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Ajanta Pharma
Pure Branded Play – Ideal candidate for re-rating
Mr. Arvind Agrawal – CFO and Mr. Rajeev Agrawal – Deputy General
Manager, Finance shared their view on the industry and the company
Key Highlights
¡ Domestic business – In the Indian market Ajanta ranks 63rd with sales growing at
27% CAGR over FY06-11 on back of strong foothold in Ophthalmology (FY06-11
sales CAGR - 35%), Dermatology (FY06-11 sales CAGR - 57%) and Cardiology
(FY06-11 sales CAGR - 34%).
¡ In the Opthal segment, the company has 30 brands with 9 of them in the top 5
rankings. In the Derma segment, the company has 24 brands & 5 brands stand in
top 4 rankings. In the Cardio segment, the company 8 brands with 3 in top 10.
¡ 70-75% of the domestic sales are through prescriptions and the rest are tender
based sales. The company has reduced its exposure to tender based sales (5% in
FY11 vis-à-vis 23% in FY07) as a result of which EBITDA margins have expanded
by 386bps to 19.1% over the same period.
¡ Management has iterated that the competition in the domestic market is increasing.
However, it is confident of achieving 15% growth from in FY12E and 15-20%
growth in FY13E, driven by 10-12 new product launches, line extensions and
therapy expansions. Total filed force strength stands at 2400 MRs
¡ Exports – During FY11, exports business contributed 63% of the total sales with
Asia/ Africa collectively contributing 95% to the export revenues and remaining
from the LatAM.
¡ Management has iterated that the institution business (~20% contribution to
exports) is expected to remain sluggish and as a result FY13 may witness flat
growth in the institutional business
¡ In African markets, the company derives 50:50 revenues from Anglo and French
African markets. Going ahead, margins in exports segment will improve as the
company has deliberately reduced its focus on tender business in Afirca (16%
contribution to exports in FY11) and has not bidden for any of the WHO tenders.
¡ The company is gearing up for entry into regulated markets like the US and has
planned a capex of Rs1.4bn in FY13E to build up capacities to address the market.
Majority of the capex will be towards setting-up of manufacturing unit. The
company anticipates 4-6 ANDA filings every year going ahead, which is evident
from increased R&D spend of 4.5%. The company has 3 ANDAs approved and has
filed for 2 more approvals
¡ Management has stated for margins to increase on the back of improved
contribution from the US business from FY14
Valuations
At CMP, Ajanta trades at 7.4x FY11E EPS and 5.8x FY11 EV/EBITDA. During FY07-11,
sales have grown at a CAGR of 18%, EBITDA at 25% and PAT at 36% with EBITDA
and PAT margin expanding by 368bps and 436bps to 19% and 10%, respectively.
Although we do not have a formal rating on the stock, we are positively biased.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Ajanta Pharma
Pure Branded Play – Ideal candidate for re-rating
Mr. Arvind Agrawal – CFO and Mr. Rajeev Agrawal – Deputy General
Manager, Finance shared their view on the industry and the company
Key Highlights
¡ Domestic business – In the Indian market Ajanta ranks 63rd with sales growing at
27% CAGR over FY06-11 on back of strong foothold in Ophthalmology (FY06-11
sales CAGR - 35%), Dermatology (FY06-11 sales CAGR - 57%) and Cardiology
(FY06-11 sales CAGR - 34%).
¡ In the Opthal segment, the company has 30 brands with 9 of them in the top 5
rankings. In the Derma segment, the company has 24 brands & 5 brands stand in
top 4 rankings. In the Cardio segment, the company 8 brands with 3 in top 10.
¡ 70-75% of the domestic sales are through prescriptions and the rest are tender
based sales. The company has reduced its exposure to tender based sales (5% in
FY11 vis-à-vis 23% in FY07) as a result of which EBITDA margins have expanded
by 386bps to 19.1% over the same period.
¡ Management has iterated that the competition in the domestic market is increasing.
However, it is confident of achieving 15% growth from in FY12E and 15-20%
growth in FY13E, driven by 10-12 new product launches, line extensions and
therapy expansions. Total filed force strength stands at 2400 MRs
¡ Exports – During FY11, exports business contributed 63% of the total sales with
Asia/ Africa collectively contributing 95% to the export revenues and remaining
from the LatAM.
¡ Management has iterated that the institution business (~20% contribution to
exports) is expected to remain sluggish and as a result FY13 may witness flat
growth in the institutional business
¡ In African markets, the company derives 50:50 revenues from Anglo and French
African markets. Going ahead, margins in exports segment will improve as the
company has deliberately reduced its focus on tender business in Afirca (16%
contribution to exports in FY11) and has not bidden for any of the WHO tenders.
¡ The company is gearing up for entry into regulated markets like the US and has
planned a capex of Rs1.4bn in FY13E to build up capacities to address the market.
Majority of the capex will be towards setting-up of manufacturing unit. The
company anticipates 4-6 ANDA filings every year going ahead, which is evident
from increased R&D spend of 4.5%. The company has 3 ANDAs approved and has
filed for 2 more approvals
¡ Management has stated for margins to increase on the back of improved
contribution from the US business from FY14
Valuations
At CMP, Ajanta trades at 7.4x FY11E EPS and 5.8x FY11 EV/EBITDA. During FY07-11,
sales have grown at a CAGR of 18%, EBITDA at 25% and PAT at 36% with EBITDA
and PAT margin expanding by 368bps and 436bps to 19% and 10%, respectively.
Although we do not have a formal rating on the stock, we are positively biased.
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