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“ ripe for a re-rating “
Investment Rationale
The `5bn Ajanta Pharma Ltd - APL has grown its consolidated revenues at a CAGR of 17% during the past 5 years with its focus on Asia, Africa, Middle East & Latin America. We expect APL to maintain this 17% growth in revenues for the next 2 years as well since its formulation facility at Paithan in Aurangabad is now approved by the US FDA and the UK MHRA.
APL has during the past 5 years grown its consolidated net profits at a CAGR of 33% and after being in an investment phase for the past 3 years, we believe that it is now on track to work on a sustainable ROI of 20% with a sustainable EBIDTA margin of 20%
APL launched close to two dozen products last fiscal and notched up revenues of `5bn and net profits of `500mn on a consolidated basis and we expect the `1.5bn invested in the last 3 years to expand capacities to start yielding results during FY'12 & FY'13.
Therapeutic focus areas in India is gaining strength as its 2400 strong field force operate in cardiology, dermatology, opthalmology, orthopedic, respiratory, gastroenterology and nephrology.
APL is a comparatively late entrant into pharmaceuticals as compared to its peers like Indoco Remedies and we believe that it now has got its act together to create value to its stakeholders.
Valuation
Despite being a marginal player in the domestic pharmaceutical business, APL we believe has demonstrated its ability to come up with differentiated products in fast growing therapeutic categories and this strategy would help in brand building.
APL we believe has the ability to operate at a sustainable 20% EBIDTA margin with an ROI of 20% and the stock trading at 6xFY’12E earnings looks extremely attractive with respect to both valuations and price to book.
We rate APL as a ‘BUY’, with a 1 year target price of `475. At the current market price the stock is trading at a P/E of 6x FY’12E EPS of `51.7 and 5.3x FY’13E EPS of `59.8.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
“ ripe for a re-rating “
Investment Rationale
The `5bn Ajanta Pharma Ltd - APL has grown its consolidated revenues at a CAGR of 17% during the past 5 years with its focus on Asia, Africa, Middle East & Latin America. We expect APL to maintain this 17% growth in revenues for the next 2 years as well since its formulation facility at Paithan in Aurangabad is now approved by the US FDA and the UK MHRA.
APL has during the past 5 years grown its consolidated net profits at a CAGR of 33% and after being in an investment phase for the past 3 years, we believe that it is now on track to work on a sustainable ROI of 20% with a sustainable EBIDTA margin of 20%
APL launched close to two dozen products last fiscal and notched up revenues of `5bn and net profits of `500mn on a consolidated basis and we expect the `1.5bn invested in the last 3 years to expand capacities to start yielding results during FY'12 & FY'13.
Therapeutic focus areas in India is gaining strength as its 2400 strong field force operate in cardiology, dermatology, opthalmology, orthopedic, respiratory, gastroenterology and nephrology.
APL is a comparatively late entrant into pharmaceuticals as compared to its peers like Indoco Remedies and we believe that it now has got its act together to create value to its stakeholders.
Valuation
Despite being a marginal player in the domestic pharmaceutical business, APL we believe has demonstrated its ability to come up with differentiated products in fast growing therapeutic categories and this strategy would help in brand building.
APL we believe has the ability to operate at a sustainable 20% EBIDTA margin with an ROI of 20% and the stock trading at 6xFY’12E earnings looks extremely attractive with respect to both valuations and price to book.
We rate APL as a ‘BUY’, with a 1 year target price of `475. At the current market price the stock is trading at a P/E of 6x FY’12E EPS of `51.7 and 5.3x FY’13E EPS of `59.8.
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