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You are here : IndiaNotes >> Research & Analysis >> Companies >> Ajanta Pharma Ltd. >> Research

Ajanta Pharma: To maintain growth trajectory and superior fundamentals; buy

Manu Jain | 30 Jul, 2012  | Follow Author | Add to my Favourites 


Ajanta Pharma (APL), incorporated in 1979, is engaged manufacturing pharmaceutical products. The company runs three divisions - prescription drugs, OTC and institutional sales.

The company has a marketing workforce of 700 people that reach 75,000 doctors and 125,000 pharmacies. It supplies its products to various government institutions like defence, state and national government hospitals under purchase schemes.

APL caters to therapeutic areas like cardiology, ophthalmology and dermatology. It manufactures various dosage forms such as tablets, capsules, injections, ointments and powders. Company manufacturing facilities are located at India, Mauritius and Turkmenistan.

The company’s research and development division conduct activities in three aspects namely new drug delivery system (NDDS), formulation and development and herbal/ nutraceutical.

Ajanta's first brand, Pinkoo Gripe Water, continues to be one of the leading products in the market.

Products

- Allopathic - This division manufactures drugs for anthelmintics, antibiotics, anti–diarrhoeal, anti-histaminics anti–malarials, anti–retrovirals, anti-tussives / bronchodilator, anti–TB, cardiovascular and many more. APL has created products like Uniminth, Apmox, Cetazone, Norfloxacin, Oral Rehydration Salts, Apifen and many more.

- Herbal - Under this company manufactures various pharmaceutical products such as Apcosule, Figurin, Apdyl-H, Imnohans and many more.(Source: Shine.com)

Q1FY13 Result Update
Ajanta Pharma reported excellent results for Q1FY13. Sales inclined 36.7% YoY. EBITDA Margins expanded 460 bps to 21.3% on a YoY Basis. Net Profit margins expanded 140bps to 11.2% YoY. Going forward these 20%+. Margins are sustainable according to the Management. Sales and Profits have grown at a 3 year CAGR of 24 and 52% respectively in the past.

Projections

 

 

 

In Rs Crs

FY13E

FY14E

 

Sales

816.875

972.615

 

EBITDA

172.075

206.33

 

EBITDA M

21.07%

21.21%

 

PBT

119.275

142.855

 

PBT M

14.60%

14.69%

 

PAT

99.55

119.95

 

No of Shrs

 

 

 

Crs

1.18

1.18

 

EPS

84.36441

101.6525

 

Debt

165.55

235.55

 

Interest

 

21.94

 

NW

384.81

488.93

 

ROE

29.16%

27.46%

 

BVPS

326.11

414.35

 

#Consensus Estimates

From Brokerage Reports

 

PEER COMPARISON

 

 

 

 

(Source: Edelweiss)

 

 

 

 

COMPANIES FUNDAMENTAL COMPARISON Valuation

AJAPHA

LUPLTD

DIVLAB

MATLAB

PE (x)

11.03

26.97

28.43

8.13

Price to Book Value (x)

2.8

6.3

6.74

2

EV to Sales (x)

1.35

3.62

7.7

1.34

EV to EBITDA (x)

6.16

17.45

19.2

5.64

Dividend Yield (%)

1.05

0.6

1.2

0

 

Valuation Matrix

 

 

 

 

 

CMP

733.55

Rs

 

 

 

 

Sales

NP

P/E

P/Bv

ROE(%)

FY13E

816.875

99.55

8.695018

2.249393

29.16%

FY14E

972.615

119.95

7.216248

1.770374

27.46%


So what is the justifiable P/E and PT for Ajanta Pharma?

Ajanta Pharma

Consensus

FY14E

 

 

Debt

235.55

t rate

0.18

 

 

Networth

488.93

Beta

0.7

 

 

D+E

724.48

D/(D+E)

0.32513

 

 

ROE

27.46

E/(D+E)

0.67487

 

 

TGR

3

Interest

21.94

RFR

 

WACC

10.79092

Risk Prem

6

8.11

 

Cost of Debt

 

7.637784

WACD

2.483271

 

Cost of Equity

 

12.31

WACE

8.307653

 

 

 

 

 

 

 

TGR/WACC-TGR

 

0.385063

 

 

 

ROE-WACC

 

16.66908

 

 

 

ROE*WACC

 

296.3188

 

 

 

((TGR/WACC-TGR)*((ROE-WACC)/(ROE*WACC))

 

2.166131

1/WACC*100

 

 

 

 

9.267047

JUSTIFIABLE P/E

 

 

 

 

11.43318

 

 

 

 

 

 

Coloured Cells are output cells and not to be touched

 

 

 

 

 

 

 

Method 2

 

 

 

 

 

g

0.03

 

 

 

 

1+g

1.03

 

 

 

 

DPS

12.2

 

 

 

 

EPS

101.6525

 

 

 

 

1-D Payout

0.879983

 

 

 

 

r

0.107909

 

 

 

 

Justifiable PE

 

11.63383

 

 

 

TP

1182.608

 

 

 

 

 

 

 

 

 

 

Method 3

 

 

 

 

 

Div Payout Ratio

 

0.120017

 

 

 

COE

 

0.1231

 

 

 

Ret Rate

 

0.879983

 

 

 

Exp Growth in Div

 

0.108326

 

 

 

Justfiable P/E

 

8.123477

 

 

 

PT

 

826

 

 

 

Avg Justifiable P/E

 

10.39683

 

 

 

PT

 

1056.864

 

 

 

Justifiable P/BV

 

 

 

 

 

 

 

 

 

 

 

ROE

27.46

 

 

 

 

TGR

3

 

 

 

 

ROE-TGR

24.46

 

 

 

 

COE

12.31

 

 

 

 

COE-TGR

9.31

 

 

 

 

Justifiable P/BV

 

2.627282

 

 

 

P/BV

1.770374

 

 

 

 

CMP

733.55

 

 

 

 

PT

1088.608

 

 

 

 

#Inputs Based on Concensus Estimates

 

 

 

 

Method 4

Source

Of Formula

Vectorvest

 

 

Value of the stock(V)=100*(E/I)*SQRT((R+G)/(I+F))

 

 

E=EPS

 

 

 

 

 

I=RFR

 

 

 

 

 

R=1*SQRT(ROCE/I)

 

 

 

 

 

E=Earnings Growth

 

 

 

 

 

F=CPI

10.02

 

 

 

 

100*(E/I)

1253.422

 

 

 

 

N+I+T

167.6039

 

 

 

 

CE

637.42

 

 

 

 

ROCE

26.29411

 

 

 

 

R

1.800606

 

 

 

 

G

20.49221

 

 

 

 

SQRT((R+G)/(I+F))

1.108878

 

 

 

 

Value of the stock(V)=100*(E/I)*SQRT((R+G)/(I+F))

1389.892

 

 

Altman's Z Score

In Crs

 

 

 

Ajanta Pharma

 

FY12A

 

 

EBIT

108.9

 

 

 

Total Asset

648.8

 

 

 

EBIT/TA*3.3

 

0.5539

 

 

 

 

 

 

 

WC

82.07

 

 

 

WC/TA*1.2

 

0.151794

 

 

 

 

 

 

 

Net Sales

677.4

 

 

 

NS/TA*0.9

 

0.939673

 

 

 

 

 

 

 

Retained

 

 

 

 

Earnings

286.23

 

 

 

RE/TA*1.4

 

0.617636

 

 

 

 

 

 

 

M.Cap

865.589

 

 

 

CMP

733.55

 

 

 

No of Sh

1.18

 

 

 

 

 

 

 

 

M.cap/TL*0.6

 

0.800483

 

 

 

 

 

 

 

Z score

 

3.063486

 

 

 

 

 

 

 

Coloured cells are Output cells and are Not to be Touched


Ajanta Pharma trades at attractive valuations of 8.7x and 7.2x FY13E and FY14E EPS. The record date for stock split is 10th August 2012. The FV shall reduce from 10 to 5. Given the stock's high growth trajectory the valuation gap between Ajanta Pharma and its peers should get reduced. Value the stock at 11.6x FY14E EPS of ~102 with a price objective of Rs1183. Upside potential of ~61% in the medium term. Maintain BUY. An Altman’s Z-score of 3.06 makes the company immune to adverse macroeconomic circumstances. Company to maintain growth trajectory and superior fundamentals.

Disclaimer: The author has taken due care and caution to compile and analyze the data. The recommendations are his/her personal views. He/she shall not accept any liability whatsoever arising from the use of any of the above content.

Sources have been mentioned at relevant places in the article. In spite of this, the author does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.

The author does not hold positions in the stock.



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About Manu Jain

Manu Jain is a Market/Investment Analyst based in Delhi. He can be contacted at manujain1232003@yahoo.co.in or his blog http://talkmanujain.blogspot.com/


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Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. Neither the author nor IndiaNotes.com accept any liability whatsoever arising from the use of any of the above contents.


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