Ajanta Pharma: Buy for 26% upside in 12-18 months | Outlook and Valuation | Indianotes.com


Ajanta Pharma (APL) a midcap pharma company, has focus on a few emerging markets in the export space and a few therapies in the domestic space. With its unconventional approach of focusing on FTF launches and vertically integrated model, the company has come a long way by demonstrating stand-out performances. With consistent new product launches, backed by strong R&D support, the unconventional approach has helped APL to create its own mark in the crowded midcap pharma space. We are initiating coverage on Ajanta Pharma as the company offers healthy growth and high margins with its USP in the midcap pharma space.


Highlights:

 

– FTF launches in Key Therapies to trigger Domestic sales


– Emerging Markets provide major Export Traction


– US to provide a strong growth trajectory


Outlook and Valuation


With a focus of niche therapies in Domestic market and a front-end presence in all markets, Ajanta Pharma has maintained high growth, strong margins, commendable return ratios and a debt-free balance sheet. The company is currently well established to expand its presence in the US generic markets. Commissioning of Dahej facility to focus on US products and Anti-malaria products for its tender business in Africa and Guwahati facility for in-house production of currently out-licensed products has provided the company with operational and administrative ease to expand its presence in these markets. The company has planned a capex of INR 3 billion and INR 2 billion for FY18 and FY19 for its Guwahati facility expansion. We expect Revenues, EBITDA and PAT to grow at 15.7%, 13.3% and 16.2% respectively to INR 26.8 billion, INR 8.8 billion and INR 6.7 billion. We recommend a BUY rating with a Target Price of INR 1520 (26.6% upside) for a period of 12-18 months at a FY19E PE of 20x and FY19E EPS of INR 76.0.

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