Putting some more thoughts on the topic:
1). Firstly, pharma companies like ajanta etc dont have too much brand/pricing power. And for stocks available at around 5 PE we dont get pricing power as well. Most of companies having pricing power are quoting at above 20 PE.
2). The place where they score is in launching newer drugs (first time in India kind of drugs) where because others are around 6-12 months behind them they have some kind of pricing power. Once others enter the fray it is again back to cut throat competition.
3). Regarding revenue mix, around 60% comes from international markets where again they usually market their own brands and seem to be smart enough to launch country/area specific drugs as mentioned in the ceo transcript.
4). Margins are continuously on an uptrend and we need to see where they settle down. To me this is a company with a wonderful combination of increasing sales with increasing margins. This always is a good recipe for strong re rating.
5). DII/FII holding -- Practically nil. If and when these entities do start taking interest, things could get interesting. Would be interesting to find out why these have not noticed the company till now. (On first look there dont seem to be any hidden skeletons) In my experience many a times they start looking at companies only after they reach a threshold market cap of min 300 crores and ideally above 500 crores. So in effect we are sometimes too early for our own good.
6). Promoters have pledged around 2 Lac shares out of a total of 78 lac shares held. I would consider it insignificant.
7). Establishing the API facility looks like a step in the right direction even though capacity utilisation may at present be low. This gives the company quicker access to develop newer molecules which might offer them advantage in terms of quick launches. Flexibility of sourcing raw material from other sources also helps in maintaining costs.
8). As pointed out by Donald, reduced tax rate due to MAT and R&D expenses getting tax breaks plays to the company's advantage. Any policy decision affecting these may create problems for the company.
9). Company has not diluted equity since many years and still managed to grow by taking and handling debt efficiently. Now I feel company has achieved critical sales level and competency to propel it to next level of growth. If they continue the trend of reducing debt, it could add to the attraction.
Through some scuttlebut talk I came to know that the newer generation is getting into the business and might want to ramp up the growth and image of the company.
Projections of consolidated profits for FY 11 according to some reports project FY 11 (cons ) net profits in the range of 43-45 crores. (reports by sunidhi and some service called bgse financials.) which amounts to EPS on consolidated basis to be around 37-38.
Regarding their products in my speciality, various products like Melacare(cream for hyperpigmentation especially over face) , carofit(antioxidant tablets), carofit ultra( cream for under eye black circles), aquasoft (moisturiser cream ) , pimecrolimus (local application especially for childhood eczema and other applications-- this is a first in India launch for the molecule-- biocon has launched it at a cheaper price but still their marketing strategy is not in place -- their representatives are still not meeting dermatologists on a regular basis to re inforce their product) Ajanta seems to occupy a very good place in terms of quality of products and quality of sales force.
Going forward, growth triggers could be :
1). Launching of their products in US and European markets where they have very little presence
2). Improving their presence in the Indian prescription market-- they already are strong and could be stronger.
3). Growth from the existing markets in international space -- increase in volumes and launch of newer products.
If some sort of M&A were to happen, this company makes an ideal takeover candidate for some biggie pharma company.