test prices as well as growing costs with increasing ground activity. Natco Pharma 1) India to grow 25.4% QoQ with Revenue 5,634 8,022 3,552 3,313 4,611 (18.2) 39.2 improving footfalls for EBITDA 1,711 2,764 825 762 1,249 (27.0) (7.6) chemotherapy. EBITDA Margin (%) 30.4 34.5 23.2 23.0 27.1 (330)bps 410bps 2) Export to grow 43.9% QoQ on extremely low base. PAT 1,228 2,024 627 530 928 (24.4) (15.5) 3) EBITDA margin to improve QoQ EPS (Rs) 6.7 11.1 3.4 2.9 5.1 (24.4) (15.5) with growing revenue. Pfizer 1) Growth to strong at 40.0% on a Revenue 5,149 5,954 5,935 5,348 7,208 40.0 34.8 low base and high demand for its EBITDA 1,863 2,034 1,968 1,257 1,946 4.5 (36.1) VMN as well as COVID-19 related EBITDA Margin (%) 36.2 34.2 33.2 23.5 27.0 (920)bps 350bps drugs. 2) EBITDA margin to be lower YoY PAT 1,245 1,314 1,412 796 1,383 11.2 (43.6) due to high base but improve QoQ EPS (Rs) 27.2 28.7 30.9 17.4 30.2 11.2 (43.6) with sharp growth in revenue. 3) S,G&A costs should increase QoQ with growing ad spends. Sanofi India** 1) Revenue to grow 15.0% led by Revenue 7,105 6,866 7,203 7,251 8,171 15.0 12.7 its diabetic segment supported by EBITDA 1,772 1,922 1,670 1,894 2,124 19.9 13.4 its cardiac segment. EBITDA Margin (%) 24.9 28.0 23.2 26.1 26.0 110bps (10)bps 2) EBITDA margin to be higher YoY with declining component of PAT 1,355 1,330 1,174 1,459 1,572 16.0 24.3 exports but it would remain stable EPS (Rs) 58.9 57.8 51.0 63.4 68.3 16.0 24.3 QoQ. 3) Employee and S,G&A costs should increase QoQ with increased field activity and growing ad spends.

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Pharmaceuticals & Healthcare ICICI Securities

(Rs mn) Q1FY21 Q2FY21 Q3FY21 Q4FY21 Q1FY22E % YoY % QoQ Comments Shilpa Medicare 1) Revenue to remain subdued in Revenue 2,229 2,789 1,912 2,080 2,453 10.1 17.9 the formulation segment due to EBITDA 657 687 210 262 503 (23.5) 25.0 regulatory issues in US. EBITDA Margin (%) 29.5 24.6 11.0 12.6 20.5 (900)bps 790bps 2) API sales to post growth with steady demand. PAT 409 454 77 78 292 (28.5) 2.1 3) EBITDA margin to decline YoY EPS (Rs) 5.1 5.7 1.0 1.0 3.6 (28.5) 2.1 with weak performance. QoQ jump is on a very low base. Solara 1) Revenue to remain strong with Revenue 3,484 3,976 4,267 4,442 4,251 22.0 (4.3) continuous demand across EBITDA 838 976 1,053 991 999 19.2 (5.9) markets. EBITDA Margin (%) 24.1 24.6 24.7 22.3 23.5 (60)bps 120bps 2) Operating leverage should PAT 423 567 658 566 533 26.0 (14.0) support EBITDA but higher EPS (Rs) expenses would keep margins in check. 15.7 15.8 24.5 21.1 19.8 26.0 (14.0) 3) Higher tax rate would limit profit growth. Strides Pharma 1) US to improve 3.4% QoQ to Revenue 7,818 7,936 8,320 9,085 9,147 17.0 0.7 US$60mn led by new launches. EBITDA 1,510 1,572 1,594 1,592 1,738 15.1 (0.1) 2) EU & Others (including Aus) to EBITDA Margin (%) 19.3 19.8 19.2 17.5 19.0 (30)bps 150bps grow in low double digits with steady demand. PAT 546 498 475 492 632 15.9 3.7 3) Africa to grow in mid-teens YoY EPS (Rs) 6.1 5.6 5.3 5.5 7.1 15.8 3.7 on a low base supported by new tenders and demand pick up in the private market. 4) EBITDA margin would improve QoQ led by improving performance. Sun Pharma 1) India to grow 15.0% YoY led by Revenue 75,853 85,531 88,368 85,230 87,600 15.5 2.8 chronic drugs and strong recovery EBITDA 18,435 21,933 24,061 20,484 20,148 9.3 (14.9) in the acute segment. EBITDA Margin (%) 24.3 25.6 27.2 24.0 23.0 (130)bps (100)bps 2) US to remain grow YoY on a low base for Taro but decline QoQ to PAT 11,460 15,900 18,525 13,431 13,573 18.4 (27.5) US$339mn with decline in Absorica EPS (Rs) 4.8 6.6 7.7 5.6 5.7 18.4 (27.5) sales post generic entry. 3) EM and ROW to grow low to mid-teens with steady demand and stable currency. 4) EBITDA margin to be in check with rise in R&D and S,G&A expenses. Thyrocare 1) Vol growth to be strong YoY on Revenue 563 1,533 1,383 1,468 1,602 184.7 9.1 a low base with recovery in non- EBITDA 85 619 496 515 585 591.1 3.8 COVID tests supported by rise in EBITDA Margin (%) 15.0 40.4 35.9 35.1 36.5 2150bps 140bps COVID-19 testing. 2) Avg realisation will sharply PAT 2 431 324 378 402 17,369.1 16.5 decline YoY with falling rates of EPS (Rs) 0.0 8.2 6.1 7.2 7.6 17,369.1 16.5 COVID-19 testing. 3) EBITDA margin to improve sharply YoY on a low base. QoQ improvement is led by growing regular business and recovery in the imaging business. Torrent Pharma 1) India to grow 16.0% YoY fuelled Revenue 20,560 20,170 19,950 19,370 21,833 6.2 12.7 by recovery in footfalls and chronic EBITDA 6,610 6,350 6,070 5,820 6,768 2.4 (4.1) segments. EBITDA Margin (%) 32.1 31.5 30.4 30.0 31.0 (110)bps 100bps 2) US to remain flat QoQ at $38mn but decline 19.8% YoY due to PAT 3,210 3,100 2,970 3,240 3,519 9.6 9.1 absence of new launches. EPS (Rs) 19.0 18.3 17.5 19.1 20.8 9.6 9.1 4) Germany to grow in high double digits on low base due to serialisation and new launches. 5) ROW to remain steady with demand while Brazil will decline as company reduces tender business. 6) EBITDA margin to remain under pressure due to subdued US performance. Source: Company data, I-Sec research; Note: CY ending estimates for Sanofi India

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Pharmaceuticals & Healthcare ICICI Securities

Price charts Abbott India Alembic Pharma Alkem Aurobindo 22000 1200 3400 1100 1100 1000 18000 1000 3000 900 900 800 14000 2600 800 700 10000(Rs) (Rs) 700 (Rs) 2200 (Rs) 600 600 500 6000 500 1800 400 400 1400 300 2000 300 200 Jul-18 Jul-19 Jul-20 Jul-21 Jan-19 Jan-20 Jul-18 Jul-19 Jul-20 Jul-21 Jul-18 Jul-19 Jul-20 Jul-21 Dec-20 Jan-19 Jan-20 Jul-18 Jul-19 Jul-20 Jul-21 Jan-19 Jan-20 Dec-20 Dec-20 Jan-19 Jan-20 Dec-20

Biocon Cadila Cipla Dr Reddy’s 600 700 1100 6,000 600 1000 5,500 500 900 5,000 500 400 800 4,500 400 700 4,000 300 (Rs) (Rs) 300 600 (Rs) 3,500 (Rs) 200 200 500 3,000 400 2,500 100 100 300 2,000 0 0 200 1,500 Jul-18 Jul-19 Jul-20 Jul-21 Jul-18 Jul-19 Jul-20 Jul-21 Jul-18 Jul-19 Jul-20 Jul-21 Jan-19 Jan-20 Jan-19 Jan-20 Jan-19 Jan-20 Jul-18 Jul-19 Jul-20 Jul-21 Dec-20 Dec-20 Dec-20 Jan-19 Jan-20 Dec-20

Divis Lab Glenmark GSK Pharma JB Chemicals 5000 800 2000 2000 4500 1800 1800 4000 600 1600 3500 1600 1400 3000 1200 400 1400 (Rs) 2500 (Rs) (Rs) 1000 (Rs) 2000 200 1200 800 600 1500 1000 1000 0 400 500 800 200 Jul-18 Jul-19 Jul-20 Jul-21 Jan-19 Jan-20 Dec-20 Jul-18 Jul-19 Jul-20 Jul-21 Jul-18 Jul-19 Jul-20 Jul-21 Jul-18 Jul-19 Jul-20 Jul-21 Jan-19 Jan-20 Jan-19 Jan-20 Jan-19 Jan-20 Dec-20 Dec-20 Dec-20 Jubilant Pharmova Lupin Natco Pharma Pfizer 1200 1,300 1200 7000 1,200 1100 1000 6000 1,100 1000 1,000 5000 800 900 900 4000 800 800 (Rs) (Rs) 600 (Rs) (Rs) 3000 700 700 400 600 600 2000 500 500 1000 200 400 400 0 0 Jul-18 Jul-19 Jul-20 Jul-21 Jan-19 Jan-20 Dec-20 Jul-18 Jul-19 Jul-20 Jul-21 Jul-18 Jul-19 Jul-20 Jul-21 Jan-19 Jan-20 Jan-19 Jan-20 Jan-21 Dec-20 Jul-18 Jul-19 Jul-20 Jul-21 Jan-19 Jan-20 Dec-20 Sanofi India Shilpa Medicare Solara Active Pharma Strides Pharma Science 10000 700 2000 1100 9000 600 900 8000 1500 500 7000 700 400 1000 (Rs) 6000 (Rs) (Rs) (Rs) 500 300 5000 500 300 4000 200 3000 100 0 100 Jul-18 Jul-19 Jul-20 Jul-21 Jul-18 Jul-19 Jul-20 Jul-21 Jul-18 Jul-19 Jul-20 Jul-21 Jul-18 Jul-19 Jul-20 Jul-21 Jan-19 Jan-20 Jan-19 Jan-20 Jan-19 Jan-20 Dec-20 Dec-20 Dec-20 Jan-19 Jan-20 Dec-20

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Pharmaceuticals & Healthcare ICICI Securities

Sun Pharma Torrent Pharma Aster DM 800 3400 4300 210 190 700 3000 3800 170 2600 3300 600 150 2800 2200 130 (Rs)

500 (Rs) (Rs)

(Rs) 2300 1800 110 400 1800 1400 90 300 1300 70 1000 800 50 200 Jul-18 Jul-19 Jul-20 Jul-21 Jan-19 Jan-20 Dec-20 Jul-18 Jul-19 Jul-20 Jul-21 Jul-18 Jul-19 Jul-20 Jul-21 Jan-19 Jan-20 Jan-19 Jan-20 Dec-20 Dec-20 Jul-18 Jul-19 Jul-20 Jul-21 Jan-19 Jan-20 Dec-20 Dr Lal Pathlab Fortis HealthCare Global Metropolis 260 3,500 350 3200 240 300 3,000 220 2700 2,500 200 250 2200 2,000 180 200 (Rs) (Rs) 160 (Rs) 150 (Rs) 1,500 1700 140 100 1,000 120 1200 50 100 500 0 700 Jul-18 Jul-19 Jul-20 Jul-21 Jul-18 Jul-19 Jul-20 Jul-21 Jan-19 Jan-20 Dec-20 Jan-19 Jan-20 Dec-20 Jul-18 Jul-19 Jul-20 Jul-21 Apr-19 Jan-19 Jan-20 Jan-21 Jun-21 Mar-20 Dec-20 Sep-19 Aug-20

Thyrocare

1700 1500 1300 1100

(Rs) 900 700 500 300 Jul-18 Jul-19 Jul-20 Jul-21 Jan-19 Jan-20 Dec-20

Source: Bloomberg

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Pharmaceuticals & Healthcare ICICI Securities

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