FDC Ltd.

17/01/2014

Company Details CMP: Face value: Market cap: TTM EPS 52 week high: 52 week low: NSE Code BSE Code: Sector

Rs.128.25 Re.1.00 Rs.2280.29Crs. Rs.9.18 Rs.143.45 Rs.79.00 FDC 531599 Pharmaceuticals & Drugs

Financial Highlights (YoY)

Rs. In crores FY13 FY12 % Var Net Sales 764.60 699.24 9.35 Total Expenditure 582.08 537.51 8.29 PBDIT 182.52 161.73 12.85 Op.Profit 230.08 189.55 21.38 OPM (%) 30.09 27.11 11.01 PBT 201.06 170.18 18.15 PAT 158.33 132.69 19.32 EPS (Rs.) 8.90 7.46 19.32 Equity 17.78 17.78 0.00

Half-Yearly Performance (YoY)

Rs. In crores H1FY14 H1FY13 % Var Net Sales 436.97 412.00 6.06 Total Expenditure 322.11 305.47 5.45 PBDIT 114.86 106.53 7.82 Op.Profit 134.37 124.16 8.22 OPM (%) 30.75 30.14 2.04 PBT 121.13 107.99 12.17 PAT 92.15 87.17 5.71 EPS (Rs.) 5.18 4.90 5.71

Share Price Graph

Shareholding pattern December. 30, 2013

as

on

Target Price Rs.166.70

Company Background FDC Ltd. a Mumbai-based company incorporated in 1940, is engaged in manufacture of pharmaceutical products. Its products include formulations that cater to (1) Therapeutic segment such as anti-fungal, anti-anaemic, anti-diabetic, anti-intestinal, anti-hemorrhagic, antioxidants and anti-spasmodic, ophthalmic & orthopaedics (2).food supplements such as antioxidants, vitamins and nutraceuticals and (3) bulk drugs. It has manufacturing units at Roha, Waluj, Sinnar and Jogeshwari in Maharashtra, Goa and Baddi in Himachal Pradesh. It exports to over 50 countries, including US, UK, South Africa, Japan and a few emerging markets. Financial Performance The net sales and PAT reported by the Company during FY13 at Rs.764.60 crores and Rs.158.33 crores, respectively, were higher by 9.4% and 19.3%, over those for FY12. The EPS had increased from Rs.7.46 for FY12 to Rs.8.90 for FY13. The Company had declared dividend of 225% for FY13 against 200% for FY12. The net sales and PAT of the Company during the latest half year ended September 2013 at Rs.436.97 crores and Rs.92.15 crores, respectively, are up by 6.1% and 5.7% over those during H1FY13. The EPS has increased from Rs.4.90 for H1FY13 to Rs.5.18 for H1FY14. The operating profit margin of the Company has improved from 27.1% for FY12 to 30.1% for FY13 and further to 30.8% for H1FY14. Investment Rationale • India's pharmaceutical sector is poised to grow from current $21.7 billion to $74 billion by 2020. This is in line with Indian Government's Pharma Vision 2020 which aims at making India a global leader in end-to-end manufacturer by 2020, and is planning to set up $640 million venture capital (VC) to boost drug discovery and strengthen the pharmaceutical sector. Thus, the outlook for the pharma sector is fairly positive for the coming few years. • The Company had surplus cash on its books and had bought back 33.5 lakh shares during FY11 & FY12. It has again announced a buyback program in May 2012, worth Rs.50 crores at a max price of Rs.110 per share. Currently, the Company has outstanding shares 17.78 crores of face value of Rs.1 each at the end of September 2013. • As an integrated pharmaceutical company – with world-class API and formulation capabilities, the Company has become a preferred supplier to global customers including nonprofit organizations like UNICEF, IDA, MSF and PSI. The annual export turnover for FY13 was Rs.106.62 crores with a marginal growth of 6% as compared to FY12. It is continuously exploring possibilities of exporting more of its products to different markets. • The Company has launched products in the various therapeutic areas. It has developed formulations as collaboration projects with overseas companies and the dossiers of products have been submitted for registration. The Company has developed novel drug delivery technologies and patents for Gastro retention dosage form, multilayer tablets, floating suspensions and matrix system. • It ideal energy drink named "ENERZAL" has become the drink of the Mumbai Marathon 2013. It is aggressively promoting this product through various sports events across metros of India. • It has strong balance sheet with zero debt and accumulated reserves of Rs.827.21 crores at the end of September 2013. The book value of share works out to Rs.47.31 as on September 30, 2013. • The rate of dividend has been progressively increased by the Company from Rs.1.25 per share for FY09 to Rs.2.25 for FY13. • The promoters hold 68.9% equity capital of the Company, followed by FIIs, DIIs and nonpromoter corporates that hold 6.5%, 5% and 2.5%, respectively, and the balance 17.1% shares are held by the public. The promoters and FIIs have increased the stake in the Company by 1.6% and 3.2%, respectively, during the last one year. Concerns Slow down in economy, exchange rate fluctuations, change in regulatory framework and competitions from other players are some of the concerns. Valuation The share of the Company is trading at a TTM P/E of 14x against that of industry at 23.5x. Keeping in view the positive outlook for pharmaceutical industry, improvement in margins, increasing export business, increase in promoter & FIIs holdings, new product launches and lower PE ratio, we recommend a buy on share of this mid-cap pharma Company with an expected price appreciation of about 30% over the next 12 months.

These views expressed in this report are personal views of the analysts. SATCO capital market ltd. shall not be responsible for any loss arising from the use thereof. Also, SATCO does not have any investment exposure to any of the stocks covered in this newsletter.