^ Many thanks for this Donald and Hitesh, I guess on behalf of all board members.
Thanks a lot sharing the information,Donald. Appreciate your help in sharing information.
From the available price list in the website ,I have prepared price list comparison for Met-XL and Atorfit tablets with other brand. As management mentioned, Ajanta's price is lower than other major companies. But, I don't know how the price is fixed by the Govt.
Among the range,considered only Met-XL and Atorfit
| Met-XL | ||
| Company | Drug Name | Price/10 Tab-50mg |
| Ajanta | Met XL | 42 |
| Ipca | Ace Revelol | 10 |
| Biocon | Actiblok-AM | 7.5 |
| Biocon | Actiblok-IPR | 70 |
| USV | Amolpin-M | 6.02 |
| Intas | Amtas-M | 6.9 |
| Unichem | betafit | 6.6 |
| AstraZenca | betaloc | 3.8 |
| Reddy's | Betaone-XL | NA(No variant) |
| ManKind | Gudpress-XL | 3.5 |
| Novartis | Lopresor | 3.6 |
| Atorfit | ||
| Company | Drug Name | Price/10 Tab for 10 mg |
| Ajanta | Atorfit | 25 |
| Piramal | Amat | 40 |
| Cadila | Amdapin-Duo | 40 |
| USV | Amlopin Plus | 43 |
| Alembic | Amter | 38.5 |
| indoco | Atherochek | 31 |
| Reddy's | Atocor | 81.5 |
| Cadila(Generic) | Atorbest | 75 |
| Zuventis | Atorfen 10 | 96 |
| Aurobindo | Atoril | 48 |
| Cipla | Atorlip | 85 |
| Zydus | Atorva | 94 |
| Morepen | Atorsave | 65 |
| Aztor | Sun | 83 |
Disc: Invested
Some factors that need to be considered while looking at the impact of DPCO on Ajanta like companies:
65% revenues accrue from exports. So only 35% of portfolio is exposed to govt actions and there too products in skin care range are almost not likely to be brought under DPCO as these are non essential kind of drugs…cosmetics, skin lightening agents, moisturisers etc.
Cardiac division of the company is most likely to be hit by govt actions if at all. There the explanation of the company makes sense.
Ophthalmology which is a big growth engine for ajanta also is not likely to be hit by DPCO.
The companies which are mainly dependent on cardiology and diabetes drugs and that too from domestic market are likely to be worst off being the most exposed to govt actions.
2 Likes
Outstanding Results…
Revenue Growth YoY 32%
EBIDTA Growth 78%
EPS Growth 78%
Exports now 56% of company’s sales
YoY results are outstanding… QoQ results should not be compared much as June quarter has ALWAYS been a bit subdued compared to March quarter.
2 more ANDAs filed. Co expects 2-3 product approvals this year which will accelerate US business.
Waiting for the comments of seniors.
Q1-2014 results out.
Revenue from operations up 32% Rs.287 cr vs Rs.218 cr vs Q1-2013.
EBIDTA up 78% to Rs.90 cr from Rs.50 cr.vs Q1-2013.
PAT up 80% Rs.59 cr from Rs.33 cr. vs Q1-2013.
I thought the results were excellent. But market does not agree. Stock down 10%. Have I missed something.
Probably it is about pledging :
Pledgingincreasedfrom 2.53% Q4’13 to 4.11% in Q1’14.
Ramesh. Thank you for pointing out the increased pledging. Had missed it completely. But I think that in itself is not the reason for the fall. According to my friend, who is a pharma analyst with a financial services firm, the disappointment is due to the fact that Q1-2015 results are below Q4-2014 results. The market was expecting otherwise.
I attended the AGM yesterday in Mumbai. Management indicated sustainable topline growth of 20-25% for next 3 years. That is below their past 30-35% growth rate.
Pledgingincreasedfrom
Was surprised to see the market reaction to the numbers. Maybe it is the increased pledging, “disappointing” numbers QoQ, absense of bonus/split or “expensive” valuations.
Holding Ajanta since 900 levels and have bought yesterday too and have initiated buy at around 22x trailing PE. If people are selling, no problem, I will buy aggressively at 19x or lower.
Interesting reactions to ajanta results.
I think it could be due to either people comparing q1 fy 15 results to q4 fy 14 numbers instead of comparing the former with q1 fy 14.
Personally I think results are absolutely fantastic and company seems to be on track to deliver 30% topline and 35-40% bottomline growth for fy 15. I think consolidated eps of around 90-95 look likely for fy 15.
I also read the indianivesh update where they still stick to their projection of 78 eps for fy 15 and 92 for fy 16. Projections seem conservative and fy 16 projections are in all likelihood going to be met in fy 15 itself.
Regarding management guidance it has been 20-25% all throughout the past 2-3 yrs and they always manage higher than expected growth.
Pledging of small fraction of their holding is insignificant.
I think its a consistent growth company available at attractive valuations.
I think the jury is still out on Ajanta’s EBITDA margins…as far as the markets are concerned.A 25% topline growth,should help the company achieve some very healthy PAT growth.As Hitesh bhai said,90+ EPS seems a possibility for Fy15.The next leg of margin expansion will come from their US business.AP has filed 2 ANDAs in Q1 & their timing seems just about right.I suspect,that they will become a bit more aggressive towards the US markets.Risperidone should contribute in Q2 & onwards.
Ajanta continues to have the best in class margins.Lupin is at 32%,Sun is 44-45%…so my sense is,the stock should trade at higher multiples.Consensus earnings estimates are on the lower side,so it makes for a good case of decent upside over the coming year.The result reaction was an over-reaction,& it happens with AP,almost all the time(remember Q1,Q2 Fy14?) All this,even as Alembic trades at 27x TTM now!!
Disc.: Invested in both Ajanta & Alembic.
Dear Hitesh,
I agree with your analysis as my views are of a similar nature. The reaction which all saw was because of traders entering and exiting the stock for quick gains. Ajanta is a long term story and in a year should give very good returns. Long term value investors should accumulate it at lower levels.
Tony
Every few months, there are surprising market reactions to two stocks viz. ajanta pharma and kaveri seeds.
These are usually in form of some rumours of misunderstood news or something like that. That over the past three years has offered good entry points for investors with longer term time horizon in both these stocks.
Here in case of ajanta most of the brokerage reports with q1 fy 15 updates are predicting eps of around 80 for fy 15 and basing their projected prices.
The benefit in case of ajanta is that since their US market presence is likely to be miniscule over next 2-3 years, the risk of USFDA antics is very very low. And that to me is a big big plus for me.
Their presence & growth in non-US markets is what attracted me to Ajanta in the first place. When most other players are focussing on US and with higher scrutiny from USFDA, Ajanta’s business model provides a lot more comfort from potentially major risks.
I think India Nivesh projections of Rs 78 EPS for FY15E is bang on!
If Sales growth is taken at 30%, then Ajanta can only deliver about Rs 78-82 EPS (Tax rate 29.45 -33%) for FY15 at the existing 32% EBITDA margins, with Depreciation at 40 Cr and Interest costs at 10 Cr - both are very much on the lower side if you compare FY14. (we think these should hold good; if you take higher depreciation and interest costs, the figures will be much lower!)
So to say Ajanta will easily do 90-95 Rs EPS for FY15 is making the assumption that Ajanta will exceed Sales growth of 30% and or will deliver EBITDA margins 2 notches up. That is a very aggressive projection :)
Here are my calculations
| Ajanta Pharma | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015E |
| Growth | 19.37% | 12.08% | 19.52% | 19.69% | 32.29% | 39% | 32.35% | 30.00% | |
| Total Sales | 238.69 | 284.92 | 319.33 | 381.65 | 456.78 | 604.27 | 839.20 | 1110.67 | 1443.87 |
| EBITDA | 36.67 | 47.55 | 63.13 | 74.23 | 91.76 | 134.28 | 225.59 | 364.04 | 462.04 |
| EBITDA Margins | 15.36% | 16.69% | 19.77% | 19.45% | 20.09% | 22.22% | 26.88% | 32.78% | 32.00% |
| Depreciation | 6.78 | 6.97 | 13.15 | 19.76 | 23.79 | 30.68 | 32.70 | 41.97 | 40.00 |
| Depreciation/Sales | 2.84% | 2.45% | 4.12% | 5.18% | 5.21% | 5.08% | 3.90% | 3.78% | 3.20% |
| EBIT | 29.89 | 40.58 | 49.98 | 54.47 | 67.97 | 103.60 | 192.89 | 322.07 | 422.04 |
| Interest | 11.56 | 15.09 | 22.03 | 19.08 | 15.66 | 22.72 | 29.38 | 9.01 | 10.00 |
| Interest/Sales | 4.84% | 5.30% | 6.90% | 5.00% | 3.43% | 3.76% | 3.50% | 0.81% | 2.50% |
| PBT | 18.33 | 25.49 | 27.95 | 35.39 | 52.31 | 80.88 | 163.51 | 313.06 | 412.04 |
| Taxes | 4.42 | 6.84 | 4.53 | 5.12 | 5.3 | 13.38 | 62.39 | 92.20 | 121.35 |
| Tax rate | 24.11% | 26.83% | 16.21% | 14.47% | 10.13% | 16.54% | 38.16% | 29.45% | 29.45% |
| PAT | 13.91 | 18.65 | 23.42 | 30.27 | 47.01 | 66.49 | 101.12 | 220.86 | 290.69 |
| Net margins | 5.83% | 6.55% | 7.33% | 7.93% | 10.29% | 11.00% | 12.05% | 19.89% | 20.13% |
| # of Shares | 1.1709 | 1.1709 | 1.1709 | 1.1709 | 1.1709 | 1.1709 | 2.35922 | 3.51533 | 3.51533 |
| EPS | 11.88 | 15.93 | 20.00 | 25.85 | 40.15 | 56.79 | 42.86 | 62.83 | 82.69 |
| Adj EPS | 3.96 | 5.31 | 6.66 | 8.61 | 13.37 | 18.91 | 28.77 | 62.83 | 82.69 |
| EPS growth | 34.08% | 25.58% | 29.25% | 55.30% | 41.44% | 52.08% | 118.41% | 31.62% | |
| P/E | 19.13 | ||||||||
| P/Sales | 3.85 |
1 Like
hi donald,
you projections for EPS are standalone projections. consol eps for fy14 was 66.54, 3.71 higher than standalone eps. assuming 4.5 diff for fy15, we could have 87.19 eps for fy15 according to your estimates.
hi donald,
you projections for EPS are standalone projections. consol eps for fy14 was 66.54, 3.71 higher than standalone eps. assuming 4.5 diff for fy15, we could have 87.19 eps for fy15 according to your estimates.
Hi Donald
Thanks for the projections. I have some views / arguments against some of the assumptions you have taken, just a matter of difference in opinion.
1). Sales Growth of 30%- It is bit too aggressive despite the great history. Ajanta has shown 30%+ growth in last 3 years, but I would attribute some part of it to the INR depreciation. They could show only 30% growth in Q1 despite low base. Hence, leaving the room for some upside surprises, 25% (5% above management guidance) should be mid point estimate according to me.
2). EBITDA Margins of 32%, Net Margins of 20% - If we look at Q1 margins they are already at 31.2%/ 19.83%. Sales always increase from Q1 to Q4 , and correspondingly margins. For Rs 311 Crore sales in Q4 2014, it posted 35.5%/22.3%. With the growth expected this year, all other quarters should be more then this margin. My estimate is 35%/22% average for FY 2015
This will translate to PAT of Rs 305 Crore and EPS of 86.83. Add to that the profits from subsidiaries and we could reach somewhere close to Hitesh’s numbers 
If sales can rise by as much as 30%, then one would be more or less assured abt margins.
They do not seem to incur as much expenditure as the sales grow. Which means the margin percentage would be consistently increasing even if the sales growth rate is steady…For 30% sales growth, the EBITDA margins growth could very well be 36% imho…
Only concern is the high price to book value. Its ~9.5 now.
If we add the entire FY15E PAT into the Net worth, it (price to book) will still be high at abt 6 at CMP . And if the share price increases in proportion to PAT (which the investor hope for) , then it will remain high close to 9.5 only.
Hitesh made correct point here as this stock provides better entry points every few months.
In last 3 years Ajanta Pharma stock provided aprox 10 entry points when RSI was below 30 and CCI was below -100. I also appreciate Tony’s technical analysis for fundamental stocks particularly.
Best opportunity was created on 30-8-13 when stock went -27% from high.
Kunal