had a talk in the company . here are the key points-
over one month of India sales were impacted due to GST. However things have come back to normal , and there is not any impact of GST expected in the second quarter. One month of India sales equate to roughly around 70 cr of sales. Expect to deliver 14-15 percent growth in this segment in the next 2-3 years.
Asia business is rebouncing back after a weak last year as the currencies of Western Asia and Central Asian countries are stabilizing. Similar growth guidance of 14- 15 percent given for this segment of business.
US business - growth of 25-30 percent expected from the US business for the next 2-3 years. All their ANDA fillings are for niche products. 2-3 million dollars expected on an average per ANDA filling which has been approved and commercialized. However point to be noted is roughly 30-40 percent of ANDA fillings approved are commercialized as the remaining are normally not found to be feasible
Africa Business - The tender part of the business , which forms 60 percent of the business has been greatly affected for atleast this year. WHO has been receiving less donations from NGOs and governmental organisation which has caused them to lower the size of bids itself by 20 percent. Hence the whole market size itself is down by 20 percent. For the next couple of years what will be the market size will be estimated based on the donations recieved by the end of this calendar year.
As for as increase in employee expense is concerned that is because of the new plants which has been commisioned at Dahej and Guwahati , till now these expenses were being capitalised in the asset column. These plants have not started contributing to the topline as of now.
Same reason for increase in cost of other expenses…
overall it looks to me market is over reacting to the results , and the results are not bad as they are perceived to be. Valuation of 20 PE for a company like Ajanta with exceptional return rations , no debt, decent growth , great management quality and great scope of expansion in US ahead look on the lower side. 3 percent of sale in promoter holding hardly seems like a reason to worry when they have a stake of above 70 percent in the compnay. Seems like the stock is taking a hit due to the bad sentiments about the pharma industry in general.
From the reply i got, sales and profits are going to be muted for the year ahead(overhead and employee expenses till the plants run upto their capacity). Regarding the stake sale and the ethics behind it, they said the dahej and guwhati plants capex was known to everyone and therefore it was known that there would be a hit on the margins in the year they were commissioned.
Cumulative ANDAs status was at 15 pending ANDAs with two under tentative approval. The approved ANDAs were at 18. In FY18, the company expects to file 12-15 ANDAs
The capex for FY17 was at 300 crore. Q1FY18 capex was in the vicinity of 65-70 crore
Africa business included 95 crore from anti-malarial tenders for Q1FY18 as against 120 crore in Q1FY17
Overall African anti-malaria tender size has reduced. Hence, the company expects the African tender business to decline by 15-20% in FY18. Ex-tender business African business grew 5-7% in constant currency.
Asian business grew 10% in constant currency. The company has guided for 10-12% constant currency growth for FY18
The company expects 30% margins in FY18. For FY 19 the company expects 100-200 bps YoY improvement in EBITDA margins
The company has guided for 22% and 21% tax rate for FY18 and 19 respectively. Beyond FY19 the company expects MAT tax rate.
Asian revenues of 85 crore comprise of South East Asia (40-45%), MENA (45%) and Central Asia (10-15%)
Sequential growth in US was mainly due to higher off tack in gAbilify (CNS) sales
Ajanta today hit 52wk loof 1140
however looking at nos. it is still costly
it is trading at 6.7 times its BV and at PE of 21, which is not cheap by any standards considering the headwinds that pharma is supposed to have for some more period
headwinds are being faced by companies with more exposure to the US i believe. Price erosion among generic suppliers in the US, USFDA issuing observations , etc are causing a concern for such companies. Ajanta has a small exposure to US, that too in niche medicines with less chances of price erosion.
national pharma draft policy might affect the margins of indian business of all pharma companies. i think this is a major concern for ajanta pharma .Also african business will degrew this year . Except US , i dont see any growth for ajanta in the short term
Mumbai, India – (31st August, 2017) -
Ajanta Pharma Limited, announces today the launch of Eletriptan Hydrobromide Tablets in the US market through its wholly owned subsidiary Ajanta Pharma USA Inc. It is a bioequivalent generic version of Relpax®1 Tablets. Ajanta Pharma has launched the product in two strengths, 20 mg and 40 mg tablets.
Eletriptan Hydrobromide Tablets is part of an ever growing portfolio of products that Ajanta has developed for the US market. In total, Ajanta has 35 Abbreviated New Drug Applications (ANDAs) of which it has 19 final ANDA approvals, 2 tentative approvals, and 14 ANDAs under review with US FDA. So far it has launched 14 products in the US market.
Given the pricing pressure from US as well as Indian government, it would not be wise to ignore the head winds. However, one cant overwrite the sector cause without R&D expenses, new discovery will not aspire that much. Government will understand that and will strike a balance over long term.
Given both the facts, I think a PE of 15 offers some margin of safety with additional exposure at every 10-15% fall.
I am restricting my allocation to Pharma to 15% given the current headwinds, at present have 8% exposure. minimum 3-5 years of patience is needed to let the company prove its mantle.
Disclosure - Currently do not hold any position in the company, look for 1000 level.
