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Year 2019 - Equity Market
Outlooko 2019 will be a challenging and volatile year
o Global economies likely to exhibit slowdown in growth, Indian economy
poised to grow driven by consumption and recovery in private capex
o Commodity prices including crude oil likely to remain stable, inflation to also
remain contained, rate hike cycle likely to come to an end
o Run up to National Elections to see volatile and range bound markets,
Political clarity to ensure better fund flows to Emerging Markets including
India in 2HCY19
o Bottom up market, remain focused on stock specific triggers including
earnings visibility and valuations
Source- internal research
What is IDBI Healthcare
Fund ?o This is a Sectoral Scheme
o Primary focus is on the growing companies in the Healthcare and allied
sectors
o Stock selection is based on sustainable long term growth potential and
sound technical expertise
o Bottom up stock picking strategy for investment
o Portfolio will mainly consist of stocks of the companies engaged in
Healthcare, Pharmaceuticals, Hospitals, Diagnostics, Medical Insurance,
Medical supplies and equipment, Wellness etc.
o Investment across Market Capitalizations
o Upto 20% allocation to ‘other than healthcare and allied sectors’ stocks,
which offers diversification in the Scheme
o Concentrated portfolio, focused on one sector. Hence has a high risk
profile and is a long term product.
High Risk High Return
Profile
Categories as applicable for Equity Oriented Schemes are mentioned above
Arbitrage Fund
Index Fund
Large Cap Fund
Multi Cap Fund
Mid Cap Fund
Small Cap Fund
Sectoral
/Thematic Fund
0
0.5
1
1.5
2
2.5
3
3.5
4
Arbitrage Fund Index Fund Large Cap Fund Multi Cap Fund Mid Cap Fund Small Cap Fund Thematic / Sector
Fund
Pro
du
ct R
isk
(%
)
Product Returns Potential (%)
IDBI
Healthcare
Fund
Who should Invest?
o Investors looking for growth opportunities available in
Healthcare and allied sectors
o Investors with long term investment horizon i.e. 3 years and
more
o Regular Investors willing to have a tactical allocation to their
overall equity portfolio
o Investors with relatively high risk appetite and looking for
capital appreciation on their investments
Components of the
Healthcare Sector
Source : India Brand Equity Foundation (IBEF)
IDBI Healthcare Fund seeks to invest in companies engaged in Healthcare &
Allied sectors including Hospitals, Pharmaceutical, Diagnostics, Medical
equipment and supplies and Medical Insurance etc.
Indian Healthcare Sector –
Structural Growth Story
o Healthcare has become one of India's largest sectors both in terms of
revenue and employment and is hence a critical industry.
o India is one of the fastest growing economies in the world, and healthcare
spends rise as GDP and per capita income increases.
o Healthcare spends currently very low compared to other countries.
o Introduction of schemes like Ayushman Bharat, which shows the intent of
the Government to keenly focus on greater healthcare penetration.
o Increased consumer spending, rapid urbanisation, rising healthcare
insurance are key factors which should help the market grow well over the
next 5-10 years.
Indian Healthcare Sector –
Structural Growth Story o Favourable demographics in terms of growing population including large proportion of
elderly people, combined with increasing life expectancy
o Rise of New segments in the past few years – health insurance, hospitals, diagnostic
companies – all fast growing and under penetrated segments in the country today
o Investment in Research & Development (R&D) by companies paying off as topline growth
has started to accelerate
o India still remains the largest outsourcer of pharmaceutical products to developed
markets like the US, owing to better cost metrics – volume growth seen despite pricing
issues
o Due to the above factors , Demand for Healthcare to remain structurally strong
o Post FY16, the sector saw a meaningful correction, however valuations now appear to be
reasonable
India’s GDP Growth – set to
outpace peers
2019 are Forecast figures. Source- International Monetary Fund (IMF)
More importantly, per capita GDP
is growing..
Per capita GDP at current prices for 2018 was US$ 2,134.75
2019 to 2023 are Forecast figures. Source- International Monetary Fund (IMF)
Indian Healthcare industry spends
among the lowest in the world but
growing fast
Per capital spending on Healthcare in India remains among the
lowest in the world
Source : India Brand Equity Foundation (IBEF)- December 2018
Government spending via Ayushman
Bharat Yojana
o Ayushman Bharat Yojana or Pradhan Mantri Jan Arogya Yojana (PMJAY) or National
Health Protection Scheme is a centrally sponsored scheme launched in 2018, under
the Ayushman Bharat Mission of Ministry of Health and Family Welfare (MoHFW)
o It is an umbrella of two major health initiatives namely
– National Health Protection Scheme(NHPS):
It will cover over 10 crores poor and vulnerable families (approximately 50 crores
beneficiaries) providing coverage up to 5 lakhs rupees per family per year for
secondary and tertiary care hospitalization.
– Health and Wellness centers
Rs 1200 crore allocated for 1.5 lakhs health and wellness centers
Under this 1.5 lakhs centers will be setup to provide comprehensive health care,
including for non-communicable diseases and maternal and child health
services, apart from free essential drugs and diagnostic services.
o The scheme is set to benefit hospitals and diagnostic centers as more patients obtain
medical treatment
Increase in lifestyle diseases and
growing awareness
o The purported rise of lifestyle diseases in
India is expected to boost industry sales
figures
o Increased incidences such as heart disease,
obesity and diabetes have contributed to
rising healthcare spending by individuals
o Growing health awareness and
precautionary treatments coupled with
improved diagnostics are resulting in an
increase in hospitalization
o CAGR of hospitalized cases from 2008 –
2018:
– Cardiac – 18%
– Oncology - 16%
– Diabetes - 19%
Source- Apollo Hospitals- September 2018 Presentation, IBEF
Domestic Pharma Market
o Underpenetrated segment, with significant investments being made, should grow by a 12-14%
CAGR over the foreseeable future
o Chronic is the fastest growing segment and comprises of lifestyle diseases including Diabetes,
Cardiovascular, problems of the Central Nervous System, Hypertension, Cancer, Brain Disease etc.
o Companies with significant presence in the chronic segment showing revenue and profitability
growth
Year Market size Rs. Cr. Growth Rate %
FY09 35,367 10.1
FY10 41,700 17.7
FY11 48,239 15.3
FY12 55,507 15
FY13 61,189 10.1
FY14 72,820 6.2
FY15 76,412 13
FY16 87,875 13.5
FY17 1,11,135 10.3
FY18 1,19,386 5.7
Source: IMS, AIOCD AWACS data. Disclaimer: The information herein is used for comparison and illustration
purpose. Past performance may or may not be sustained in future .
US – Remains a Key Market
o India is one of the world’s largest provider of generic medicines (formulations and APIs)
accounting for 20% of global exports, with the US being the biggest export destination.
o Nearly 40% of India’s formulations exports were to the US, with India accounting for 22%
of global U S Food and Drug Administration (USFDA) approved plants
o Indian companies benefitted from the rush of large products going off patent in the US,
which allowed them to manufacture generic products at about 1/3rd the US price.
o India continues to have cost advantages and skilled manpower
o Strong growth seen in such traditional products till FY16. Thereafter, increased
competition and lower pricing in these products impacted sales and profits
o US however remains one of the largest markets for Indian companies and we are
positive on a robust recovery in US sales, led by new opportunities in more complex and
limited competition products Source-India Brand Equity Foundation (IBEF)
Complexity drives US
Market Opportunity
o The US market offers a large $105 bn opportunity in highly complex products and
new segments like Biosimilars
o Several Indian Pharmaceutical companies have invested significantly in R&D over
the past few years (approx. 8%-13% of sales), with a focus on complex and limited
competition products and they will benefit from this opportunity
Source : Edelweiss Securities Ltd
Figures In billion (bn)
US FDA Issues Likely to
Reduce
o Over the past five years, there has been enhanced scrutiny of
the US FDA (Food and Drug Administration) on Indian
Pharmaceutical companies’ factories/plants
o Several plants had received warning letters or import alerts
o Indian companies have invested in improving manufacturing
processes to align with global standards
o Incremental negative news on plant related observations
could reduce
Disruptions are Temporary,
Expect Rebound
o The Indian healthcare sector witnessed two years of negative returns driven by
several factors, both in the domestic market as well as in the US market
o In the Domestic market, drug price controls had severely impacted the pricing
power of companies and caused margins to contract meaningfully
o A similar story was seen in the US, where after years of slow pace of approvals,
the US FDA more than doubled the number of generics allowed into the market
and this caused a sharp erosion in US prices, thereby impacting profitability of
one of the most lucrative markets for Indian Pharma companies
o The industry has however now bottomed out, with much of the pricing impact
already done.
o Given the structural demand for generic products in India as well as the US, the
Indian Pharma companies are expected to perform well
Sector profitability appears to
have bottomed out
The sector has seen a sharp decline in margins driven by poor domestic and US
pricing environment and higher competition.
We believe the worst is done in terms of margin and profitability declines, and
financial metrics should improve from here. Source : Edelweiss Securities Ltd
21.0
22.0
23.0
24.0
25.0
26.0
27.0
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18
EBITDA Margins %
The information herein is used for comparison and illustration purpose. Past performance may or may not be sustained
in future .
….And set to Rebound
o Indian Healthcare sector has historically traded at a meaningful premium to the Nifty
50 Index
o FY15 was the peak year in terms of earnings growth and PE multiple, after which the
sector witnessed 3 years of lower earnings growth due to both domestic as well as US
factors
o Structural story remains intact, will see an improvement in earnings in FY19 and FY20
and potentially increase the premium of the sector to the Nifty 50 Index
Date
S&P BSE
Healthcare Index Nifty 50 Index PE (x) Discount/Premium
S&P BSE Healthcare
Index Earnings
FY09 18.9 23.5 0.8 -33.5%
FY10 23.0 23.5 1.0 68.7%
FY11 34.1 20.0 1.7 -26.0%
FY12 22.0 13.8 1.6 66.9%
FY13 22.6 16.1 1.4 18.1%
FY14 27.6 16.2 1.7 3.5%
FY15 35.9 19.4 1.9 30.7%
FY16 30.6 20.7 1.5 6.2%
FY17 29.7 20.4 1.5 3.7%
FY18 27.5 22.7 1.2 -2.5%
Source- Bloomberg
Healthcare Index has traditionally
outperformed the Nifty 50
Disclaimer - The information herein is used for comparison and illustrative purpose.
Past Performance may or may not sustain in future. Source- Bloomberg
Healthcare Index has traditionally
outperformed the Nifty 50 Index
o The S&P BSE Healthcare Index has traditionally outperformed the broad
market index due to the sector’s growth profile
o 2016 and 2018 were years of underperformance due to pricing issues in
domestic and US markets
o This underperformance is expected to reverse with rebound in growth to the
sector
Year
S&P BSE
Healthcare Index
Return % Nifty 50 Index Return %
2008 -35.3% -51.8%
2009 75.9% 75.8%
2010 33.5% 17.9%
2011 -14.2% -24.6%
2012 37.2% 27.7%
2013 21.1% 6.8%
2014 48.4% 31.4%
2015 15.3% -4.1%
2016 -12.9% 3.0%
2017 48.8% 28.6%
2018 -5.9% 3.2%
Source- Bloomberg
Insurance opportunity is
significant
In India, almost 78% of the Healthcare spend is borne Out of the Pocket of the
individuals.
This presents a large opportunity for Health Insurers
Source- http://www.eindiainsurance.com/india-health-insurance/
Increasing Health Insurance
penetration bodes well
o The health insurance industry has shown a good growth over the past few
years but still remains vastly under penetrated
o Several companies have increased focus on this segment, thereby
providing us with visibility of future growthSource: Apollo Hospitals Annual Report FY18
Hospitals- An
Underpenetrated Opportunity
o India is among the most under-penetrated markets for healthcare
infrastructure with only 9 beds per 10,000 population
o Meaningful increase in infrastructure by private players to address this gap
Source: Apollo Hospitals Annual Report FY18
Medical Tourism – Rapidly
Growingo Presence of world class hospitals and skilled medical professionals- Helps to strengthen
India’s position as a preferred destination for medical tourism
o Superior quality healthcare, coupled with low treatment costs in comparison with other
countries- Benefit Indian medical tourism, and enhance the prospects of the Indian
healthcare market
o Major surgeries treatment cost in India is approximately 20% of that in developed countries
o India also attracts medical tourists from developing nations due to lack of advanced medical
facilities in many of these countries
o The medical tourism market in India is estimated to be around $3.9 bn and is expected to
grow by a CAGR of 20%-25% over the next few years
o Yoga, meditation, Ayurveda and other traditional methods of treatment are major service
offerings that attract medical tourists from developed nations to India
Source: India Brand Equity Foundation (IBEF)
Diagnostics – a Sunrise
Industry
o Low penetration of Diagnostics centres despite high population, compared to other
countries
o Diagnostics market expected to grow , at a CAR of 15% over the next five years, after a 16%
CAGR over 2012-15
o The diagnostic market has been dominated by small unorganized players, however the shift
towards organized players is happening gradually due to rising preference for brands and
quality Source: Equirus Securities/August 2018
Diagnostic Market size is shown in US Billion Dollars
Diagnostics – a Sunrise
Industry
Source: Equirus Securities
Examples of Healthcare
Universe
Pharma Stocks
+
Wellness
Consumer Stocks
=
Healthcare
The Stocks mentioned above are used to explain the concept and is for illustration purpose only. The stocks may or
may not be part of our schemes.
In Summary, Why Healthcare
Fund and Why Now?
Sound growth prospects across health care segments
Government focus on healthcare penetration throughschemes like Ayushman Bharat and increased spending inthe economy
FDA related issues expected to be minimal on account ofstrengthening manufacturing processes by companies
Reasonable Valuations post significant market correction
Scheme Asset Allocation
Other Scheme Features
Riskometer
This product is suitable for investors who are seeking*:
• Long term capital appreciation
• Investment predominantly in
equity and equity related
instruments of companies
engaged in Healthcare & Allied
Sectors
*Investors should consult their financial advisors if in doubt about whether the product is
suitable for them.
Mutual Fund Investments are subject to market risks, read all scheme related documents carefully
Investors understand that their principal will be at
High risk
Disclaimers
This presentation has been prepared and issued on the basis of internal data, publicly
available information and other sources believed to be reliable. All opinions, figures,
charts/graphs, estimates and data included in this presentation are as on date and are subject
to change without notice. While utmost care has been exercised while preparing this
document, IDBI Asset Management Limited does not warrant the completeness or accuracy of
the information and disclaims all liabilities, losses and damages arising out of the use of this
information. The statements contained herein may include statements of future expectations
and other forward-looking statements that are based on our current views and assumptions
and involve known and unknown risks and uncertainties that could cause actual results,
performance or events to differ materially from those expressed or implied in such
statements. Readers shall be fully responsible/liable for any decision taken on the basis of this
presentation. No part of this document may be duplicated in whole or in part in any form
and/or redistributed without prior written consent of the IDBI Mutual Fund/IDBI Asset
Management Company Limited. Past performance of the Sponsor / AMC / Mutual Fund and
its affiliates does not indicate the future performance of the schemes and may not provide a
basis of comparison with other investments.
Statutory Details: IDBI Mutual Fund has been set up as a trust sponsored by IDBI Bank Ltd.
with IDBI MF Trustee Company Ltd. as the Trustee (Trustee under the Indian Trusts Act, 1882)
and with IDBI Asset Management Ltd. as the Investment Manager
THANK YOU
IDBI Asset Management Limited
(Investment Manager to IDBI Mutual Fund) CIN: U65100MH2010PLC199319
Registered Office: IDBI Tower, WTC Complex, Cuffe Parade, Colaba, Mumbai -400005 Corporate Office: 4th Floor, IDBI Tower, WTC Complex, Cuffe Parade, Colaba, Mumbai - 400005