The management remains confident of delivering double-digit growth in branded generics business (India and Brazil) and expects growth recovery in Germany from FY21 and the US from FY22 after remediation in FY21. Focus is currently on (1) improving growth in India formulation sales through new launches and scaling up smaller brands by introducing line extensions and new combinations; and (2) reducing net debt via FCF generation as it targets to reduce net debt/Ebitda to 1x (currently at 2.15x) by the end of FY21.

Given the strong EPS growth visibility (~18% CAGR over FY19-22E), superior return ratios (RoCE of over 25% vs avg 17% for peers) and quality management (superior capital allocation and execution), we maintain ‘buy’ rating with target price (TP) of Rs 2,200 (16x H1FY22E EV/Ebitda) implying target P/E of ~23x on adj EPS (ex-amortisation) vs Rs 2,000 (15x) earlier.

India (~45% of sales) — expects double-digit growth and PCPM^ to improve led by new launches (CVS —Ticagrelor in November 2019, Diabetes – Remo, Vildagliptin in December 2019).

Unichem: Focus on increasing scale of smaller brands — Unienzyme, Vizylac, Pregabalin and higher growing molecule telmisartan (Telsar); objectives in terms of achieving cost synergies have been substantially completed. Not looking at any large acquisition, as the focus is on improving growth in key chronic/ sub-chronic therapies (CNS, CVS, diabetes, Vitamins) and others (gastro, derma, etc) where coverage is lower by introducing line extensions, new combinations, etc.

While 12%  year-on-year India growth was led by 8% price growth in H1FY20 (as per AIOCD), volume growth and new product growth to improve on aforementioned measures US (~19% of sales) — expects sales to pick up from FY22 as the current focus is on USFDA remediation: Expects to complete remediation for Dahej (OAI*) and Levittown (WL**) facility by around H1FY21 and Indrad (WL) facility by around H2FY21; build pipeline for future (as filing continues — 20 filed in FY19, 9 filed in H1FY20); R&D to remain at 6-8% of sales.