D:Detail ReportBilcare - DetaRegd. Office: SBICAP Securities Limited, 191, Maker Towers 'F', Cuffe...

Bilcare Research

Initiating coverage Sector: Pharma Packaging 30 August 2011

RAJESH GUPTA - Research AnalystRegd. Office: SBICAP Securities Limited, 191, Maker Towers 'F', Cuffe Parade, Mumbai 400 005

For a list of our branches refer to our website: www.sbicapsec.com

Retail Research

"Delivering Innovation -Transforming Lives"

Bilcare Research Pharma Packaging

2 • August 30, 2011 SBICAP Securities Limited

Year Sales EBITDA PBT PAT EPS CEPS DPS BV(Cr) (Cr) (Cr) (Cr) (Rs) (Rs) (Rs) (Rs)

2010 A 1,047.8 241.9 162.5 117.0 51.5 75.2 2.5 384.72011 A 2,286.6 334.7 199.2 149.5 63.5 100.0 3.0 452.72012 E 2,903.3 429.5 223.0 160.1 68.0 130.8 3.5 516.72013 E 3,393.3 537.7 292.5 210.0 89.2 166.0 4.0 601.3

The largest integrated player in Pharma packaging in India:

Bilcare Research Ltd, with its cutting-edge technology, offers customer centricpackaging solutions , card solutions, specialty film solutions and global clinicalsupplies (GCS) to pharmaceutical companies right from 'drug discovery to marketvalue chain' in most cost effective manner. The company is highly integratedfrom design to final delivery of products and has over 60 percent marketshare in India.

Packaging solutions to continue it's dominance in overall revenue contributionwith overall share of 90 percent or more followed by GCS and very small amountfrom Bilcare Research technology.

Robust business synergy with acquisition of INEOS:

Bilcare Research Ltd has recently acquired global polymer film business ofINEOS Corporation, Germany for Rs607 crore. INEOS is the largest and secondlargest film packaging company in Europe and US market respectively withpresence in Pharma packaging, Food & FMCG, Specialty packaging and Cardsolutions.

The FY10 sales of INEOS were around Rs1500 crore which entails at acquisitioncost to sales ratio of 0.4x. The acquisition not only provides access to over1900 customer globally but indirect access to 51 percent stake in CaprihansIndia, which is a leading and well-established diversified player in PVC films &sheetings, leather cloth, decorative & industrial laminates, paper and extrusionproducts etc.

Bilcare Research Buy: Rs 325 Target: Rs 490

Retail Research Pharma Packaging

Initiating Coverage 30 August 2011

Bilcare Research Ltd is the largest Pharma packaging company in India with market share of over 60 percent. With acquisitionof global polymer film business of German based company 'INEOS Corporation' Bilcare Research is now emerged as one of thelargest Pharma packaging company in the world. The global pharmaceutical market (sales) is pegged at $~900 billion of whichUS and Europe alone accounts for nearly 70 percent. According to WHO, nearly 10 percent of total drug market is counterfeitresulting into revenue loss of over $~90 billion to global Pharma companies and hence required scientific packaging solutionnot only to maintain the shelf life of drug but to fight against the global counterfeiting.

FINANCIAL SUMMARY

Investment Rationale:

RAJESH GUPTA - Research AnalystRegd. Office: SBICAP Securities Limited, 191, Maker Towers 'F', Cuffe Parade, Mumbai 400 005

For a list of our branches refer to our website: www.sbicapsec.com

Particulars 2010A 2011A 2012E 2013E

PE (x) 6.3 5.1 4.8 3.6P/BV (x) 0.8 0.7 0.6 0.5EV/EBITDA (x) 4.9 5.4 4.1 3.2EV/Sales (x) 1.1 0.8 0.6 0.5Mcap/Sales (x) 0.7 0.3 0.3 0.2ROE (%) 13.4 14.0 13.2 14.8ROCE (%) 13.0 11.7 11.8 13.3

STOCK DATA

BSE Code 526853NSE Code NABloomberg Code BILC IN52 Week High / Low (Rs.) 787 / 318Face Value (Rs.) 10Diluted Number of Shares (Crore.) 2.35Market Cap. (Rs Crore.) 764Avg. Yearly Volume 83603

SHAREHOLDING PATTERN (%)

FINANCIAL RATIOS

RELATIVE TO SENSEX

RETURNS STATISTICS (%)

Particulars Jun. Mar. Dec. Sept.FY11 FY11 FY10 FY10

Promoters 34.1 34.1 34.1 35.4FII's 8.0 8.0 9.9 3.9Other Institutions 5.8 5.84 3.8 2.0Public & Others 43.1 43.1 43.2 47.0Custodian against GDR 8.96 8.96 9.04 11.7Total 100.0 100.0 100.0 100.0

3 M 6 M 12 M

Bilcare (13.6) (28.5) (40.0)Sensex (10.1) (7.9) (8.8)

We believe, with packaging cost (in value term) in overall Pharma products inbranded and generic being negligible at less than 1 and 3 percent respectively,Bilcare Research is expected to benefit immensely from its proven expertise inscientific research on drug stabilization and protection through packaging.We also expect the patent expiry of many drugs to create massive opportunitiesfor Bilcare Research. We initiate coverage on stock with 'BUY' ratings.

20

75

130

185

Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11

Bilcare Ltd Sensex


SBICAP Securities Limited August 30, 2011 • 3

Consolidated Margins to stabilize at 15-17 percent post Acquisition.

Prior to INEOS acquisition, Bilcare Research was deriving nearly 50 percent of revenuefrom Indian operation and rest from its overseas operation and had healthy EBITDAmargin of ~28 percent for India operation whereas the blended EBITDA margins werebetween 22-23 percent.

The current EBITDA margin as per the last reported financial number of INEOS was2.3 percent which was on account of time taken by the company to pass on the rawmaterial price increase to the customers as the prices of its key raw material PVC resinwent up due to sharp increase in crude oil prices from $74 to $120 per barrel in lessthan 6 months. However we expect EBITDA margin to cross over 8-10 percent innext 2-3 years as the company looks to save 2-3 percentage points on procurement innear term.

The company also looking to change the product mix of INEOS operation towardhigh margin segment and may discontinue some low margin businesses to improveoverall operating efficiency. We expect the consolidated blended EBITDA marginincluding INEOS to stabilize at 15-17 percent over next 3-4 years.

Diversified client base with repeat businesses ensures consistent cash flows:

The company has over 2500 clients primarily dominated by pharmaceutical companies;INEOS alone has over 1900 clients spread across Pharma, Food & FMCG, Specialtyfilms and Card solutions.

The company offers customer centric packaging solutions depending upon the drugsensitivity across difference geographical locations to retain the shelf life of the drugand patient compliance. Bilcare Research is committed to addressing the 5 Cs of thepharmaceutical industry viz Counterfeit, Compliance, Communication, Convenienceand Cost. Over and above, the packaging cost in the drug value chain is very negligibleat 2-3 percent for generic and negligible for patented products which also enable themdeal only with exiting packaging solutions providers.

Robust business opportunities across different regions:

The total pharmaceutical market is pegged at $~900 billion which is expected to cross$1 trillion by 2014. India account for around 2 percent and growing over 15-20 percentper annum. European and Asian Pharma market comprises of 80 percent blisterpackaging and rest in bottles & others which is vice-versa in US (US is the largestpharmaceutical market in the world).

The company has tie up with largest retail chain in US 'Wal-Mart' to provide innovativepackaging solutions for medicines distributed under its $4 prescription drug program.Apart from above, we also expect the overall packaging trend in US to shift towardsblister packaging which will create huge opportunity for Bilcare Research.

As per the IMS health estimates, nearly $142 billion sales to come under pressure due topatent expiry in next 1-2 years. By 2012, 6 of top 10 selling like LIPITOR, PLAVIX,DIOVAN, ZYPREXA, SINGULAIR, SEROQUEL to face competition from genericwhich would make the way for innovative packaging solution provided byBilcare Research.

Valuations:

At current price of Rs325 the stock is trading at 4.8x and 3.6x of its FY12E andFY13E earnings respectively. While comparing the company with global peers acrossdifferent valuation parameter both on forward estimates and current financial numbers,Bilcare Research is trading at discount on all valuations parameters.

Additionally, current valuation multiples (PE & P/BV) on TTM basis is trading muchlower to its two years forward trailing PE and P/BV which entails good upside potential.We have assigned a multiple of ~5.5x to arrive at the target price of 490by discountingFY13E EPS of Rs89.2.

~ The current EBITDA margin as per thelast reported financial number of INEOSwas 2.3 percent which was on account oftime taken by the company to pass on theraw material price increase to thecustomers.

~ Bilcare Research derives over 90 percentof businesses from their existing clientsespecially Pharmaceutical companies.

~ The total pharmaceutical market is peggedat $~900 billion which is expected to cross$ 1 trillion by 2014. India account foraround 2 percent and growing over 15-20percent per annum



Robust business synergy with acquisition of INEOS:

Bilcare Research Ltd has recently acquired global polymer film division of INEOSCorporation, Germany for Rs607 crore. INEOS is the largest and second largestpackaging company in Europe and US market respectively with presence in Pharmapackaging, Food & FMCG, Specialty packaging and Cards solutions. The cost ofacquiring Ineos is at 0.4x on sales to price consideration paid to INEOS corporations.

With this acquisition, Bilcare Research has got an access to nearly 1900 clients spreadacross different segment of packaging viz Pharma, Food & FMCG, Cards and Specialtyfilms. The performance of Ineos was not very good during FY11 due to very high rawmaterial prices as PVC is purely based on global crude prices.

In September 2010, the crude prices were at $~74 per barrel which crossed to $120per barrel in April 2011 that has hampered the margin.

We believe, going forward the margins to improve owing to change in product mix postacquisition as Bilcare Research to discontinue some low margin business and pass on aprice increase to customers. Synergies in terms of aluminium packaging solutions andanti counterfeiting solutions etc. to improve the margin of the company going forward.In addtion, the crude oil prices has started cooling off from its recent high of USD 126per barrel to nearly USD 105 per barrel which would help to push the margin goingforward.

The net sales of Bilcare AG (INEOS) to grow at 15 percent in FY12E and for FY13 itis expected to grow at 11 percent.

The current EBITDA margin as per the last reported financial number of INEOS wasjust 2.3 percent which was worst performance, however we expect EBITDA marginto cross over 8-10 percent in next 2-3 years lower than management expectation of12-14 percent.

INEOS REVENUE BREAKUP (%)

Source: SBICAP Securities Research

REVENUE CONTRIBUTION FROM THREE OPERATIONS


ONE YEAR CRUDE PRICE $ PER BARREL

Source: Capital ine, SBICAP Securities Research

5 YEARS CRUDE PRICE $ PER BARREL

Source: Capital ine, SBICAP Securities Research

EBITDA CONTRIBUTION FROM THREEOPERATIONS


200

700

1,200

1,700

2010A 2011A 2012E 2013E

Indian Operation Ineos Rest of World

Fig

Rs

Cro

.

10

120

230

340

2010A 2011A 2012E 2013E

Indian Operation Ineos

Rest of the world

Fig

Rs

Cr.

5 years crude Price $ per barrel

10

55

100

145

190

Apr-06 Jan-07 Oct-07 Jul-08 Apr-09 Jan-10 Oct-10 Jul-11

40

1520

25

5

20

35

50

PharmaPackaging

Food & FMCG Card SpecialityFilms

One year crude Price $ per barrel

10

45

80

115

150

Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11



0%

12%

24%

36%

2010A 2011A 2012E 2013E

Ind ian Operation Ineos Rest of the world

100

450

800

1,150

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

2

6

10

14

Pharma Sales ($ Billion) Growth

Fig

in $

Bil

lion

Fig

in p

erce

ntag

e

INEOS acquisition has not only provided access to 1900 diversified client base but ithas also provided new business verticals viz Card, Specialty films, Food & FMCGpackaging and Card solutions. which is a fast growing market especially in India. Thecompany has got the indirect access of 51 percent stake in Caprihans India which is aleading and well-established diversified player in PVC products.

We expect the Bilcare AG (INEOS) to dominate the revenue share in overall topline ofthe company with share of over 40-45 percent though margins would not be matchwith exiting business of Bilcare Research and overseas operation excluding Ineos.

Consolidated Margins to stabilize at 15-17 percent post Acquisition:Prior to INEOS acquisition, Bilcare Research was deriving nearly 50 percent of revenuefrom Indian operation and rest from its overseas operation and had healthy EBITDAmargin of nearly 30 percent for India operation whereas the blended EBITDA marginswere between 21-23 percent.

The current EBITDA margin as per the Q4FY11 of INEOS was 2.3 percent which wason account of time taken by the company to pass on the raw material price increase tothe customers as the prices of its key raw material PVC resin went up sharply. Howeverwe expect EBITDA margin to cross over 8-10 percent in next 2-3 years as the companylooks to save 2-3 percentage points on procurement in near term.

The overseas operation (ex. INEOS), are expected to have EBITDA margin of 15-16percent whereas the Indian operation to have EBITDA margins between 28-29 percent.Hence we expect the consolidated EBITDA margins to stabilize between 15-17 percentgoing forward.

Robust business opportunities across different regions:The total pharmaceutical market is pegged at $~900 billion which is expected to cross$ 1 trillion by 2014. India accounts for around 2 percent and growing over 15-20percent per annum. European and Asian Pharma market comprises of 80 percent blisterpackaging and rest in bottles & others, which is vice-versa in US (US is the largestpharmaceutical market in the world)

EBITDA MARGIN COMPARISON


GLOBAL PHARMA SALES

Source: IMS Intelligence Applied /Company Annual Report/SBICAP Securities Ltd

~ We expect EBITDA margin to cross over8-10 percent in next 2-3 years as thecompany looks to save 2-3 percentagepoints on procurement in near term.



The company has tied up with largest retail chain in US 'Wal-Mart' to provide innovativepackaging solutions for medicines distributed under its $4 prescription drug program.Apart from above, we also expect the overall packaging trend in US to shift towardsblister packaging which will create huge opportunity for Bilcare Research.

As per the IMS health estimates, nearly $142 billion sales to come under pressure dueto patent expiry in next 1-2 years. Peak years of patent expiries shift major therapies togeneric dominance. In 2011, products with sales of more than $30 billion are expectedto face the prospect of generic competition in the major developed markets. In the USalone, Lipitor, Plavix, Zyprexa and Levaquin - which together accounted for morethan 93 million prescriptions dispensed in the past 12 months and generated morethan $17 billion in total sales.

Governments are pursuing an ongoing wave of budgetary control mechanisms thattarget drug spending as one way to restore fiscal balance through the use of cheapergeneric drugs in comparison to the branded costly drugs.

PHARMA PACKAGING MARKET


GLOBAL PHARMACEUTICAL MARKET


Pharma Packaging Market

4

7

9

12

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Fig

in $

Bill

ion

Pharma Packaging Market

4

7

9

12

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Fig

in $

Bil

lion

Global Pharmaceutical Market

4031

13 116

2

17

31

46

Nor

thA

mer

ica

Eur

ope

Asi

a/A

ustr

alia

/Afr

ica Japa

n

Lat

in A

mer

ica

Fig

in %



Bilcare Research Ltd is the largest Pharma packaging company in India with marketshare of over 60 percent. With acquisition of global polymer film business of Germanbased company 'INEOS Corporation' Bilcare Research has now emerged as one of thelargest Pharma packaging company in the world. The company is innovation-ledsolutions provider that partners with the global pharmaceutical and healthcare industryto improve patient healthcare outcomes.

Bilcare Research Ltd, with its cutting-edge technology, offers customer centricpackaging solutions , card solutions, specialty film solutions and global clinical supplies(GCS) to pharmaceutical companies right from 'drug discovery to market value chain'in most cost effective manner.

The company has global footprint with its dedicated manufacturing facilities acrossthree continents viz Asia (India & Singapore), Europe and US. The company with itsinnovative and products specific solution addresses the challenges of its clients viz5Cs - Counterfeit, Compliance, Communication, Convenience and Cost in drugdiscovery as well drug delivery process.

Company background and business model:

Source: Company

BILCARE CORPORATE STRUCTURE

Bilcare India

Bilcare Singapore International Labs

100% 50%

Bilcare Mauritius

100%

Bilcare Inc.

Bilcare U.K.

Bilcare Brazil

Bilcare Technologies

100%

100%

100%

80%

Bilcare AG100%

Bilcare ResearchGmbH

Bilcare Italia Srl.

Bilcare FilmsItalia Srl.

Bilcare ResearchInc.

100%

100%

100%

100%

Caprilians51%Bilcare Clinical

Supplies (Europe)Ltd.

100%

BilcareTechnologies

Italia

92%

Bilcare Solutions• Pharma Packaging Innovation

Research ServicesInnovative SolutionsPackaging Materials

Global Clinical SuppliesAccelerating drug development process-Solutions for clinical trial programs &Facilitating speed to market

Source: Company, SBICAP Securities Research

Business Verticals

NonClonableID TechnologiesAnytime, Anywhere Authenticationand Track & Trace technology forpeople and products



1) Pharma Packaging Innovation (PPI)

Under PPI segment, Bilcare Research provides customized and wide range ofpharmaceutical film and foil packaging solution as per the drug sensitivity to strengthenthe brand equity of its clients by retaining the drug shelf life and patient compliance.Over years, Bilcare Research has built up strong domain expertise in the area ofinnovative packaging to fulfill the needs of the pharmaceutical industry.

The company continued to focus on higher-end packaging solutions and is excitedabout the potential that higher-end anti-counterfeiting packaging solutions hold goodfuture prospects for the company and are enthused by positive response to the research-based solution offering.

Bilcare Research under PPI segment offers packaging solution through three broadintegrated business segments.

A ) Research Services

Bilcare Research is a pioneer in scientific research on drug stabilization and protectionthrough packaging. Its research personnel includes pharmacists, material scientistsand packaging engineers who develop innovative methodologies, customizedequipment and testing protocols for understanding and optimizing the drug protectionprocess to overcome the regulatory, quality and compliance concerns. The researchservices include Bilcare Research Optima, Packaging Analytical Services and PackagingAudit Services.

Bilcare Research 'OptimaTM': it is a scientific packaging development and sensitivityprofiling method; it helps in understanding product sensitivity and developing optimumpackaging solutions for pharmaceutical formulations throughout its shelf life in desiredclimatic conditions.

This technology analyzes the packaging needs of the particular formulation throughscientifically designed protocols and analysis. It accurately quantifies the environmentaland dimensional sensitivity of the formulation and quantifies it on a scientific scale.Further, it determines the optimum protection requirements for drug stability using avalidated mathematical simulation program.

Packaging Analytical Services: Its state of art analytical equipments and testingprotocol helps understanding packaging efficiency and packaging material quality. Theanalytical services facilitate packaging engineers and quality professionals to understandprotection effectiveness and application suitability.

Packaging Audit Services: Packaging Audits provide comprehensive insights intothe current status of packaging operations and solutions to meet global standards andstreamline operations. The cost and process/productivity optimization potential inpackaging operations is normally overlooked and auditing this process can not onlysave costs, but also prevent quality hazards once the product is in the market.

B) Innovative solutions

Innovative packaging solutions of Bilcare Research enable product differentiation andmarketing by providing a unique brand identity to products. The Company works closelyto facilitate the distribution and innovative packaging for brand protection.

The 'BrandpackTM' solution of Bilcare Research provides packaging solution usingits unique patented material, process & design.

C) Packaging Materials

Bilcare Research is an established supply chain partner catering to the blister packagingneeds of leading pharmaceutical manufacturers. The company offers full range of filmand foil packaging materials to protect even the most sensitive pharmaceutical productsdepending upon the climatic condition of that country where the medicine is finallysold to end consumers.

~ Bilcare Research is a pioneer in scientificresearch on drug stabil ization andprotection through

~ Bilcare Optima is a scientific packagingdevelopment and sensitivity profilingmethod.

~ The analytical services facil itatepackaging engineers and quali typrofessionals to understand protectioneffectiveness and application suitability.



Our coating, lamination and printing plants are equipped with online process controland quality inspection tools that meet all global regulatory, functional and applicationrequirements.

All products are registered with USFDA with DMF (Drug Master File) level 3 filingand comply with European standards. The material scientists of Bilcare Research arecontinuously developing and introducing new and innovative materials into ourgrowing product range.

BRIDGING WIDE GAPS IN WVTR VALUES.... ADDING VALUE TO BRANDS

Note: Upward graph from Left to Right shows packaging needs as per the drug sensitivity fromhigh to low. WVTR (Water Vapor Transmission Rate) .

Source: Company, SBICAP Securities Research

VenusCold Form (O)

Bilcare (Eco-friendly thermo formable PP blister firm)

ECONA

Bilcare (Eco-friendly thermo formable PP blister firm)

OPTRA

WVTR

DuplexPVC/PVdC (0.68 - 0.35)

Zymax Tx(0.20 - 0.12)

Topaz(0.55 - 0.20)

Ultra Tx(0.36 - 0.20)

Ultra(0.45 - 0.27)

Triplex(0.48 - 0.29)

Super(1.8 - 1.0)

Patina / Protect / Secure2.0

Exel(3.2 - 2.7)

ExxtraPVC (3.5)

bridging wide gaps in WVTR values...adding value to your brands



Blister Films as per the drug sensitivity

n Duplex TM: DuplexTM is the internationally well accepted PVdc coated PVCfilm with excellent thermoforming properties and increased gas and water vaporbarrier, suitable for sensitive medicine. This material is ideal for packaging of anti-hypertensive, Antibiotics, Cardiovascular drugs etc.

n TriplexTM: This is PVC/PE/PVDC coated film suitable for sensitive medicineand superior to traditional PVC/PVDC structure blister packing. WHO speciallyrecommends these blister films for packaging of medicine meant for globaldistribution particularly into tropical zones.

n ExxtraTM: This is a pharmaceutical grade rigid pvc film having excellentthermoforming properties with high yield and complied to global regulatoryrequirement for blister packaging of non-sensitive medicine.

n ExcelTM: This is multilayer blister film which is superior to conventional monopvc blister film, yet cheaper. This is ideal for medicine with bigger dimension anduseful for non-sensitive products like selective anti-pyretic, analgesic, anti-emeticsdrugs for treatment of migraine.

n SuperTM: This is useful for mid sensitive medicine which were found in packedinto mono systems due to unavailability of other option. It is ideal for mid sensitiverange of pharmaceutical products like selective antibiotics, hypolipidacemic agent,cardiovascular drugs etc.

n TopasTM: This is unique polymer which is totally halogen free and environmentalfriendly. It is an ideal for sensitive to high sensitive drug formulation. It absorbsmoisture and provides an excellent barrier to water vapor and is resistant tochemicals.

n PatinaTM: This is a classical aesthetic solution differentiating the pharmaceuticalproduct from the crowded market place. This is useful for non-sensitive to mid-sensitive drugs and offers very unique and cost effective way of providing effectiveanti-counterfeiting measures.

n UltraTM: This is a superb aesthetic solution differentiating the pharmaceuticalproduct from the crowded market place. This is useful for sensitive drugs and canbe sealed on the coated side only with pvdc compatible oil. This is ideal for volumeproducts which are sensitive to nature.

n Ultra txTM: This product helps for blister packaging of highly sensitive drugswhich hitherto in outstrips and other aluminium based films, ultra tx has in builtanti-counterfeit measures as well as aesthetic excellence.

n VenusTM: This is multilayer cold formable aluminium based blister structure toprovide complete protection against water vapour, light, gases and aroma etc. Thisis designed for highly sensitive rage of generic medicine which are highly moistureand light sensitive.

Above are few patented pvc films for blister packaging of various sensitive toNon-sensitive drugs. Apart from above, the company also has ZingTM, novaTM,ZeonTM, Zeon+TM, Zeon xtTM, zenithTM etc for packaging of pharmaceuticalproducts.

2) Global Clinical Supplies (GCS):

Under GCS, Bilcare Research serves the global pharmaceutical and bio-pharmaceuticalindustries with clinical trial materials support, services and complete projectmanagement. With its state of art plant and manufacturing facilities across threecontinents viz US, Europe and Asia, the company provides end-to-end solutions thatsupport a client's drug through the entire clinical trial life cycle.

~ The company has 16 different types ofpatented blister packaging films dependingupon the drug sensitivity.

~ All these materials are USFDA and DMF(Drug Master File) level 3 filing andcomply with European standards.



The services of Bilcare Research for solid, semi-solid, liquid, DEA (CI-V) and biotechclinical trial materials (CTM) satisfy a broad range of requirements from pre-formulation research and development, manufacturing, analytical services and clinicalsupplies packaging and labeling to IVRS, QP services, controlled-temperature (coldchain) CTM storage, worldwide distribution, returns and destructions accountability.

3) Bilcare Research Technology:

Bilcare Research Technology solutions focused on creating next-generation solutionsfor anti-counterfeiting, security and brand protection across different industries.

The company has developed unique security technology called 'nonClonableID' whichenables the product authentication through out the supply chain to the end customersand thus protect brand and prevent the misuse. This technology comprises of'NonclonableID' fingerprint that can be seamlessly integrated into the supply chainsystem thus provides providing totally secure and irrefutable real-time productidentification and authentication.

It can significantly enhance security levels with an impregnable personal access controland identity management system. Bilcare Research technology finds numerousapplications across different sectors like Pharma, Agrochemical, Heritage Assets, Highvalue goods, document security, currency security, property registration etc.

~ The company has developed uniquesecurity technology called'NonClonab leID' which enables theproduct authentication through out thesupply chain to the end customers and thusprotect brand and prevent the misuse.

~ Bilcare Research technology findsnumerous applications across differentsecto rs like Pharma, Agrochemical,Heritage Assets, High value goods,document security, currency security,property registration etc.

Project Management

PharmaResearch

ClinicalPackaging

& Labelling

Storage&

Disribution

IVRSIWRS

ComparatorSourcing

QPServices

In-sourcing/offsite clinical

operations

Quality Foundation

Source: Company



We expect the consolidated net sales and profit of the companyto grow at 22 and 19 percent to Rs3393 and Rs210 crorerespectively between 2011A and 2013E. The consolidatedEBITDA is expected to grow at 27 percent CAGR to Rs538 crorebut the margin is expected to stabilize at 15-17 percent.

The lower net margin is also expected to settle 5-6 percent ascompare to high margin at 9-11 percent previously due to higherman power cost for INEOS and its overseas operations.

Bilcare Research Ltd, post acquisition of INEOS, is now a globalpharma packaging company and in India we do not have a perfectapple to apple comparison but we have taken few overseascompanies like AMCOR based in Australia, Rexam PLC inEurope, Bemis Co. INC and Sonoco Products of US forcomparison.

At current price of Rs325 the stock is trading at 4.8x and 3.6x ofits FY12E and FY13E earnings respectively. While comparingthe company with global peers across different valuationparameter both on forward estimates and current financialnumbers, Bilcare Research is trading at discount on all valuationsparameters.

Additionally, current valuation multiples (PE & P/BV) on TTMbasis is trading much lower to its two years forward trailing PEand P/BV which entails good upside potential. We have assigneda multiple of ~5.5x to arrive at the target price of 490bydiscounting FY13E EPS of Rs89.2.

Financials & Valuations:

RELATIVE VALUATIONS

Sources: Bloomberg, Capital ine & SBICAP Securities ResearchThe year ending for all the companies except Bilcare is December whereasfor Bilcare it is March.

PE (x) EV/EBITDA (x) M.cap/Sales (x)Company 2012 2013 2012 2013 2012 2013Bilcare Research 5.2 3.9 4.2 3.3 0.3 0.2

AMCORE 12.2 10.5 6.5 5.8 0.2 0.2REXAM PLC 9.3 8.9 5.6 5.1 1.1 1.0

BEMIS Co. INC 12.4 10.9 6.0 5.3 0.6 0.6

SONOCO Products 10.9 10.4 5.6 5.3 0.6 0.6

RELATIVE VALUATIONS

Sources: Bloomberg, Capital ine & SBICAP Securities ResearchWe have converted the Bilcare Research number into USD for comparison purpose and the conversion rate is at @ Rs45 per USD.

Particulars Bilcare Research SONOC Products REXAM PLC BEMI Co. INC AMCOR

CMP (USD) 7 31 4 31 7

Sales (USD Mn) 632.0 4,432.8 4,466.8 5,228.9 6,175.3

Mcap (USD Mn) 170.0 3,121.4 3,227.2 3,295.9 8,653.7

PE (x) 4.9 13.1 11.4 15.3 26.8

EV/Sales (x) 0.4 0.8 1.1 0.9 1.0

EV/EBITDA(x) 3.0 6.8 7.1 7.4 8.6

Mcap/Sales (x) 0.3 0.7 0.7 0.6 1.4

P/BV(x) 0.7 2.1 1.3 1.8 2.3

OPM (%) 14.4 8.8 10.4 8.3 7.5

NPM (%) 5.4 4.9 2.7 4.2 3.7



1 YEAR FORWARD PE MULTIPLE


1 YEAR FORWARD P/BV MULTIPLE

Source: SBICAP Securities Research Source: SBICAP Securities Research

AVERAGE P/BV MULTIPLE

AVERAGE PE MULTIPLE


250

750

1250

1750


Close Price 8.5x 12.5x 16.5x

2

12

21

31

40


Daily PE Average PE 1+SD

1+2SD 1+3SD

50

630

1210

1790


Close Price 2x 2.2x 2.5x 2.9x

0

3

5

8


Daily P/BV Avg P/BV 1+SD

1+2SD 1+3SD



NET SALES


PAT & MARGINS

Source: SBICAP Securities Research Source: SBICAP Securities Research

EPS & CASH EPS

EBDITA & MARGINS



ROE & ROCE (%)

10

115

220

325

2010A 2011A 2012E 2013E

6

13

20

27

EBDITA EBDITA Margins

Fig

in R

s C

rore

Fig

in %

10

80

150

220

2010A 2011A 2012E 2013E

2

6

10

14

Adjusted Net Profit PAT Margins

Fig

in R

s C

rore

Fi in

%

10

60

110

160

2010A 2011A 2012E 2013E

EPS (Rs.) Cash EPS (Rs.)

Fig

Rs.

2

8

14

20

2010A 2011A 2012E 2013E

ROE (%) ROCE (%)

Fig

in %

500

1450

2400

3350

2010A 2011A 2012E 2013E

Fig

Rs

Cro

re



Financial Statements:

Income Statement Figures in Cr.


Net Sales 1,047.8 2,286.6 2,903.3 3,393.3

Other Income 18.0 42.2 29.4 17.0

Total Income 1,065.8 2,328.8 2,932.7 3,410.3

Total Expenditure 805.9 1,951.9 2,473.8 2,855.7

Material Consumed 591.1 1,304.9 1,637.5 1,917.2

As % of Sales 56.4% 57.1% 56.4% 56.5%

Other Operating Cost 214.8 647.0 836.3 938.4

As % of Sales 20.5% 28.3% 28.8% 27.7%

EBDITA ( Excl OI) 241.9 334.7 429.5 537.7

EBDITA ( Incl. OI) 259.9 376.9 458.9 554.6

Interest 43.9 91.8 88.0 81.3

PBDT 216.0 285.2 370.9 473.3

Depreciation 53.6 85.9 147.9 180.8

PBT 162.5 199.2 223.0 292.5

Tax 45.5 49.8 62.9 82.5

Net Profit 117.0 149.5 160.1 210.0

Extra-ordinary Item - - - -

Adjusted PAT 117.0 149.5 160.1 210.0

Equity 22.7 23.5 23.5 23.5

EPS 51.5 63.5 68.0 89.2

Cash EPS 75.2 100.0 130.8 166.0

FV 10.0 10.0 10.0 10.0


Equity Capital 22.7 23.5 23.5 23.5Reserve and Surplus 850.0 1,042.3 1,193.0 1,392.1Net Worth 872.7 1,065.9 1,216.5 1,415.7Secured Loans 521.4 1,094.2 1,039.5 987.5Unsecured Loans 77.9 125.5 119.3 113.3Loan Funds 599.3 1,219.7 1,158.7 1,100.8Deferred Tax Liability 117.1 157.2 203.2 237.5Minority Interst - 48.8 51.2 53.8Total Capital Employed 1,589.1 2,491.6 2,629.7 2,807.8Gross Block 1,001.3 2,459.8 2,553.9 2,649.7Less: Accumulated Dep. 146.6 1,051.4 1,199.3 1,380.2Net Block 854.7 1,408.3 1,354.5 1,269.5Capital Work In Progress 33.2 35.6 31.5 34.7Investments - 0.2 0.2 0.2Inventories 170.5 434.1 504.6 629.7Sundry Debtors 353.0 822.8 951.5 1,163.1Cash and Bank Balance 151.6 177.8 176.9 159.2Loans and Advances 146.9 216.3 363.3 472.2Total Current Assets 822.0 1,650.9 1,996.2 2,424.3Creditors 101.6 370.4 446.9 524.7Other Current Liabilities 36.8 248.7 319.4 407.2Provision 9.7 8.6 9.5 10.8Total Current Liabilit ies 148.1 627.8 775.8 942.8Net Current Assets 674.0 1,023.2 1,220.5 1,481.5Micellanious Exp. 27.2 24.3 23.1 21.9Total Assets 1,589.1 2,491.6 2,629.7 2,807.8

Balance Sheet Figures in Cr.

Cash Flow Statement Figures in Cr.Particulars 2010A 2011A 2012E 2013E

PBT 162.5 199.2 223.0 292.5

Depreciation 53.6 909.5 147.9 180.8

Interest 43.9 91.8 88.0 81.3

Direct Taxes Paid (45.5) (49.8) (62.9) (82.5)

Change in WC (96.2) (323.0) (198.2) (278.7)

CF from optg. activities 118.2 827.7 197.8 193.5

(Inc) / Dec. Capex (91.6) (1,460.9) (90.0) (99.0)

Free Cash Flow 26.6 (633.2) 107.8 94.5

(Inc) / Dec. in Investment 145.5 (0.2) 0.0 -

Other Adjustment (Net) 9.5 97.6 49.7 38.0

CF from Invst. activities 63.4 (1,363.5) (40.3) (61.0)

Issue of Shares 266.3 41.4 - -

Change in Debt (351.1) 620.4 (61.0) (57.9)

Interest (43.9) (91.8) (88.0) (81.3)

Dividend (6.5) (8.1) (9.5) (10.8)

CF from Fin. activites (135.2) 562.0 (158.5) (150.1)

Net Change in cash 46.3 26.2 (0.9) (17.6)

Opening Balance 105.3 151.6 177.8 176.9

Closing Balance 151.6 177.8 176.9 159.2

Important Ratios:Particulars 2010A 2011A 2012E 2013E

(A) Measures of Performance (%)EBIDTAM. excl. O. Inc. 23.1 14.6 14.8 15.8Gross Profit Margin 20.6 12.5 12.8 13.9Total Tax/PBT 28.0 25.0 28.2 28.2Net Profit Margin 11.2 6.5 5.5 6.2

(B) Measures of Financial StatusDebt / Equity (x) 1.1 0.9 1.0 0.9Net Debt / Equity (x) 0.9 0.8 0.9 0.7Debtors Period (days) 129.1 126.9 132.0 133.0Creditors Period (days) 35.1 51.0 62.0 60.0Inventory Period (days) 59.0 65.3 70.0 72.0

(C) Measures of InvestmentEPS (Rs) 51.5 63.5 68.0 89.2Book Value (Rs) 384.7 452.7 516.7 601.3Earning Yield (%) 15.9 19.5 20.9 27.4ROA (%) 13.7 10.6 11.8 16.5Return on Net Worth (%) 13.4 14.0 13.2 14.8Return on Cap. Emp. (%) 13.0 11.7 11.8 13.3Interest Coverage (x) 4.4 3.7 3.3 4.0

(D) Measures of ValuationP/E (x) 6.3 5.1 4.8 3.6M. Cap to Sales (x) 0.7 0.3 0.3 0.2EV/Sales (x) 1.1 0.8 0.6 0.5EV/EBDITA (x) 4.9 5.4 4.1 3.2




Name Designation

Alpesh Porwal SVP & Head (Retail)

Rajesh Gupta Research Analyst

DISCLAIMER:SBI Capit al Markets Limited (SBICAP) is a full-service , integrated Investment Banking co mpany and it s who lly owned subsidiary SBICAP Securities L td is a Sto ck Bro king Compan y having membersh ips on BSE and NSE. SBICAPis also an underwrit er of secur ities. ("SBICAP and SBICAP Securit ies Lt d. ar e collectively referred to as SBICAP Gro up") SBICAP has Invest ment Banking, Adv isory and o ther business relationships with a significan t percentage ofthe companies covered by o ur Research Group . Our research professionals provide imp ortan t inputs int o our Investment Banking and other business selection processes. Recipien ts of this r eport should assume th at SBICAP Groupis seekin g or m ay seek or will seek Investm ent Banking, advisory, project finance or oth er businesses and may receiv e com missio n, bro kerage, fees or o ther compen satio n from the compan y or companies th at are the subject of t hismat erial/ repor t. SBICAP group and its off icers, directors and employees, in cluding the analysts and oth ers involved in t he preparat ion or issuance o f this material and th eir dependan ts, m ay on the date of this repor t or f rom, t imeto time h ave "long" or "sh ort" p ositio ns in , act as principal in, and buy or sell t he securities or derivatives thereof of compan ies m ention ed herein. Our sales people, dealers, tr aders and o ther p rofessionals may provide oral orwritten m arket commentary or trading strategies t o our clien ts th at ref lect o pinio n that are contrary to the op inion s expressed herein, and our p roprietary tradin g and investing businesses m ay make inv estmen t decisions that areinconsist ent with th e reco mmendations expressed herein . SBICAP Group may hav e earlier issued or may issue in future repor ts on the companies cov ered herein with recom mendat ions/ information inco nsistent or different f romtho se made in t his r eport. In reviewing this document, you should be aware th at an y or a ll of the foregoing, am ong o ther t hings, migh t give rise to po tentia l conf licts of in terest. SBICAP Group m ay rely on inform ation barriers,such as " Chinese Walls" to control the flow of in format ion contain ed in one o r more areas within SBICAP Group in to ot her ar eas, units, group s or affilia tes o f SBICAP Gro up.This repo rt is for information p urposes only and this document/mat erial should not be con strued as an offer to sell or the solicitation of an offer to buy, p urchase or subscribe to any securit ies, and neither this document nor anyth ingcon tained herein shall form the basis of or be r elied upon in con nectio n wit h any contract or commitment whatsoever. This docum ent does no t solicit any act ion based o n the mater ial co ntained herein. I t is for th e generalinformation of the c lients of SBICAP Group. Though disseminated t o clients simultaneously, no t all client s may receive this rep ort at the same t ime. SBICAP Group will not t reat r ecipients as clients by virt ue of their receiving t hisrep ort. I t does not constitute a perso nal recommendatio n or t ake in to account the particular in vestment objectives, financial situations, or needs of individual clients. Similarly, t his documen t does not h ave r egard to the specificinv estmen t objectives, fin ancial situation/circum stances and the p articular n eeds o f any specific person who ma y receive t his documen t. The securities discussed in this repo rt may not be suitable for a ll the investors. The securit iesdescribed herein may not be eligible for sale in all jurisdiction s or t o all categories of in vestor s. The coun tries in which th e comp anies mentioned in this repo rt are organized may have restrict ions o n inv estmen ts, v oting rights ordealings in securities by nation als of other coun tries. The approp riaten ess o f a particular inv estment or strategy will dep end on an investo r's in dividual circumst ances and o bjectives. P erson s who may receive this document sho uldcon sider and in depen dently evaluate whether it is suit able for his/ her /their part icular circumstan ces an d, if necessary, seek p rofessional/finan cial advice. Any such person shall be r esponsible for co nducting his/her/their owninv estigation and analysis of th e info rmatio n con tained or referred to in this docum ent an d of evaluating t he mer its and risks inv olved in th e securities form ing th e subject matter of this document. The p rice and value of theinv estmen ts ref erred to in this document/mat erial and t he income from th em may go do wn as well as up, and investo rs may realize lo sses on any investments. Past performance is n ot a guide for future p erformance. Future returnsare not guarant eed and a loss o f original capita l may occur. Actual results may differ m aterially f rom th ose set for th in projections. Forward-looking stat ements are not predictions and may be subject to ch ange without notice.SBICAP Group do es no t prov ide t ax adv ises t o its clien ts, an d all investors are st rongly advised to consult regardin g any poten tial investm ent. SBICAP Group and its af filia tes accept n o liabilit ies for any loss o r dam age of any k indarising o ut of the use of this r eport. Foreign currency deno minated securities are subject to f luctuations in ex change rates that could have an adverse effect on t he value or price of or incom e der ived f rom th e investmen t. In addition,inv estors in securities such as ADRs, the v alue o f which are influenced by foreign curren cies effectively assume currency risk. Certain transactio ns including those invo lving futures, opt ions, and o ther derivatives as well as n on-inv estmen t grade securities give rise to substant ial r isk an d are not suitable for all investo rs. Please ensure that you h ave read an d understood the curren t risk disclosure docum ents before enter ing into an y derivativ e tran sactio ns.This repo rt/document has been prepared by t he SBICAP Group based upon information available to the p ublic and sources, believed to be reliable. T hough utmost care has been t aken t o ensure it s accuracy, no represen tation orwar ranty, express or implied is made t hat i t is accurat e or complete. SBICAP Group has r eviewed the repor t and, in so far as it includes current or historical information, i t is believed to be reliable, altho ugh its accuracy andcom pleten ess cannot be guaranteed. SBICAP Group endeav ors t o update on a reasonable basis the informatio n discussed in th is document /mater ial, but regulato ry, co mpliance or other reasons may prevent us fro m doin g so. Theopinions expressed in this docum ent/m ateria l are subject to change with out no tice and have no obligation to tell the clien ts when opinions or in format ion in this repor t chan ge.This repo rt or recomm endat ions o r info rmatio n con tained herein do/does n ot con stitut e or purpor t to constit ute investm ent advice in publicly accessible m edia and sh ould n ot be repro duced, transmitted or p ublish ed by therecipient . The repor t is for th e use and co nsump tion o f the recip ient o nly. This p ublication may no t be distributed to th e public used by the public m edia without the express written consen t of SBICAP Group . This repo rt or anypor tion h ereof may no t be printed, sold or distributed without the writt en con sent o f SBICAP Group. Neither this docum ent no r any copy of it may be taken or t ransmitted into th e United St ate (t o U.S.Perso ns), Canada, or Japanor distributed, directly o r indirectly, in the United States or Canada or distributed or redistributed in Japan or t o any resident th ereof . Law may r estric t the distr ibutio n of t his documen t in other jurisdictio ns, an d per sons into wh osepossessio n this docum ent comes should inform them selves about , and observe, an y such restr ictio ns. Neither SBICAP Group nor its directo rs, em ployees, agents o r representatives shall be liable for any damages wh ether direct orindirect, incidental, special or consequent ial in cludin g lost revenue or lost profits that may arise from or in connection with t he use of t he information.

Retail Research Reports - Recent 'Initiating Coverages'

Date Scrips Recom. on Rating Target Price Time FrameRs. Rs.

23-Aug-11 Jindal Steel & Power 477.00 Buy 553.00 12 Months

05-July-11 Omnitech Infosolutions 146.00 Buy 181.00 12 Months

21-Apr-11 Sterlite Industries 175.00 Buy 209.00 12 Months

11-Apr-11 Hindustan Zinc 145.00 Buy 177.00 12 Months

04-April-11 Hindalco Industries. Ltd. 209.00 Buy 233.00 12 Months

28-Mar-11 IRB Infrastructure Developers Ltd. 193.00 Buy 264.00 12 Months

28-Mar-11 ILFS Transportation Networks Ltd 206.00 Buy 342.00 12 Months

28-Mar-11 Man Infraconstruction Ltd. 140.00 Buy 173.00 12 Months

Corporate Office: SBICAP Securities Limited;II Floor, A Wing, Mafatlal Chambers, N.M.Joshi Marg, Lower Parel, Mumbai -400013

For any information contact us:Toll Free: MTNL/BSNL Users: 1800-22-3345 / Private Telecom Users: 1800-209-9345 Or E-mail: [email protected]

D:Detail ReportBilcare - DetaRegd. Office: SBICAP Securities Limited, 191, Maker Towers 'F', Cuffe...

Documents

Transcript of D:Detail ReportBilcare - DetaRegd. Office: SBICAP Securities Limited, 191, Maker Towers 'F', Cuffe...