If you sell at the lowest point, even the best picks handed on a platter to you (like at ValuePickr) is unlikely to make you any money. Ajanta is one of the most well research cos here. The price likely went down because a director was fired from the board and he was heavily insider selling. The reasons for the same are unclear - it might very well be something simple and sane (or) it might be that the management is doing something unethical and the director was not co-operating. In the latter case, often they say the director resigns. This does seem highly innocent. Seniors can comment on the validity of the above story.
Prasanna, Ms Madhu Verma , nominee director of exim bank is the only director whose nomination has withdrawn and she or exim bank did not have any holding any way.Which director are you talking about?
Rakesh - I was wrong then about the seller. Someone is selling, and the price drop is hardly 5% from the mean. Not sure if we should be analyzing this. It is a clear buy for me.
Anyone with the idea of the reason for withdrawal of nomination ofMs. Madhu Verma by Exim Bank.
Hi Prasanna,
The purpose of nominee directors are often different. Very often large strategic equity holders or banks/FIs with significant debt exposure might have nominee directors on board to safeguard their investment/loans. These directors might well be nominated/withdrawn depending on the immediate need of their respective parent organizations.
If you refer to the FY13 AR for Ajanta, you can see none of the 4 Independent and Non-Executive directors held any shares. So instances of “insider selling” can be easily ruled out. In fact the promoters have been only increasing their stake and recently de-pledged further shares.
Export Import Bank of India, or EXIM Bank as it is commonly called, has withdrawn nominee directors from 3 other companies on the same date (10th Jan). Refer here: http://www.moneycontrol.com/news-topic/exim-bank/
So to establish a link between**“price likely went down” and “director was fired from the board”** is completely misleading in this case.
It would be helpful if you validate such potential allegations with simple facts before declaring the same on public forums as false information might lead some people to panic selling of their coveted investments.
1 Like
Rudra - I’m sorry I was wrong about who was selling. Since I would not have acted on that information regardless of who the seller was, the investigation was over right there for me. Perhaps I should have kept my half-baked guess to myself. Point taken.
Cheers
Stellar performance continues…Sales/Revenues grow 31%,PAT up a whopping 92%! PAT margins too,have expanded.They now stand at 21%,up from what I was thinking to be a one-off(19.94%) I guess re-rating should continue & this may again become the ‘hot stock’.The growth just continues to accelerate.Great going 
Q3FY14
Revenues up 31%
EBITDA up 62%, now at 32% margin
PAT up 92%, now at 21% margin
Exports 65%
4 more ANDAs filed. Total now 22 (2 approved, 20 pending)
109 product registrations in EM.(1400 registration, 1380 under registration)
9MFY14
Revenue up 35%
EBITDA up 68%, now at 29% margin
PAT up 104%, now at 19% margin
Exports 61%
Total 8 ANDAs in FY14
R&D expenses at 39Cr (5% sales)
Excellent results by the company. PBDIT margins at 32%. What is encouraging is R&D expenses the company is incurring. The filing of ANDA’s for the US markets shows the company’s ambition to enter the US market which might be the next growth driver…
Company looks all set to do 60 Rs. EPS for the year. That means its trading around 15 pe for FY14. It appears cheap based on projected EPS.
Gyan, I completely agree to you. The results have been phenomenol recently.
In fact, Ajanta has already done 42.89 in first 9 months. Looking back at the history, it shows some seasonality with significantly better results in March Quarter. Itcan in fact show anywhere between18-24 EPS in 4th quarter. At consolidated level, I think its safe to add another 8-10%. Which means the FY14 Cons EPS is in the range 65-70 and the stock is trading at 13-14 PE. Some ANDA approvals and the confirmation of the plant completioncan act as next triggers for Ajanta.
Disc: Hold
Tried to analyze quarterly numbers. Here is the analysis
| Previous March | Next Yr | Multiplier |
|---|---|---|
|
17.47 |
77 |
4.40 |
|
23.6 |
112 |
4.74 |
|
42.7 |
150 |
3.50 |
There is a bit of seasonality in results with Q4 being the best & Q1 being the worst quarter.
Still in last 2 yrs, company has grown such that next yr's PAT is more than 4 times (4.4 & 4.74 resp) PAT of last March quarter.
Now Clean PAT for Q4-13 was 42.7 crs (27crs + 15.7 crs-- extra tax).
Evenapplying a 3.5 multiplier for that... (assuming not muchgrowth in salesscenario), this year PAT should be 150 Crs...35% growth.
Using a multiplier of 4... PAT would be 170 crs...52% growth.
Based on this calculation, Ajanta looks a super 1 year pick to me.
Kindly point any errors in my assumptions.
When am looking back,the projections from Jatin came closer to the target,EvenAjanta Pharma had beaten this expectation also,full year PAT can cross 200 crs.
If we safely assume 20 EPS for 4th quarter and a conservative 4 multiplier gives 80 EPS for 2015 March and stock looks cheap one year forward PE of 11 or 12.
By the way why the stock is down today.
Dosclosure : Invested from lower levels,bought few quantities today,planingto buy more.
regards,
Shanid.V.H
be careful in ajanta pharma…
looks like an ideal co for the investors to get trapped…most of optimism is built into the price and co valued at 4000 cr mkt cap…i fear something boiling in this co…results will surprise on the downside at any instant and then it might be too late…risk-reward not favourable…risk is loosing more than 50-70% of capital and reward in long term is 10-20% trading gain here there…
my recommendation is just sell and forget to look at this company…do not average downwards in the hope of better results…
if want to hold on…play on technicals…do not play on fundamentals…
happy investing
Yes great results.
But as per the latest Mgt Q&A-
Top 45 Pharma Company in India. You are making making rapid progress in climbing the ranks - from 60 to 50 to now 45. Where do we go from here?
Yes our brands are growing in strength. Our rankings have improved. But beyond a point it is difficult for our kind of niche market/products. Below 40 ranking is almost impossible to achieve.
Now as per result press release, they are now 40th.
So, now, will growth be tough?? Or they were being humble in that Q&A??
How the mgt is seeing the next 1-2 yrs??
Request Donald/ Seniors to please get in touch with the management to get views on this.
I don’t think we need to confirm & re-confirm things from the management.They were probably being modest or underestimated themselves! I remember that they had guided for 22-23% EBITDA margins,but they have been doing much better than that for two quarters running.All in all,looks like the company’s products are finding better traction & their growth strategies are paying off.The R&D efforts also seem good and filing 4 more ANDAs is another good development.At an EPS of about 50,looks good for a 20-25% upmove from here…hopefully we can get it at lower levels,given the mini-panic in global equity markets.
Ranking is driven by growth. In the domestic segment, their growth is far higher than average of top 40 pharma companies. Naturally, they will move up in the ranking. Only if they stop growing faster than average, they will not gain in ranking, which looks very less likely given their performance.
What is the reason for being too bearish in the company that is growing fantastically over the last 3years? Do you have any valid reasons for that? Or simply firing in the air (having exited it earlier)?
Again a great set of results. In my opinion, taking FY14 results and extrapolating it to FY 15 could both be erroneous and risky.
If we compare the first nine months of FY13 and FY14, almost most of the margin expansion has come from the reduction in the cost of material consumed. This line item has come down to about 25% from 35% as a percentage of revenue from operarations from the previous year. This is a very significant decrease and can this be repeated next year? This 10% decrease in this line item translates to a saving of around Rs 78 crs for 9 months FY 14 on the nine month revenue as compared to the profit of Rs 74 crs in 9 months of FY 13.
I think that we need to answer the question as to what led to this steep decrease in RM costs.
Is it the scale effect that higher volumes led them to negotiate RM prices down?
Is it the effect of rupee depreciation wherein the RM is Indian but the export volume is around 60% of the total revenue?
Is it that there business mix has improved allowing them to raise prices for some products or enter some higher margin therapies?
indianivesh guys who have till now got their predictions on ajanta spot on have come out with a buy recommendation… they predict fy 14 eps at 68, fy 15 at 81 and fy 16 at 96 per share.
as mentioned before by P sharma correctly its no use predicting numbers for fy 15 and fy 16 by extrapolation…
But overall nearer to 900 and below I think ajanta looks attractive.
Yes Hitesh bhai,their estimates seem pretty bullish to say the least.They expect AP to end FY14 at 240cr. Net Profit & I think that would require a Q4 PAT of 85cr. or more compared to 32cr. for Q4FY13.Still,given the improving visibility,I guess re-rating should continue.Ipca was rewarded today,inspite of already high expectations.The appetite for Pharma seems very strong,25%+ from here over medium term looks very likely.