Apollo Hospitals (APOHOS) 1344

Result Update Rating matrix Rating : Hold Target : 142 Target Period : 15-18 months Potential Upside : 6% What s Changed? Target Unchanged EPS FY16P Changed from 23.9 to 22.2 EPS FY17E Changed from 34.6 to 35. EPS FY18E Changed from 48.3 to 49.2 Rating Unchanged Standalone Quarterly Performance Q4FY16 Q4FY15 YoY (%) Q3FY16 QoQ (%) Revenue 1,396.3 1,23.7 16. 1,38.5 1.1 EBITDA 183.8 174.5 5.3 182.6.7 EBITDA (%) 13.2 14.5-133 bps 13.2-6 bps Adj. Net Profit 75.7 77. -1.7 13.9-42.2 Key Financials ( Crore) FY15 FY16P FY17E FY18E Revenues 5178.5 685.6 7126.1 8168.9 EBITDA 734.7 782.3 167.3 135.3 Adjusted PAT 326.5 31.9 486.4 684.4 Adj. EPS ( ) 23.7 22.2 35. 49.2 Valuation summary FY15 FY16E FY17E FY18E PE (x) 55. 56.5 38.5 27.3 EV to EBITDA (x) 27.5 26.7 19.3 15.3 Target EV/EBITDA (x) 28.6 26.9 19.7 16.1 Price to book (x) 5.9 5.4 4.9 4.2 RoNW (%) 1.4 8.9 12.6 15.4 RoCE (%) 9.9 8.2 1.9 13.3 Stock data Particular Amount Market Capitalisation 1871 crore Debt (FY16P) 2478 crore Cash (FY16P) 398 crore EV 2781 crore 52 week H/L 1544/115 Equity capital 69.6 crore Face value 5 Price performance (%) 1M 3M 6M 1Y Apollo Hospitals 1.1-7.3.8 4.9 Fortis Healthcare -5.2.2 5.7 -.7 May 26, 216 Apollo Hospitals (APOHOS) 1344 Subdued numbers; expansion affect margins Revenues increased 16% YoY to 1396 crore (I-direct estimate: 1494 crore) on the back of 8.5% YoY increase in healthcare business to 787 crore (I-direct estimate: 858 crore) and 27.4% YoY increase in pharmacy business to 69 crore (I-direct estimate: 637 crore) EBITDA margins declined 133 bps to 13.2% (I-direct estimate: 14.%) due to higher marketing expenditure. EBITDA increased 5.3% YoY to 184 crore (I-direct estimate: 21 crore) Adjusted net profit de-grew 1.7% to 76 crore (I-direct estimate: 17 crore) on account of higher interest cost and depreciation Healthcare business growth to piggyback on sustained expansion The healthcare services segment (51% of the consolidated revenues) has grown at a CAGR of 13.1% in FY11-16P on account of incremental hospital addition in all three clusters i.e. Chennai, Hyderabad and Others. Rapid expansion and maturity of older hospitals has kept the overall growth tempo at ~14% per annum. The next phase of expansion includes addition of 145 beds to the existing network of 42 hospitals and 762 beds (own hospitals) by FY19 with an additional capex of 936.3 crore. This is likely to put some pressure on EBITDA margins in the short to medium term. However, in the past, the company has demonstrated its ability to balance between expansion and margins. By acquiring Nova speciality and Assam hospitals the company has also adopted for inorganic route for expansion. We expect more focus in improvement of important parameters such as average length of stay (ALOS) and average revenue per operating bed (AROPB), which were flat in the last few quarters on account of incremental bed additions. We expect healthcare sales to grow at a CAGR of 15.2% in FY16P-18E to 498.7 crore as the company keeps on investing in new assets. Pharmacy business EBITDA positive; candidate for value unlocking The pharmacy business (39% of consolidated revenues) has grown at a CAGR of ~29% in the last five years on the back of consistent addition of new pharmacies and timely closure of non-performing pharmacies. This business has become EBITDA positive as old stores are maturing and making contribution. We expect the pharmacy business to grow at a CAGR of 18.8% in FY16P-18E to 3278.1 crore on the back of higher sales from existing stores. The company has added 63 stores in Q4FY16 taking total stores to 2326. In the last three years, we have seen strong improvement in revenues per store from 15 lakh in FY11 to 28 lakh in FY16P. The Hetero acquisition may put some pressure on margins initially but augurs well in the long run. Margin improvement, return ratios key in competitive scenario Q4 revenues were largely driven by strong growth in pharmacy segment led by Hetero acquisition. However, high growth in low margin pharmacy business has dragged down over margins. With more and more players getting listed in the healthcare space, we believe scrutiny for margin improvement and improvement in return ratios is likely to intensify. The newly commissioned hospitals have achieved the BE level fairly ahead of our expectations. Focus now is likely to shift to operational gauges for different cluster hospitals as the current phase of capex cycle nears the end. On the pharmacy front, margins showed substantial improvement in the last few quarters. We continue to value the stock on SOTP basis by valuing the healthcare business at 15x FY18E EV/EBITDA and pharmacy business at 1.5x FY18E EV/sales. We maintain our target price at 142. We continue to monitor progress on margins as well return ratios. ICICI Securities Ltd Retail Equity Research

Variance analysis Q4FY16 Q4FY16E Q4FY15 Q3FY16 YoY (%) QoQ (%) Comments Revenue 1,396.3 1,494.1 1,23.7 1,38.5 16. 1.1 Growth driven by 27.4% growth in pharmacy segment Raw Material Expenses 734.9 798.4 629.9 737.7 16.7 -.4 Employee Expenses 225.5 24.5 191.1 222.2 18. 1.5 Marketing Expenses 48.3 48.5 34. 44.9 41.9 7.7 Other expenditure 23.8 197. 174.1 193.2 17. 5.5 EBITDA 183.8 29.7 174.5 182.6 5.3.7 EBITDA (%) 13.2 14. 14.5 13.2-133 bps -6 bps EBITDA was impacted mainly due to increase in marketing expenses Interest 43.8 32. 22.6 32. 94.3 36.8 Depreciation 56.8 5.1 4.6 5.1 39.8 13.4 YoY increased due to commissioning of new hospitals and amortization of goodwill for Hetero pharmacy acquisition Other Income 5.3 6. 4.8 55. 9.3-9.4 PBT before EO & Forex 88.5 133.6 116.1 155.4-23.8-43.1 EO.. -.5 25.7.. PBT after Exceptional Items 88.5 133.6 116.6 129.7-24.2-31.8 Tax 12.8 26.7 39.3 2.5-67.5-37.6 YoY decline due to applicability of 15% deduction under the Income Tax Act Tax rate (%) 14.4 2. 33.7 15.8-57.1-8.5 Adj. Net Profit 75.7 16.9 77. 13.9-1.7-42.2 YoY decreased due to lower operational performance, higher interest expenses and depreciation EPS ( ) 5.4 7.7 5.6 7.9-2.1-3.7 Key Metrics Healthcare Services 787.4 857.5 725.8 769.1 8.5 2.4 Growth mainly driven by new hospital additions. Pharmacy 69. 636.8 478. 611.5 27.4 -.4 Growth driven by integration of Hetero pharmacy, 63 net stores addition and traction from mature stores Change in estimates FY17E FY18E ( Crore) Old New % Change Old New % Change Comments Revenue 7,25.7 7,126.1-1.1 8,261. 8,168.9-1.1 EBITDA 1,82.4 1,67.3-1.4 1,321.1 1,35.3-1.2 EBITDA Margin (%) 15. 15. -2 bps 16. 16. -2 bps PAT 482. 486.4.9 671.9 684.4 1.9 EPS ( ) 34.6 35. 1. 48.3 49.2 1.8 Assumptions Current Earlier (% Growth) FY15 FY16P FY17E FY18E FY17E FY18E Healthcare Services 2,82.7 3,85.8 3,564.1 4,98.7 3,644.8 4,191.5 Pharmacy 1,772.6 2,323.7 2,865.8 3,278.1 2,827.2 3,236. ICICI Securities Ltd Retail Equity Research Page 2

Company Analysis Established in 1983, the company is one of the few listed players in the healthcare space. It derives revenues from two broader segments in the standalone accounts- 1) healthcare services i.e. hospitals and 2) standalone pharmacies. In consolidated accounts, other reporting segments are 1) hospital revenues from JVs, subsidiaries and associates, 2) Apollo-Munich Health insurance JV, 3) Apollo Health & Lifestyle Ltd, which is the retail healthcare business of Apollo Hospitals. Apollo owns 69 hospitals with a total bed capacity of 9554 beds. Of these 69 hospitals, 42 are owned by the company (including JVs, subsidiaries and associates) while eight are managed by the company with 1434 beds and 19 are day care/ short surgical stay centres and cradle with 5 beds. This business has been categorised as healthcare business and comprises ~57% of standalone revenues. In case of managed hospitals, the company charges 5-6% management fees to third party hospitals for project management and consultancy covering all facets of development and operation of a hospital, including market research, technical design, arranging finance, hiring manpower and running the facility. The healthcare segment has been divided into three clusters- 1) Chennai, 2) Hyderabad, and 3) Others which include hospitals located in Madurai, Karur, Karaikudi, Trichy, Mysore, Vizag, Pune, Karimnagar, Bilaspur, Bhubaneswar, Vanagaram, Nasik, Nellore, Jayanagar, etc. In June 215, the company acquired a 51% stake in Assam Hospitals Ltd, which runs a 22 bed hospital in Guwahati. Apollo Healthcare and Lifestyle Ltd (AHLL) subsidiary covers the retail healthcare business of the Apollo group, comprising Apollo Clinics, Apollo Sugar, White Dental, Apollo Day Surgery Centres and Apollo Cradle. AHLL reported 124.2 crore of sales in FY16. Apollo Sugar Clinics is a one stop shop for diabetics and offer packages to better manage diabetes through a combination of prescriptions, dietary, exercise regimens and other lifestyle changes apart from management of diabetes related complications. Sanofi has 2% stake in Apollo Sugar Clinics business. The company has 26 Apollo Sugar Clinics. Apollo Day Surgery centres focus on planned surgeries done in a day/short stay basis. The company has 12 centres as of FY16. Apollo Cradle denotes lifestyle birthing centres. It has launched the first Apollo Cradle in Delhi a decade ago and currently has three centres in the network, and plans to add five more centres - two in Hyderabad, two in Delhi and one in Bengaluru. In FY15, AHLL acquired 11 day and short stay surgery centres (over 35 beds) from Nova Specialty Hospitals with a presence in eight cities across India. This acquisition provides APL an opportunity to provide quality healthcare delivery closer to the home and also entry in new markets such as Mumbai, Jaipur and Kanpur In case of standalone pharmacies, which is basically drug stores chain selling prescription, OTC and private label FMCG products, the company owns 2326 stores. In FY15, the company acquired Hyderabad-based ICICI Securities Ltd Retail Equity Research Page 3

Hetero Med Solutions (HMSL). HMSL has ~32 stores across Telangana, Andhra Pradesh and Tamil Nadu Overall, we expect revenues to grow at a CAGR of 15.9% in FY15-18E to 8261 crore. Exhibit 1: Revenues to grow at CAGR of 15.9% in FY16P-18E 9 8 7 6 5 4 3 2 1 15.9% CAGR 8168.9 18.2% CAGR 7126.1 685.6 5178.5 4384.2 3768.7 3147.5 265.4 Revenues The healthcare services segment (51% of the consolidated revenues) has grown at a CAGR of 13% in FY11-16P on account of incremental hospital addition in all three clusters i.e. Chennai, Hyderabad and Others. Rapid expansion and maturity of older hospitals has kept the overall growth tempo at ~14% per annum. The next phase of expansion includes addition of 145 beds to the existing network of 42 hospitals and 762 beds (own hospitals) by FY19 with an additional capex of 936.3 crore. This is likely to put some pressure on EBITDA margins in the short to medium term. However, in the past, the company has demonstrated its ability to balance between expansion and margins. By acquiring Nova speciality and Assam Hospitals, the company has also adopted the inorganic route for expansion. We expect more focus in improvement of important parameters such as average length of stay (ALOS) and average revenue per operating bed (AROPB), which have been flat in the last few quarters on account of incremental bed additions. We expect healthcare sales to grow at a CAGR of 15.2% in FY16P-18E to 498.7 crore as the company keeps on investing in new assets. Exhibit 2: Healthcare services to grow at CAGR of 15.2% in FY16P-18E 45 4 35 3 25 2 15 1 5 15.2% CAGR 498.7 3564.1 13.1% CAGR 282.7 385.8 2497.1 2216.7 194.2 1671.2 Healthcare Services The pharmacy business (39% of consolidated revenues) has grown at a CAGR of ~29% in the last five years on the back of consistent addition of new pharmacies, timely closure of non-performing pharmacies and acquisition of Hetero s pharmacy chain. This business has become ICICI Securities Ltd Retail Equity Research Page 4

EBITDA positive as more and more old stores are maturing and making contribution. We expect the pharmacy business to grow at a CAGR of 18.8% in FY16P-18E to 3278.1 crore on the back of higher sales from existing stores. The company has added 63 stores in Q4FY16 taking total stores to 2326. In the last three years we have seen strong improvement in revenues per store from 15 lakh in FY11 to 28 lakh in FY16P. The pharmacy business is also a candidate possible value unlocking. Exhibit 3: Pharmacy business to grow at CAGR of 18.8% in FY16P-18E 35 3 18.8% CAGR 2865.8 3278.1 25 28.6% CAGR 2323.7 2 15 1 661.4 86.6 111.7 1364.8 1772.6 5 Pharmacy Exhibit 4: Subsidiaries & others to grow at CAGR of 12% in FY16P-18E 35 12% CAGR 326.6 285.6 291.6 3 11.1% CAGR 249.7 26.4 25 215. 2 153.7 153. 15 1 5 Subsidiaries & consulting fees Source: Company, ICICIdirect.com, Research Exhibit 5: JVs sales to grow at CAGR of 15% in FY16P-18E 5 15.4% CAGR 466.7 45.8 4 35.7 17.4% CAGR 37.9 3 272.9 235.8 194.5 2 157.1 1 Add JV Source: Company, ICICIdirect.com, Research Exhibit 6: EBITDA to grow at CAGR of 29.2% in FY16P-18E 14 135.3 2 12 1 8 6 4 2 16.1 16.3 16.1 68.2 513.1 418.3 672.4 15.3 734.7 14.2 782.312.9 167.3 15. 16. 16 12 8 4 (%) EBITDA EBITDA Margins (%) ICICI Securities Ltd Retail Equity Research Page 5

Exhibit 7: Net profit to grow at CAGR of 43.8% in FY16P-18E 8 7 684.4 12 6 5 4 3 2 7.1 6.9 183.9 218.6 7.3 7.2 275.5 316.8 6.6 339.9 331. 5.4 486.4 6.8 8.4 8 4 (%) 1 Net Profit Net Profit Margins (%) Exhibit 8: Trends in return ratios (%) 18 16 14 12 1 8 6 4 2 15.4 12.6 1.8 11. 11.8 11.3 9.9 13.3 1.9 9.9 8.2 9.8 1.6 1.4 8.7 8.9 RoCE (%) RoNW (%) ICICI Securities Ltd Retail Equity Research Page 6

Exhibit 9: Trends in Standalone quarterly financials Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16 Q3FY16 Q4FY16 YoY (%) QoQ (%) Total Operating Income 895. 975.1 993.3 998.2 153.7 1152.9 1182.5 123.7 1269.2 1367.3 138.5 1396.3 16. 1.1 Raw Material Expenses 463.7 55.7 519.2 513.3 553.2 68.8 632.1 629.9 672.5 732.6 737.7 734.9 16.7 -.4 as % revenues 51.8 51.9 52.3 51.4 52.5 52.8 53.4 52.3 53. 53.6 53.4 52.6 Gross Profit 431.3 469.3 474.2 484.9 5.5 544.1 55.5 573.8 596.7 634.7 642.8 661.4 15.3 2.9 GPM (%) 48.2 48.1 47.7 48.6 47.5 47.2 46.6 47.7 47. 46.4 46.6 47.4 Employee Expenses 139.1 151.3 157.2 162.7 17.7 179.5 179.7 191.1 193.1 24.8 222.2 225.5 18. 1.5 as % revenues 15.5 15.5 15.8 16.3 16.2 15.6 15.2 15.9 15.2 15. 16.1 16.1 Marketing Expenses 21.3 24.2 26.6 3.8 29.8 35.9 39. 34. 4.2 41.4 44.9 48.3 41.9 7.7 as % revenues 2.4 2.5 2.7 3.1 2.8 3.1 3.3 2.8 3.2 3. 3.2 3.5 Other expenditure 125. 133.7 132.6 141.4 143.7 156.1 157.2 174.1 178.1 195.4 193.2 23.8 17. 5.5 as % revenues 14. 13.7 13.3 14.2 13.6 13.5 13.3 14.5 14. 14.3 14. 14.6 Total expenditure 749.1 815. 835.6 848.1 897.4 98.3 17.8 129.2 183.9 1174.2 1197.9 1212.4 17.8 1.2 EBITDA 145.9 16.1 157.8 15.1 156.3 172.6 174.7 174.5 185.3 193.2 182.6 183.8 5.3.7 EBITDA Margins (%) 16.31 16.42 15.88 15.3 14.83 14.97 14.77 14.5 14.6 14.13 13.23 13.17-133 bps -6 bps Depreciation 3.7 31.7 33.5 33.1 39.9 38.9 38.6 4.6 45. 46.2 5.1 56.8 39.8 13.4 Interest 2.5 22.6 23.1 2.9 18.9 2.1 21.7 22.6 26.9 3.9 32. 43.8 94.3 36.8 Other Income 6.2 5.5 3.8 7. 6.5 8.2 25.8 4.8 4.2 4.5 55. 5.3 9.3-9.4 PBT 1.9 111.3 15. 13. 13.9 121.8 14.2 116.1 117.6 12.6 155.4 88.5-23.8-43.1 Less: Exceptional Items...... -15.2.5.. -25.7. Total Tax 22. 24.3 21.5 21.7 21.2 3.3 3. 39.3 22.5 26.9 2.5 12.8-67.5-37.6 Tax rate (%) 21.8 21.8 2.5 21. 2.4 24.9 21.4 33.8 19.2 22.3 13.2 14.4 Net Profit 78.9 87. 83.4 81.3 82.7 91.5 95. 77.3 95. 93.7 19.2 75.7-2.1-3.7 Net Profit Margin (%) 8.8 8.9 8.4 8.1 7.9 7.9 8. 6.4 7.5 6.9 7.9 5.4 EPS (Adjusted) 5.7 6.3 6. 5.8 5.9 6.6 6.8 5.6 6.8 6.7 7.9 5.4 Exhibit 1: Standalone healthcare service performance ( Crore) Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16 Q3FY16 Q4FY16 YoY (%) QoQ (%) Sales 59.9 636.5 636.3 633.4 667.6 715.8 711.5 725.8 745. 784.4 769.1 787.4 8.5 2.4 EBITDA 136.9 149. 145.5 137.5 144.3 158.2 173.2 158.2 162.2 171.8 158.2 165.2 4.4 4.4 EBITDA Margins (%) 23.2 23.4 22.9 21.7 21.6 22.1 24.3 21.8 21.8 21.9 2.6 21. Exhibit 11: Standalone pharmacy performance Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16 Q3FY16 Q4FY16 YoY (%) QoQ (%) Sales 34.2 338.6 357.1 364.9 386.2 437.17 471.2 478. 52.1 583.1 611.5 69.1 27.4 -.4 EBITDA 9. 11.1 12.2 12.5 12. 14.4 15.1 15.1 18.9 21.4 24.4 18.6 23.2-23.7 EBITDA Margins (%) 3. 3.3 3.4 3.4 3.1 3.3 3.2 3.2 3.6 3.7 4. 3.1 No of Stores 1526 156 1586 1632 1664 1717 1784 1822 2171 2217 2263 2263 Rev per store ( lakh) 19.9 21.7 22.5 22.4 23.2 25.5 26.4 26.2 24. 26.3 27. 26.9 SWOT Analysis Strengths - Early mover in the healthcare space. Strong balance sheet despite being in a business of higher gestation period. Strong brand value- a significant aspect in this business Weakness - Presence in the low margin pharmacy space Opportunities - Under-penetrated Indian healthcare space with favourable demographics and disease pattern Threats - Too much capacity built-up may lead to lower capacity utilisation and the cost associated with it. ICICI Securities Ltd Retail Equity Research Page 7

Conference call highlights Of the 69 hospitals with total bed capacity of 9,554 beds, 42 are owned hospitals including JVs/ subsidiaries and associates with 7,62 beds, 12 day care/ short surgical stay centres with 34 beds, seven cradles with 16 beds and eight managed hospitals with 1,434 beds. Of the 7,62 owned hospital beds capacity, 6,724 beds were operational and had an occupancy rate of 63%. Total 1,725 beds in 11 locations were commissioned in the last 36 months Vanagaram 26, Jayanagar 14, Trichy 2, Nashik 12, Women and Child OMR 6, Indore 12, Nellore 19, Perungudi 15, Women & Child SMR 5, Vizag new 245, Malleswaram 19. Chennai cluster revenues grew 11% YoY in FY16 to 1378 crore, Hyderabad revenues grew 8% in FY16 to 535.4 crore and revenues from new hospitals grew to 318.7 crore in FY16 from 176.7 crore in FY15. The company plans to add 545 beds in Navi Mumbai (48 beds) and Indore (65 beds). Navi Mumbai hospital is expected to be commissioned by Q2FY17 (15-2 beds initially). The company plans to add another 5 beds in FY19 - South Chennai 2, South Mumbai 3. Hospitals in Vizag and Malleswaram were commercialized in Q4FY16 with ~5% occupancy rate. Total capex estimated for this expansion plan is 152.4 crore. Of this, investment of 584.1 crore has already been made. Balance will be invested through a mix of internal accruals and debt. The company plans expansion of international business in South East Asia along with Africa and the Middle East Currently, 15% of the business can be attributed to international patients. The company expects it to improve to 2-25%, going forward. The company added 251 pharmacy stores and closed 51 stores in FY16, taking the total number of pharmacy stores to 2326. Datar Genetics Limits, centre for molecular and genetic analysis, partnered with Apollo Hospitals to develop, offer and promote precision oncology based on molecular and genetic analysis. These technologies can potentially impact all aspects of cancer management eliminating several painful and ambiguous processes from current treatment modalities. The company entered into an agreement with Patanjali to market its products through Apollo s stores The company expects overall EBITDA margins to reach 2% in five years from 13.7% in FY16. The company gave tax rate guidance of 2-21% for FY17 and FY18 Robotic surgery is growing at 15-2% per annum. Robotic realisation is ~15% higher than normal surgery Change in ARPOB in FY16 was mainly due to volume increase and price hike by ~2% Top five surgeries for Apollo are cardiac, neurology, joint replacement, oncology-chemotherapy and urology ICICI Securities Ltd Retail Equity Research Page 8

Valuation Q4 revenues were largely driven by strong growth in pharmacy segment led by Hetero acquisition. However, high growth in low margin pharmacy business has dragged down over margins. With more and more players getting listed in the healthcare space, we believe the scrutiny for margin improvement and improvement in return ratios is likely to intensify. The newly commissioned hospitals have achieved the BE level fairly ahead of our expectations. Focus now is likely to shift to operational gauges for different cluster hospitals as the current phase of capex cycle nears the end. On the pharmacy front, margins have showed substantial improvement in the last few quarters. We continue to value the stock on SOTP basis by valuing the healthcare business at 15x FY18E EV/EBITDA and pharmacy business at 1.5x FY18E EV/sales. We maintain our target price at 142. We continue to monitor progress on margins as well as return ratios. Exhibit 12: One year forward EV/EBITDA 24 21 18 15 12 9 6 3 Mar-6 Sep-6 Mar-7 Sep-7 Mar-8 Sep-8 Mar-9 Sep-9 Mar-1 Sep-1 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 [ EV 2.1x 19.3x 17.8x 15.6x 14.1x Exhibit 13: Valuation Particulers Valuation Matrix Multiple (x) Enterprise value ( cr) Healthcare EV/EBITDA 15. 15,499 Pharmacy EV/Sales 1.5 4,917.2 Others EV/Sales 1. 792 Net Debt FY18E ( cr) 1,455.7 EV ( cr) 19,752 No of shares (cr) 13.9 Per Share Value ( ) 1,42 Exhibit 14: Valuation Revenues Growth EPS Growth P/E EV/EBITDA RoNW RoCE (%) ( ) (%) (x) (X) (%) (%) FY15 5178 18 23.7 3 27.5 3.9 9.9 11.4 FY16P 686 18 22.2-8 26.7 3.4 8.2 9.4 FY17E 7126 17 35. 61 19.3 2.9 1.9 13.6 FY18E 8169 15 49.2 41 15.3 2.4 13.3 17.5 ICICI Securities Ltd Retail Equity Research Page 9

Company snapshot 1,8 1,6 Target Price: 142 1,4 1,2 1, 8 6 4 2 Jan-1 Apr-1 Jul-1 Oct-1 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Source: Bloomberg, Company, ICICIdirect.com Research Key events Date Sep-8 Jun-9 Event Opens first reach hospital at Karimnagar, Andhra Pradesh Issues 15 unsecured foreign currency convertible bonds of US$1 each to International Finance Corporation aggregating to US$15 million. IFC also granted a loan May-11 Pharmacy business of company turns profitable for first time Sep-12 Government allows foreign direct investment in multi brand retail. Pharmacy business of Apollo Hospitals falls into this category Dec-12 Sells stake in its BPO company Apollo Health Street to US based company Sutherland Global Services. It holds 39.4% in Apollo Health Street Jan-13 Plans to establish a proton therapy centre in India. It will be first of its kind across South East Asia, Africa and Australia. May-13 Apollo Hospitals and Yash Birla Group call off their JV & shut down their plans to set up super specialty hospitals in Thane, Mumbai Sep-14 Enters into agreement to acquire 32 pharmacy stores from Hetero for 146 crore Jan-15 Acquires Bengaluru-based Nova Specialty Hospitals at an estimated cost of 135-145 crore Jun-15 Acquires 51% stake in Assam Hospitals Top 1 Shareholders Rank Investor Name Latest Filing Date % O/S Position Position Chan 1 PCR Investments, Ltd. 31-Mar-16 19.6 27.2m.m 2 Integrated Mauritius Healthcare Holdings, Ltd. 31-Mar-16 1.9 15.1m.m 3 OppenheimerFunds, Inc. 2-Nov-15 1.3 14.3m 2.3m 4 Reddy (Prathap C) 31-Mar-16 3.9 5.4m.m 5 Fidelity Management & Research Company 31-Mar-16 2.6 3.7m 1.7m 6 Reddy (Suneeta) 31-Mar-16 2.4 3.4m.m 7 Schroder Investment Management (Hong Kong) Ltd. 31-Dec-15 2.4 3.3m.3m 8 Schroder Investment Management Ltd. (SIM) 31-Mar-16 2. 2.7m.m 9 Reddy (Sangita) 31-Mar-16 1.8 2.4m.m 1 MEAG Munich ERGO Kapitalanlagegesellschaft mbh 31-Mar-16 1.7 2.4m.m Source: Reuters, ICICIdirect.com Research Shareholding Pattern (in %) Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Promoter 34.4 34.4 34.4 34.4 34.4 FII 43.8 43.8 44.2 44.8 45.3 DII 2.2 2.3 1.8 1.4 1. Others 19.6 19.6 19.6 19.5 19.4 Recent Activity Buys Sells Investor name Value ($) Shares Investor name Value ($) Shares OppenheimerFunds, Inc. 44.7m 2.3m Newton Investment Management Ltd. -32.1m -1.5m Fidelity Management & Research Company 34.m 1.7m William Blair Investment Management, LLC -22.m -1.m Norges Bank Investment Management (NBIM) 7.5m.3m Driehaus Capital Management, LLC -3.4m -.2m Schroder Investment Management (Hong Kong) Ltd. 6.7m.3m Capital International, Inc. -1.6m -.1m Mirae Asset Global Investments (Hong Kong) Limited 4.2m.2m Wellington Management Company, LLP -1.4m -.1m Source: Reuters, ICICIdirect.com Research ICICI Securities Ltd Retail Equity Research Page 1

Financial summary Profit and loss statement Crore (Year-end March) FY15 FY16P FY17E FY18E Revenues 5,178.5 6,85.6 7,126.1 8,168.9 Growth (%) 18.1 17.5 17.1 14.6 Raw Material Expenses 2,581.2 3,55.8 3,616.3 4,145.5 Employee Expenses 86. 1,24.2 1,111.7 1,225.3 Marketing Expenses 155.5 131.2 246.5 282.5 Other expenditure 847. 1,92.1 1,84.4 1,21.2 Total Operating Expenditure 4,443.7 5,33.3 6,58.8 6,863.6 EBITDA 734.7 782.3 1,67.3 1,35.3 Growth (%) 9.3 6.5 36.4 22.3 Depreciation 211.7 253.3 284.8 284.8 Interest 117.9 168.5 179.6 167.1 Other Income 36.8 26.7 19. 21.7 PBT 442. 387.2 621.9 875.1 Total Tax 13. 1.2 13.6 183.8 MI & Profit from Associates 14.5 14.9-4.9-6.9 Adjusted PAT 326.5 31.9 486.4 684.4 Growth (%) 3.1-7.5 61.1 4.7 EPS (Adjusted) 23.7 22.2 35. 49.2 Cash flow statement Crore (Year-end March) FY15 FY16E FY17E FY18E Profit/(Loss) after taxation 339.9 331. 486.4 684.4 Add: Depreciation & Amortization 211.7 253.3 284.8 284.8 Working Capital Changes -27.4-37.1-76.5-6. CF from operating activities 344.1 277.2 694.6 99.2 Change in Capex -738. -877.5-35. -35. (Inc)/dec in Investments 1.9 4.9-4.9. Others 62.3-82.4 78. 9.7 CF from investing activities -664.8-919. -312.9-259.3 Issue of Equity.... Inc/(dec) in loan funds 648. 79.5 178.5-2. Dividend paid & dividend tax -96.4-76. -87.4-95.6 Others -127.8 28.4.. CF from financing activities 423.8 662. 91.1-295.6 Net Cash flow 13.2 2.2 472.8 354.2 Opening Cash 274.2 377.3 397.6 87.4 Closing Cash 377.3 397.6 87.4 1,224.6 Free Cash Flow -393.8-6.2 344.6 559.2 Balance sheet Crore (Year-end March) FY15 FY16E FY17E FY18E Equity Capital 69.6 69.6 69.6 69.6 Reserve and Surplus 3,1.6 3,384.1 3,783. 4,371.8 Total Shareholders funds 3,17.2 3,453.6 3,852.6 4,441.3 Total Debt 1,992.3 2,71.8 2,88.3 2,68.3 Deferred Tax Liability 422.2 497.7 523.8 56.6 Minority Interest 74.2 13.3 135.2 142.1 Long term provisions 3.4 3.2 5.2 7.2 Other Non Current Liabilities 5. 1.3 1.3 1.3 Total Liabilities 5,667.3 6,787.9 7,398.4 7,832.8 Gross Block - Fixed Assets 4,43.5 4,793.5 5,143.5 5,493.5 Accumulated Depreciation 1,1.7 1,263.9 1,548.8 1,833.6 Net Block 3,32.8 3,529.5 3,594.7 3,659.9 Capital WIP 532.6 613.3 613.3 613.3 Net Intangible assets 46.1 46.1 46.1 46.1 Goodwill on Consolidation 165.2 212. 212. 212. Total Fixed Assets 3,776.8 4,41. 4,466.1 4,531.3 Investments 31.6 269.7 31.6 31.6 Inventory 35.3 443.3 524.1 6.7 Debtors 69.3 72. 829.9 951.3 Loans & Advances, & other CA 456.4 645.6 625.8 594.1 Cash 377.3 397.6 87.4 1,224.6 Total Current Assets 1,793.3 2,188.4 2,85.2 3,37.7 Creditors 419.1 53.7 595.5 682.6 Provisions & Other CL 393. 376.2 396.8 416. Total Current Liabilities 812.1 879.9 992.3 1,98.7 Net Current Assets 981.2 1,38.5 1,857.9 2,272.1 Long term loans & advances 578.5 795.3 745.3 695.3 Deferred Tax Assets 2.3 13.4 18.4 23.4 Application of Funds 5,667.3 6,787.9 7,398.4 7,832.8 Key ratios (Year-end March) FY15 FY16E FY17E FY18E Per share data ( ) Adjusted EPS 23.7 22.2 35. 49.2 BV per share 227.9 248.2 276.9 319.2 Dividend per share 6.9 5.5 6.3 6.9 Cash Per Share 27.1 28.6 62.6 88. Revenue per Share 372.2 437.4 512.2 587.2 Operating Ratios (%) Gross Profit Margins 5.2 49.8 49.3 49.3 EBITDA margins 14.2 12.9 15. 16. Net Profit margins 6.4 5.1 6.8 8.4 Inventory days 24.7 26.6 26.8 26.8 Debtor days 42.9 42.1 42.5 42.5 Creditor days 29.5 3.2 3.5 3.5 Asset Turnover.9.9 1. 1. EBITDA Conversion Rate 46.8 35.4 65.1 69.7 Return Ratios (%) RoE 1.4 8.9 12.6 15.4 RoCE 9.9 8.2 1.9 13.3 RoIC 11.4 9.4 13.6 17.5 Valuation Ratios (x) P/E 55. 56.5 38.5 27.3 EV / EBITDA 27.5 26.7 19.3 15.3 EV / Net Sales 3.9 3.4 2.9 2.4 Market Cap / Sales 3.6 3.1 2.6 2.3 Price to Book Value 5.9 5.4 4.9 4.2 Solvency Ratios Debt / EBITDA 2.7 3.5 2.7 2.1 Debt / Equity.6.8.7.6 Current Ratio 1.7 2. 2. 2.. ICICI Securities Ltd Retail Equity Research Page 11

ICICIdirect.com coverage universe (Healthcare) Company I-Direct CMP TP Rating M Cap EPS ( ) PE(x) EV/EBITDA (x) RoCE (%) RoE (%) Code ( ) ( ) ( Cr) FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E Ajanta Pharma AJAPHA 1467 1,78 Buy 12911.2 36. 45.7 52.4 4.7 32.1 28. 26.8 23.3 19.9 5.3 43.7 37.9 37.8 34.4 3. Apollo Hospitals APOHOS 1343 1,42 Hold 18955.1 23.7 22.2 35. 56.6 6.5 38.4 27.5 26.7 19.3 9.9 8.2 1.9 1.4 8.9 12.6 Aurobindo Pharma AURPHA 727 99 Buy 42541.8 28.1 33.9 37.7 25.9 21.4 19.3 3.7 25.1 22. 23.4 24.7 25. 31.7 28.7 24.7 Alembic Pharma ALEMPHA 542 62 Hold 1219.5 15.1 38.2 19.6 35.9 14.2 27.6 32.2 12.6 23.9 3.7 58. 24.8 32.1 51.5 22.3 Biocon BIOCON 642.9 56 Hold 12857. 2.4 22.1 28.3 31.5 29.1 22.7 8.3 7.6 6.4 1.4 9.1 1.9 12.5 1.9 12.7 Cadila Healthcare CADHEA 318 39 Buy 3257.4 11.2 15. 15.5 28.4 21.3 2.5 2.3 14.5 14.4 2.7 27.9 24.6 27. 28.6 24.4 Cipla CIPLA 494.9 47 Hold 39763.1 14.7 18.8 19.9 33.7 26.4 24.8 17.8 16.7 14.8 13.8 12.1 13.1 1.9 12.7 12.1 Divi's Laboratories DIVLAB 132 1,32 Buy 27383.1 32.1 4.2 46.7 32.2 25.7 22.1 22.3 18.7 15.9 29.4 31.3 31.1 24.4 25.6 25.1 Dr Reddy's Labs DRREDD 2974 3,48 Buy 51613.1 129. 142.1 139.2 23. 2.9 21.4 14.4 12.6 12.3 16.7 15.1 15.1 22.3 18.9 16.1 Glenmark Pharma GLEPHA 858 1, Buy 24229.6 23.1 32.2 41.4 37.1 26.7 2.7 22.2 16.8 13.8 13.3 16.2 18.8 21.7 21.2 21.7 Indoco Remedies INDREM 263.2 39 Buy 2424.9 9. 9.3 15.6 29.3 28.4 16.9 15.9 14.8 1.7 16.4 15.4 22.2 16. 14.7 2.8 Ipca Laboratories IPCLAB 44 515 Hold 5552.8 19.9 12.1 24.7 22.1 36.4 17.8 13.5 18.2 12.2 11.5 6.7 11.7 11.4 6.6 12.2 Jubilant Life Sciences VAMORG 343 45 Buy 5657.5 -.6 26. 41.6 NA 13.2 8.2 14.3 7.5 6.1 5.8 12. 15.1 NA 14.2 18.9 Lupin LUPIN 1466 1,85 Buy 666.9 53.6 5.4 66. 27.3 29.1 22.2 18.3 19.8 13.8 35.1 18.6 22.5 27.1 2.7 22.1 Natco Pharma NATPHA 447.4 63 Buy 7791.7 8.3 7.5 11.6 53.8 6. 38.4 35.3 29.3 21.6 15.4 13. 16.5 17.9 1. 13.8 Sun Pharma SUNPHA 773 845 Hold 185994. 19.8 23.6 28.4 39. 32.7 27.2 24.1 21.2 17.7 18.8 2. 21.1 18.6 18.8 19.1 Syngene International SYNINT 399 445 Buy 7971. 8.8 11.1 15.6 43.3 34.2 24.3 26.6 2.9 17. 19.5 13.3 16.7 2.7 21.2 23.5 Torrent Pharma TORPHA 1356 1,65 Buy 22944.5 44.4 115.5 67.8 3.6 11.7 2. 23.7 8. 13.5 2.1 51.1 27. 3.2 57.7 27. Unichem Laboratories UNILAB 267.7 31 Buy 2431.9 8.3 12.3 15.5 32.2 21.7 17.2 23.3 14.7 11.7 8.5 13.8 16.2 8.7 11.7 13.4 ICICI Securities Ltd Retail Equity Research Page 12

RATING RATIONALE ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock. Strong Buy: >15%/2% for large caps/midcaps, respectively, with high conviction; Buy: >1%/15% for large caps/midcaps, respectively; Hold: Up to +/-1%; Sell: -1% or more; Pankaj Pandey Head Research pankaj.pandey@icicisecurities.com ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai 4 93 research@icicidirect.com ICICI Securities Ltd Retail Equity Research Page 13

ANALYST CERTIFICATION We /I, Siddhant Khandekar, CA INTER and Mitesh Shah, MS (finance), Nandan Kamat MBA Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Terms & conditions and other disclosures: ICICI Securities Limited is a Sebi registered Research Analyst having registration no. INH99. ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is India s largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. ( associates ), the details in respect of which are available on www.icicibank.com. ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this company, or in certain other circumstances. This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice. ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months. ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction. ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned in the report in the past twelve months. ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts have any material conflict of interest at the time of publication of this report. It is confirmed that Siddhant Khandekar, CA INTER and Mitesh Shah, MS (finance), Nandan Kamat MBA, Research Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. ICICI Securities or its subsidiaries collectively or Research Analysts do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the research report. Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject company/companies mentioned in this report. It is confirmed that Siddhant Khandekar, CA INTER and Mitesh Shah, MS (finance), Nandan Kamat MBA, Research Analysts do not serve as an officer, director or employee of the companies mentioned in the report. ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report. We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. ICICI Securities Ltd Retail Equity Research Page 14