Results are out, sales 473 vs 476(Q1 17-18 vs 16-17)
PAT 95 VS 120
EBIDTA 131(28%) VS 166(35%)
Just got a feeling of being taken for a ride by the promoters after their selling(personal needs storytelling).
Major increases are employee benefits and other expenses.
completely taken aback. I can see that sinking feeling, post this Q1
…worst is, trust is lost
Discl - very concerned investor…and holding onto a cracked raft, amidst hi seas
I have written to the guy who asked me not to panic ,asking him where his ethics were. I have also asked for an explanation on “other expenses”. Looks like these guys don’t do concalls.
Company changed depreciation policy at the group level. This resulted in depreciation being lower by 10.55 Cr. Without this change profits would have been even lower. Earnings management from Ajanta? Now that’s not expected.
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Yogesh,thanks for that. Kindly correct me if my understanding on this is correct.
Written down value method is the one accepted for taxation.
Since Ajanta has gone for the SLM,they will end up creating a deferred tax asset on the balance sheet.
Can they keep changing this every now and then?
Normally, I tend to avoid reactions on any Quarterly results or even one-off poor annual results. It is just part & parcel of a business.
Nor, does a fraction of stake sale looks a big thing. It is the fundamental right of the founder / promoter of the company to offload a part of his stake in lieu of cash.
But, there was something intriguing, which my mind didn’t want to overlook., i.e. the timing of the stake sale.
- It was done immediately after the AGM (probably to avoid questions from minority share holders during the AGM).
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This is most important. 27 lakh shares sold at a price of Rs. 1500/- per piece., when just a few months back the share price was Rs. 2000/- sorts. The difference is a cool Rs. 135 crore.
Normally, the promoters tend to sell stake at the peaks or all-time highs.
But here, the promoter taking a loss (for the lack of a better word) of Rs. 135/- crore., did give an inkling of what is coming in the future.
Personally, I am still playing the wait-and-watch game. If it was just a poor quarterly show, with the fundamentals intact, I would have used this an opportunity to garner more.
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Hi all… I might hv a chance to meet somebody from ajanta’s finance team for a short meeting tomoro morning. Incase there are any queries, pls feel free to post here.
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Good observations. Ajanta is going through a perfect storm of high valuation, slowing growth and industry headwinds. Add to that the issues you mentioned. Normally, all these issues individually aren’t strong enough to knock down a stock like this one but taken together can have an impact which is what is happening.
India business slowed in Q1 while export business did OK. This could well be a one off event due to GST related destocking and growth should resume next quarter albeit at a slower rate. Ajanta had done better than industry peers due to its low exposure to US markets but other issues are being noted by the investing community.
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After reading investors presentation, I feel they are doing okay…All companies are going thru GST impact in this quater, so Ajanta can not escape that… Export has increaed by 8% even appreciating Rupees and issues in Afrian Market.
I feel we should not make this promoter selling a big issue, as they have put lots of money in Dahej Plant & then now they are building another facility in Assam, So they are clearly looking for more growth and this quater is justs one-off due to GST.
Also to note that Entire Pharma industry is going thru tough time, so that also has impact on Ajanta on stock Price…Natco Pharma went down more than 15% in just 2 days even after good results. We can not question Promoter’s integrity due to one quater results.
my 2 cents…
Disclosure: Holding Ajanta Pharma since more than one year now.
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Just one question. Why did the promoters pare their shareholding? Was it to take care of expansion or personal reasons? Where were the funds used if for business. Would be nice to understand.
Disc-Not invested.
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…
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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.
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Promoters have released some pledged shares http://www.bseindia.com/xml-data/corpfiling/AttachLive/6523CCD8_777C_4703_868B_AA72C46DF506_143042.pdf
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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.
Is this not major concern for us?
1Q FY18 Conference call Highlights
- India MR strength was at 3000+
- 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
- Cash was at 225 crore as of end of Q1FY18
Source: http://content.icicidirect.com/mailimages/IDirect_AjantaPharma_Q1FY18.pdf
Disc: No holding currently. No transaction in last 60 days. Realized my interest for Ajanta has not waned.
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sandeep cant find concall details (bse,researchbytes). do u have link
They do not do any quarterly conference call. I think he meant it with ICICI data.
