DSP Healthcare Fund

DSP Healthcare Fund

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  1 DSP Healthcare Fund (An openended equity scheme investing in healthcare and pharmaceutical sector)
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  2 Source: Inventions ,Inventions , Vaccination data Thermometer Open Heart Surgery X-Rays Cardiac Pacemaker CT Scan& MRI Artificial Heart Genomics Time taken for vaccine innovation has reduced drastically Polio 47 years COVID 1 year Typhoid 105 years Wireless brain sensors Evolution
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  3 S&P 500, Stoxx600, Topix 500, SHCOMP+SZCOMP, KOSPI 500 and Nifty 500 indices are considered for USA, Europe, Japan, China, South Korea and India respectively. Data as on May 23. Source: Investec, DSP. Bubble size indicates market capitalization of healthcare sector of that country’s broad equity market. Indices are managed and used for illustrative purposes only and are not intended to be indicative of any fund’s performance. It is not possible to invest directly in an index USA, 5,105 Europe, 2,139 Japan, 429 China, 959 Korea, 94 India, 156 0% 5% 10% 15% 20% 4% 6% 8% 10% 12% 14% 16% Healthcare Market cap CAGR 10-Year Weight in broad equity index of the country • India’s healthcare market cap has grown at a decent ~9% in the last 10 years. • Today, share of healthcare is ~5% of the total market capitalization in India, is one of the lowest compared to it’s developed and Emerging Market peer countries. • Over time India’s focus on healthcare may enable bridge this gap versus other markets. Lower weight in Equity Index than peers, can it change?
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  4 2.5 2.1 1.5 FY10 FY21 FY25F Govt.Health expenditure % of GDP Declining ‘out of pocket share’ due to increasing insurance penetration 2000 2010 2019 72 65 55 15 12 11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Health insurance Collection (₹) 0 100 200 300 400 500 600 700 Billions FY19 FY20 FY21 FY22 Rising FDI in healthcare is a catalyst 0 100 400 600 800 1000 1200 USD Million Medicinal & Surgical Appliances Hospitals & Diagnostic Sectors Drugs & Pharmaceuticals Source: IRDAI Annual Handbook, GI Council for FY21-22, World Bank, Bloomberg , IBEF Why is healthcare a structural theme? (1/2) INDIA USA 12% CAGR
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  5 Why is healthcarea structural theme? (1/2) Source: FRED, World bank. Data as on 2022. Prosperity may come with high medical costs 0 10 20 30 40 50 60 70 0 5 10 15 20 25 30 35 40 45 Per Capita GDP (PPP) Thousands CPI rebased to 100 Hundreds CPI Medical care (USA) CPI (USA) Per Capita GDP (USA) India’s current Per capita GDP (~6500) INDIA USA
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  6 Thematic but Diversified Source– DSP Internal. The sector(s)/stock(s)/issuer(s) mentioned in this document do not constitute any research report/recommendation of the same and the scheme(s)/ Fund may or may not have any future position in these sector(s)/stock(s)/issuer(s). All logos used in the image are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them. Data as on May 2023 Can be huge scope for private players because of increasing awareness and low penetration levels (<30%) $9bn 2% Health Insurance Evolving and new area of pharma innovation Genetic Research 3% $10bn Medical device segment opportunities are less in India. In US, the sector has shown EBITDA Growth of >9% in last 10 years Global Medical Equipment 8% $430bn Unorganized accounts for 45% of market. Can be huge beneficiary from unorganized to organized market shift Diagnostics 3% $11bn Capex cycle abating may lead to better RoCE Hospitals 10% $70bn Can be huge opportunity for growth available for companies that are focused on right approach of capital allocation and business model Generic API 7% $14bn Most innovator pharma companies are likely to be interested in asset light model and hence prone to increasing outsourcing CDMO 4% $120bn Consistent earnings, high RoCE and cash flow generation India Formulations 33% $20bn New launches, market share gains for existing products and consolidation can help to drive exports to US, Europe Exports Formulations 30% $20bn Global + Domestic Approximate Market size Global Approximate weight in DSP Healthcare Fund Domestic
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  7 Exit Process How wedo it Portfolio Construction Entry Objective Parameters Management Assessment Due Diligence Valuation • Forensic Analysis • Channel Checks • Peer Comparisons • Employee Feedback • Credible • Capable • History of Capital Allocation • Corporate Governance • Profitability Ratios • Cash Flows • Growth • Operating Leverage • Imminent Change in these Parameter Difference between Intrinsic Value & Price ‘True’ Addressable Market Structural vs. Cyclical Opportunity Liquidity considered for stock sizing Maintain judicious balance between sub-segments Identifying Business cycles - growth, value, TA, stability Investment thesis does not play out as anticipated in the expected time frame 1 Stockis near peakearnings and peakmultiples. 2 3 Mistakes in capitalallocation A large and expensive acquisition with synergies that are difficult to achieve A large capital expenditure without line of sight to a reasonable return on investment Capex in unrelated activities that have questionable odds of success 3.1 3.2 3.3 For objective parameters: companies preferred with >12% Return on Invested Capital (ROIC), >10% EBITDA growth and Operating Cash Flows of ~50% of EBITDA. Disclaimer: The investment approach / framework/ strategy mentioned herein is currently followed by the scheme(s) and the same may change in future depending on market conditions and other factors.
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  8 Earnings growth Pricegrowth Source: Bloomberg, MFIE. Data as on May 2023 Indices are managed and used for illustrative purposes only and are not intended to be indicative of any fund’s performance. It is not possible to invest directly in an index | Past performance may or may not be sustained in the future and the same should not be used as a basis for comparison with other investments. Why Healthcare – Consistent Earnings (1/3) 0 100 200 300 400 500 600 Jan-10 Sep-10 Jun-11 Feb-12 Oct-12 Jul-13 Mar-14 Dec-14 Aug-15 May-16 Jan-17 Oct-17 Jun-18 Feb-19 Nov-19 Jul-20 Apr-21 Dec-21 Sep-22 May-23 Index Rebased to 100 S&P BSE Healthcare TRI Nifty 50 TRI 50 100 150 200 250 300 350 CY22 CY21 CY20 CY19 CY18 CY17 CY16 CY15 CY14 CY13 CY12 CY11 EPS rebased to 100 Nifty 50 S&P BSE Healthcare Healthcare has performed better over long term organically with earnings growth
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  9 Why Healthcare –LowerVolatility (2/3) 5 year rolling returns 10 year rolling returns Source: MFIE. Data from 23 August 2004 to 31 May 2023. S&P BSE Healthcare TRI data is available since 23 August 2004. Indices are managed and used for illustrative purposes only and are not intended to be indicative of any fund’s performance. It is not possible to invest directly in an index | Past performance may or may not be sustained in the future and the same should not be used as a basis for comparison with other investments. S&P BSE Healthcare TRI S&P BSE Sensex TRI S&P BSE Healthcare TRI S&P BSE Sensex TRI Median 13.3% 12.9% 15.1% 12.0% Minimum -7.7% -0.3% 8.4% 5.6% Standard Deviation 7.9% 5.3% 2.9% 3.1% History depicts higher the holding period, lesser the volatility and higher the returns 6% 0% 0% 0% 18% 30% 1% 29% 52% 60% 91% 71% 24% 10% 9% 0% S&P BSE Healthcare TRI S&P BSE Sensex TRI S&P BSE Healthcare TRI S&P BSE Sensex TRI 5 Year 5 Year 10 year 10 year Return Distribution Less than 0% 0% to 10% 10% to 20% Higher than 20%
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  10 Why Healthcare –Supportive Valuations (3/3) BSE Healthcare Index is trading at 10% discount compared to a 10% premium on an average with Nifty on EV-to-EBITDA basis Source: MFI , Bloomberg. Data as on May 23. Indices are managed and used for illustrative purposes only and are not intended to be indicative of any fund’s performance. It is not possible to invest directly in an index | Past performance may or may not be sustained in the future and the same should not be used as a basis for comparison with other investments. -30% -20% -10% 0% 10% 20% 30% 40% 50% 60% 0.00 5.00 10.00 15.00 20.00 25.00 Dec-12 Apr-13 Aug-13 Dec-13 Apr-14 Aug-14 Dec-14 Apr-15 Aug-15 Dec-15 Apr-16 Aug-16 Dec-16 Apr-17 Aug-17 Dec-17 Apr-18 Aug-18 Dec-18 Apr-19 Aug-19 Dec-19 Apr-20 Aug-20 Dec-20 Apr-21 Aug-21 Dec-21 Apr-22 Aug-22 Dec-22 Apr-23 Premium/Discount EV/EBITDA BSE HC Index Premium/Discount Average
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  11 -2.87 - 0.00 2.87 -2.94 - 0.00 2.94 -6.36 - 0.006.36 -6.97 - 0.00 6.97 -7.88 - 0.80 8.68 5.95 - 6.62 0.66 4.60 - 5.09 0.49 4.22 - 4.22 0.00 3.72 - 3.72 0.00 3.46 - 6.53 3.07 Why DSP – Truly Active (1/3) Source: DSP Internal, FactSet, MFI. Data as on May 2023. The portfolio of the scheme(s) is subject to changes within the provisions of the Scheme Information document of the scheme(s). The sector(s)/stock(s)/issuer(s)mentioned in this document do not constitute any research report/recommendation of the same and the scheme(s)/ Fund may or may not have any future position in these sector(s)/stock(s)/issuer(s).All logos used in the image are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them Top 10 Active Weight DSP Healthcare Fund % Category Average % DSP Healthcare Fund % Benchmark % Category Average % Large Cap 53 50 40 Small Cap 16 22 21 Mid Cap 28 25 25 0 10.8 International Portfolio Break-Up 56 Active share 39 20 Off benchmark 6 Portfolio Weight % Benchmark Weight % Overweight % Underweight %
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  12 Why DSP -Global Exposure (2/3) In CY2021 1.5m surgeries were undertaken using the 6300 Intuitive’ s robot system installations. Abbott has sold tests worth $20bn related to Covid over a period in 2020-2022. Abbott’s nutrition brands like Pediasure are household names globally Medical Devices Genomics Is a one of the few spine implant companies with its own system for robot assisted surgeries. is a global leader in the next gen gene sequencing technology and has been instrumental in making gene sequencing affordable and more widely available. Is also playing a pivotal role to find cures for complex diseases like ALS, Parkinson’s, Alzheimer’s. provides a low cost exposure to global companies involved in genetic research and biotechnology. Source: DSP Internal
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  13 13 Why DSP –Outperformance & lower drawdowns (3/3) 1 YEAR 3 YEAR 2 YEAR DSP Healthcare Fund S&P BSE Healthcare TRI Category Average YTD Source: MFI, Data as on May 2023. Indices are managed and used for illustrative purposes only and are not intended to be indicative of any fund’s performance. It is not possible to invest directly in an index | Past performance may or may not be sustained in the future and the same should not be used as a basis for comparison with other investments. Refer page no. 15 for performance in SEBI prescribed format and other schemes managed by same fund manager. -30.0% -25.0% -20.0% -15.0% -10.0% -5.0% 0.0% Nov-18 Feb-19 May-19 Aug-19 Nov-19 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 May-22 Aug-22 Nov-22 Feb-23 May-23 S&P BSE Healthcare TRI DSP Healthcare Fund 9.8% 2.9% 19.2% 1.2% 6.2% -1.1% 15.5% 3.1% 6.5% -0.7% 14.7% 2.4% DSP Healthcare fund has had lower drawdowns compared to it’s benchmark
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  14 Fund Product SuitabilityScheme Riskometer Benchmark Riskometer S&P BSE HEALTHCARE TRI DSP Healthcare Fund (An open ended equity scheme investing in healthcare and pharmaceutical sector) This open ended equity scheme is suitable for investors who are seeking*- • Long term capital growth • Investment in equity and equity related Securities of healthcare and pharmaceutical Companies *Investors should consult their financial advisors if in doubt about whether the product is suitable for them. Disclaimers
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  15 Disclaimers -Performance inSEBI Format (Growth Option) Growth option considered. Data as on 31 May 2023 Fund Managers • Vinit Sambre – Managing since Nov 2018 • Chirag Dagli – Managing since Dec 2020 • Jay Kothari – Managing since Nov 2018
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  16 Disclaimers –Performance ofother schemes managed by same fund manager Growth option considered. Data as on 30 Apr 2023 Offshore funds managed by Vinit Notes: 1.Past performance may or may not be sustained in the future. 2.Above performance of permitted category FPI portfolio is not comparable with the performance of the scheme(s) of DSP Mutual Fund due to differing investment objective/s and fundamental differences in asset allocation, investment strategy and the regulatory environment. 3.The said disclosure is pursuant to SEBI Circular No. Cir/IMD/DF/F/2012 dated February 28, 2012 pertaining to Regulation 24(b) of SEBI (Mutual Funds) Regulations, 1996. FPI – Foreign Portfolio Investor. 4.Returns upto 1 year are absolute and >1 year are compounded annualised (CAGR). 5.If the base currency of the permitted cateogry FPI portfolio and respective benchmark is in the currency other than INR, then the base NAV is converted to INR (used for performance calculations) using USDINR closing rate sourced from Bloomberg
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  17 Growth option considered.Data as on 31 May 2023 Disclaimers –Performance of other schemes managed by same fund manager
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  18 Growth option considered.Data as on 31 May 2023 Disclaimers –Performance of other schemes managed by same fund manager
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  19 This document isfor information purposes only. In this material DSP Asset Managers Private Limited (the AMC) has used information that is publicly available, including information developed in-house. Information gathered and used in this material is believed to be from reliable sources. The statements contained herein may include statements of future expectations and other forward-looking statements that are based on prevailing market conditions / various other factors 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. While utmost care has been exercised while preparing this document, the AMC nor any person connected 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 recipient(s) before acting on any information herein should make his/their own investigation and seek appropriate professional advice. Past performance may or may not sustain in future and should not be used as a basis for comparison with other investments. All opinions, figures, charts/graphs and data included in this document are as on May 31, 2023 (unless otherwise mentioned) and are subject to change without notice. There is no assurance of any returns/capital protection/capital guarantee to the investors in this/these scheme(s) of DSP Mutual Fund. For scheme specific risk factors, Asset Allocation details, load structure, investment objective and more details, please read the Scheme Information Document and Key Information Memorandum of the scheme(s) available on ISC of AMC and also available on www.dspim.com. Mutual Fund investments are subject to market risks, read all scheme related documents carefully Disclaimers