Indeed, a useful site.Thanks Subash.
Thanks Tony/Atul,
I have been using it for last 5-6 months, and I was under the impression that everyone knows about it. Have send a mail to Ayush/Pratyush for possibility of having a similar feature in screener.
Being a SW engineer, I feel sad that I am not the guy who has created it 
. I just donāt know where to get the above data, otherwise I can create even better pdfs (may be I need 2-3 months for it)
Thanks for the link, Subash! Data presented visually makes it easier for a lot of people.
Guys,
Investment in Ajanta at current levels is not risk-free, and frankly the projections seem a bit off-the-mark and based more on hope & hype.Time to rein in your horses and focus more on how the growth will come, from where and with what risks. Only then should we project for next couple of years with any level of visibility.
Please consider risks/provisioning associated with the ECB Loan and the attendant Forex issues in view of a depreciating currency. Donāt forget with the big capacity expansion will come enough execution risks. These specifically werenāt in the picture before and our investment appeared (was) a NO-BRAINER. In my book that isnāt the case anymore. Do think about this!
As Hitesh has mentioned, please also consider higher taxation, higher depreciation and higher interest costs - put actual values to these - and then arrive at reasonable projections.
Disc: My views are biased. I had shifted 2/3rds of my original allocation away from Ajanta (this is the first since entry) around ~990-1000. Figured 20x earnings will not be justifiable for some time, a 15x maybe, and a 12-13x certainly.
Thanks Donald,
When guys like you and Hitesh are not in favour of investing at cmp, it makes sense to reduce allocation in ajanta. Thinking of doing so in 900-950 range.
Regards,
-Subash
hype.Time ** how risks. **
_ Disc: _ (this _ certainly. _
Iāve also been booking profits - but my reason is different. Itās became too volatile for my taste (1000 to 800 odd to 950 to 800 etc.). Holding from 300 levels gives some margin of safety but its become more like a trading stock.
With recent depreciation in INR, I decided to add more Ajanta. Donald, can you please confirm that you view Ajanta losing more on ECB then gaining on exports due to the INR depreciation in long term? For me, this is the only real area of concern, which I need to be clear before investing more.
I am happy to ignore project execution risks as it is common to any expansion (may be unichem is better bet in this regard but i think growth matters more to market today!!). Assuming they are honest this time about taxes, there cant be more negative surprises on that front.
I like to invest in (what are in my understanding) No-brainer situations. if you check back thru the Management Q&As, Ajanta didnāt have a clear hedging policy. Principal repayments and interest costs are likely to remain unhedged. Even those who hedge get caught in the abrupt slides such as what the Rupee has seen. Add to this higher interest, depreciation interest and higher tax costs - even if you were to say ignore Execution Risks.
At 6-7x earnings it was a no-brainer for us. At 12x too we said it was a No-brainer and advised in Dec 2012 to pick up Ajanta at ~400. In my book picking this business up at 15x does not afford me a big Margin of Safety.
As I see it, Ajanta valuations ran ahead of its business value on the back of a superior earnings growth rate. I am not so sure that earnings growth will not slow down to 25%+ ā¦do I see the current valuations sustaining then?
As we always say please do your own due-diligence. Individual opinion/style of investing shouldnāt matter. Ajanta may well continue its super pace and keep surprising all of us!There is certainly a case for Ajanta at CMP, if it continues its scorching pace of growth. Establishing that with reasonable certainty is the trick. I like to err on the side of caution.
Thanks Donald for your reply. I have been buying since 2 years mostly based on valuable discussions in valuepickr. I am surely aware of increased valuations, other risks mentioned by you and am able to take a call on those aspects.
But, personally I find 17-20 P/E for pharma company (with good investments in R&D and considering recent entries to U.S./ Europe) to be more attractive then companies even remotely dependent on indian real estate (Canfin, Astral, Cera, Kajaria ). Ican not find a real no brainer either at this point( with decent liquidity and attractive valuation).
About hedging, can you clarify this is what you mean (based on your knowledge) - Principal payments & interest costs are unhedged but sales are hedgedā¦
us!There
Been following the discussions on Ajanta.The concern seems to be on the sustainability of the current P/E.Certainly,when guys like Hitesh & Donald are wary,it is better to take your money off the table.Keeping with this,I feel a good strategy would be to wait out the Q1 results.Since the sentiment around the stock is bullish(reflected in the 21 P/E) maybe we can see 1000+ levels in anticipation of good results.At that point,I would exit partly.On the results day,it may give a huge spike either side.That day has to be the inflection point (P/E sustains or not) The other positions I will exit on that day.
Views invited.
My two centsā¦for investors not so active ā¦it makes sense to stick with a growing pharma business like Ajanta (if you havnāt found something better)ā¦but at the same time not put more money in to it 'cos of valuationsā¦
For me the key points to track here areā¦
how their US venture is shaping up. They mentioned to introduce their first product in US markets this quarter, where are they on thatā¦and howis the expansion plan doing going ahead.If mgmt is able to deliver what they are saying, it should still be a long way from here.
Havenāt more of speculators got into this one?
The whipsaws are too fast and quickā¦ It falls by 10% and goes up by 8% in a single day.
One should always try to see the brighter side. I am buying Ajanta in the range of 800-820 odd, and selling it at 880 odd mark. You get good 7-8% gain in 1-2 week time, which is quite good by any standard.
The logic here is to set buying price, below which you are ready to accumulate more in case the share price fall, and turn from a short-term trader to investor.
SubashJi,
A lot of people were writing about doing this in the previous pagesā¦
You were the only guy saying No to this due to -
-
Tax Consideration
-
Non- cyclical good business growing well.
What has changed suddenly now??
1 Like
Ajanta is capitalising the ANDA developement cost. The value is around Rs 16 crs. Is this an accepted practise? Do the other companies also do the same?
Shouldnāt this be expensed? Can some CA please throw some light on this.
Thanks
If they think the ANDA is marketable, thereās no harm in capitalizing it.
From their AR-
2.14. Research and Development
_Research costs are expensed as incurred. Development expenditure incurred on an individual__project is carried forward when its future recoverability can reasonably be regarded as assured._Any expenditure carried forward is amortised over the period of expected future sales from the__related project, not exceeding ten years. The carrying value of development costs is reviewed for__impairment annually when the asset is not yet in use, and otherwise when events or changes in__circumstances indicate that the carrying value may not be recoverable.
I think this is almost exactly as per IFRS guidelines. It is not supposed to be most conservative, but most accurate based on reasonable expectations.
( I am not a C.A., but do have some understanding of financial statements from my CFA preparations )
Ajantaās BS has improved substantially. They are able to contain the long term debt and reduced their short term debt considerably given the fact they are undergoing massive expansion plan. The cash on the books has increased as well. This improvement seems to come from the fact that they are ableto unlock capital from inventory and ofcourse increased top & bottom line. They did maintain that the savli and dehaj units should be operational in FY 14-15.
Ajanta looks as good a story as it was before.Request skeptics to help identify any gapsā¦
FY13 annual report is a good readā¦on the positives - the fist highlight page speaks everything and shows a lot of confidence. Iām quite impressed by the following nos:
1). Improvement in ranking to 45th
2). New product launches - 19 ; First to market - 4
3). 1592 Approved product registrations with 1218 awaiting approval
4). Total Anda filed - 14, approved 2 and undergoing approval 12.
Hence it seems that a lot of work is in progress and co has been able to build a good pipeline for future growth
On the concerns: The capital work in progress is quite small hence it means that the new expansion will take some time and hence there may be capacity constraints limiting high growth.
On the query of capitalization of ANDA cost - I donāt think they have done capitalization this year. The figure is of earlier year and they have provided good amount of depreciation. Infact, the co is charging off high amounts of R&D as expenses.
Ayush
JatinJi,
Nothing changed! I am still bullish on the long term perspective of Ajanta pharma. I was just saying one can do some trade taking advantage of high volatility that was prevailing in this counter. Post AR, I hope the volatility will subdue.
Regards,
-Subash
Reading latest AR of ajanta I get a feeling that, things are not likely to go bad, thanks to their unique business model.
1). Targeting one segment at a time, implies high chance of not affecting by domestic dpco issue, and immunity from slowing down domestic pharma sector.
2). Less presence in USA implies less issue with getting approvals (and thanks to bilateral issues, approvals are difficult to get these days, i.e. Wockhardt, Ranbaxy, Dabur).
3). Weak rupee, implies better revenue from their major revenue source, unregulated EM market.
4). Newer entry in US market can work like positive black swan.
5). Increased ROCE implies better operating conditions.