ajanta pharma ltd. initiating coverage - business...
TRANSCRIPT
January 18, 2018 Analysts: Bharat Celly (+91-9998580991) / Praful Bohra (+91-9819915604)
Ajanta Pharma Ltd. Initiating Coverage
Under the weather but on the mend
January 18, 2018 Analyst: Bharat Celly (+91-9998580991) / Praful Bohra(+91-9819915604) Page 1 of 29
Before reading this report, you must refer to the disclaimer on the last page.
Ajanta Pharma Ltd. Absolute : ADD
Relative : Benchmark
Initiating note Regular Coverage 6% ATR in 18 months
Under the weather but on the mend- Initiate with ADD Pharmaceuticals
© 2017 Equirus All rights reserved
Rating Information
Price (Rs) 1,533
Target Price (Rs) 1,648
Target Date 30th Jun‟19
Target Set On 18th Jan'18
Implied yrs of growth (DCF) 20
Fair Value (DCF) 1,498
Fair Value (DDM) 935
Ind Benchmark BSETHC
Model Portfolio Position -
Stock Information
Market Cap (Rs Mn) 1,34,944
Free Float (%) 29.30 %
52 Wk H/L (Rs) 1870/1106
Avg Daily Volume (1yr) 2,45,947
Avg Daily Value (Rs Mn) 364
Equity Cap (Rs Mn) 176
Face Value (Rs) 2
Bloomberg Code AJP IN
Ownership Recent 3M 12M
Promoters 70.7 % 0.0 % -3.1 %
DII 5.9 % 0.5 % 3.9 %
FII 12.7 % 0.5 % 2.3 %
Public 10.7 % -1.0 % -3.1 %
Price % 1M 3M 12M
Absolute 6.5 % 28.2 % -13.8 %
Vs Industry 1.8 % 23.7 % -12.1 %
TorrentPharma 5.3 % 3.2 % 9.3 %
GFL 6.3 % 22.9 % 36.0 %
Consolidated Quarterly EPS forecast
Rs/Share 1Q 2Q 3Q 4Q
EPS (17A) 13.5 14.8 17.8 12.9
EPS (18E) 10.7 14.9 12.0 12.3
Ajanta Pharma‟s (AJP) relentless growth trajectory (24% revenue CAGR over FY07-
FY17) is likely to pause in FY17-FY19, as the company grapples with (a) slower
domestic growth (GST hit), (b) a declining institutional business with IPCA‟s re-entry
as a supplier of anti-malarial drugs in Africa, and (c) currency headwinds in emerging
markets. While structural drivers are intact, we believe growth recovery would only
be back-ended; in the interim, we see pressure on asset turns and return ratios.
Initiate with ADD and a Jun‟19 TP of Rs 1,648, set at 27x P/E.
Domestic business – on a strong footing: AJP has built an enviable franchise in the
domestic market with a focus on key therapies such as cardiology, dermatology,
ophthalmology and pain management. It enjoys a strong edge over competition with
~40-50% products launched every year being first-time introductions. AJP‟s niche,
low-competition portfolio has helped it command a premium in most products, with
prices of 50% products topping those of peers. Also, ~35% of its current portfolio has
no competition. Therefore, it has enjoyed a strong market share and higher margins.
While AJP has been recently hit by GST-led de-stocking and declining revenues of
Melacare, we expect things to normalise in FY19E with a 14% CAGR over FY17-FY20E.
Africa business - IPCA's re-entry should hurt: Recently, WHO has re-qualified IPCA
as a preferred supplier for anti-malarial medicines in Africa. This is a negative for
incumbents such as AJP, who benefitted in FY16 when IPCA exited the global fund
business. Additionally, allocation from Global Fund towards malaria treatment is on
a declining trend, which can hurt revenues. Lower institutional revenues should
offset strong growth in the branded Africa business and keep overall revenues
muted. We thus expect flat Africa business revenues between FY17-FY20.
Recovery to be back-ended; initiate with ADD: We expect AJP to report a 7% CAGR
in earnings over FY17 led by strong growth in the domestic market and US business
(low base), negated by muted growth in the Africa business. Asia business growth
will be characterised by currency movement, and we factor in a moderate 9%
CAGR. Margins are likely to expand by 160bps over FY18-FY20 with product mix
changes (higher domestic and other branded generic biz, lower institutional
business). While structural drivers are intact, AJP's growth recovery is likely to be
back-ended.
With a moderate growth profile, we expect ROE/ROCE to decline by 10 percentage
points. Current valuations at 27x FY19E earnings are in line with the historical
average. Initiate coverage with ADD and a Mar‟19 TP of Rs 1,648.
Consolidated Financials
Rs. Mn YE Mar FY17A FY18E FY19E FY20E
Sales 20,016 20,219 22,281 25,616
EBITDA 6,890 6,123 6,857 8,165
Depreciation 612 582 695 806
Interest Expense 35 5 6 6
Other Income 239 264 483 653
Reported PAT 5,068 4,418 5,112 6,285
Recurring PAT 5,068 4,418 5,112 6,285
Total Equity 15,677 19,061 21,781 25,124
Gross Debt 322 322 322 322
Cash 2,376 3,081 3,010 3,341
Rs Per Share FY17A FY18E FY19E FY20E
Earnings 57.3 49.9 57.8 71.0
Book Value 177 215 246 284
Dividends 13.0 10.0 23.1 28.4
FCFF 24.9 19.7 26.3 37.0
P/E (x) 26.8 30.7 26.5 21.6
P/B (x) 8.7 7.1 6.2 5.4
EV/EBITDA (x) 19.3 21.6 19.3 16.2
ROE (%) 37 % 25 % 25 % 27 %
Core ROIC (%) 37 % 27 % 26 % 27 %
EBITDA Margin (%) 34 % 30 % 31 % 32 %
Net Margin (%) 25 % 22 % 23 % 25 %
Ajanta Pharmaceuticals Absolute – ADD Relative – Benchmark 6% ATR in 18 months
January 18, 2018 Analyst: Bharat Celly (+919998580991) / Praful Bohra (+91-9819915604) Page 2 of 29
Company Snapshot
How we differ from Consensus
- Equirus Consensus % Diff Comment
EPS FY18E 49.9 52.9 -6 % We are expecting commoditized
launches in US in FY19. FY19E 57.8 64.6 -11 %
Sales FY18E 20,219 20,729 -2 %
FY19E 22,281 23,848 -7 %
PAT FY18E 4,418 4,707 -6 %
FY19E 5,112 5,748 -11 %
Key Investment arguments:
Domestic niche portfolio to lead strong momentum: AJP has successfully differentiated its portfolio vis-à-vis its peers. ~35% of its products don‟t have any substitutes. This helps the company build good relationship with doctors, ultimately resulting in higher pricing and outpacing market growth.
Sizeable revenues to add up on low US base: AJP has recently forayed in the US market with its FY17 revenue at US$ 28mn (~9% of sales). On the low base, the company can easily grow with the benefit of an expedited USFDA review; AJP has 16 ANDAs awaiting approval and is targeting to to file 10-15 ANDAs each year.
Emerging markets currency stabilization: Africa branded and Asia businesses (ex. India) struggled in FY17 owing to volatile currencies. As overall currencies have started stabilizing, we expect growth to revive in these segments.
Risk to Our View:
USD/INR below Rs 63.5.
Any adverse actions by regulators.
Delay in approval and launch of ANDAs in the US market.
Applicability or expansion of NLEM (National List of Essential medicines) may lead to
price cuts in the domestic portfolio.
Currency volatility in emerging markets
Key triggers
Spate of new launches in the US market, with GDUFA goal timelines shortening to months.
Continuous launch of first-time introductions in the domestic market.
Arresting of decline in Melacare revenues.
Currency stability in emerging markets.
Sensitivity to Key Variables % Change % Impact on EPS
EBITDA Margin -1 % 0 %
DCF Valuations & Assumptions
Rf Beta Ke Term. Growth Debt/IC in Term. Yr
7.4 % 0.7 11.4 % 5.0 % 1.4 %
- FY18E FY19E FY20-22E FY23-27E FY28-37E
Sales Growth 1 % 10 % 16 % 14 % 9 %
NOPAT Margin 21 % 21 % 23 % 23 % 23 %
IC Turnover 1.19 1.12 1.12 1.12 1.12
RoIC 26.9 % 25.7 % 27.0 % 26.9 % 26.3 %
Years of strong growth 1 2 5 10 20
Valuation as on date (Rs) 627 644 826 1,066 1,282
Valuation as of Jun'19 733 752 966 1,246 1,498
Based on DCF, assuming ~11% CAGR years of growth, we derive our current fair value of
Rs 1,282 and a Jun‟19 fair value of Rs 1498.
Company Description:
AJP is a specialty pharma company focused in Domestic and emerging market. Ajanta has
changed business over time moving away from packaging company to OTC drugs
marketers to prescription drugs. It has impetus their revenues to grow at 24% CAGR over
FY2007-2017. AJP‟s focus is to position themselves as branded generic company, with
their own front-end wherever they are present in.
Comparable valuation Mkt Cap
Rs. Mn.
Price
Target
Target
Date
EPS P/E BPS P/B RoE Div Yield
Company Reco. CMP FY17A FY18E FY19E FY17A FY18E FY19E FY17A FY18E FY17A FY18E FY19E FY17A FY18E
Ajanta Pharmaceuticals
ADD 1,533 1,34,944 1,648 30th Jun‟19 57.3 49.9 57.8 26.8 30.7 26.5 177.2 7.1 37 % 25 % 25 % 0.8 % 0.7 %
Torrent Pharma ADD 1,425 2,41,013 1,394 30th Sep‟18 54.9 53.1 61.3 26.0 26.8 23.2 255.9 4.9 24 % 19 % 19 % 1.0 % 0.9 %
Alkem Lab Ltd NR 2,249 2,68,914 NA NA 74.6 67.6 90.4 30.1 33.3 24.9 373.7 - 22 % - - 0.7 % -
Ajanta Pharmaceuticals Absolute – ADD Relative – Benchmark 6% ATR in 18 months
January 18, 2018 Analyst: Bharat Celly (+919998580991) / Praful Bohra (+91-9819915604) Page 3 of 29
Investment Rationale
Domestic business – on a strong footing
In the domestic market, AJP has focused on chronic segments and brought innovation in
existing therapies. The company is present mainly in four therapies, viz. cardiology,
ophthalmology, dermatology and pain management. Across most therapies, AJP has
outstripped market growth with a 22% CAGR over FY12-FY17; however, it has trailed other
players in the dermatology segment owing to a decline in its key molecule, Melacare.
AJP‟s domestic business is expected to continue on a high-growth trajectory with a 14%
CAGR over the next three years. Growth would mainly be driven by traction in the
existing portfolio, dominated by niche, low-competition products, and new introductions.
We believe AJP has enough headroom for growth, given its low market share (~2%) in
cardiology and dermatology – two of the biggest and oldest therapies in the
pharmaceutical market and in their portfolio. Its ophthalmology market share is
relatively better at ~7%.
Exhibit 1:Domestic growth momentum to continue on higher base
Source: Company, Equirus Securities
Niche domestic player; first-time launches provide edge, pricing power
AJP enjoys a strong edge over competition with several first-time launches in the domestic
market. Of total products launched every year, ~40-50% products are first-time
introductions in terms of compound, dosage form and release profile.
Exhibit 2:Total and first-time launches
Source: Company, Equirus Securities
AJP‟s niche, low-competition portfolio has helped it command a premium in most products,
with prices of 50% products topping those of peers and the remaining ~40% trending lower.
Exhibit 3:Number of products with prices above/below avg. price
Source: Company, Equirus Securities
0%
5%
10%
15%
20%
25%
30%
35%
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20
Revenues (Rs mn) Growth (%)
0
5
10
15
20
25
30
2014 2015 2016 2017
1st time introductions Total Launches
15 17
38
16
2
27
0
5
10
15
20
25
30
35
40
5-10 Players 11-15 Players 16 and above
(Rs) Price above Avg Price Below AVG
Ajanta Pharmaceuticals Absolute – ADD Relative – Benchmark 6% ATR in 18 months
January 18, 2018 Analyst: Bharat Celly (+919998580991) / Praful Bohra (+91-9819915604) Page 4 of 29
Low product competition across most therapies
With niche products, AJP has remained ahead of the market in terms of new launches, as
reflected in its historical growth numbers and competition dynamics for its products. In the
domestic portfolio, about 93 products face no competition, while 66 see competition from
only 1-5 substitutes.
Exhibit 4:Competition dynamics of the domestic portfolio
Source: Company, Equirus Securities
In ophthalmology, dermatology and pain management, competition in 65-85% of products is
less than 5 players. In the highly competitive cardiology therapy, competition in 30%
products is less than 5 players. Consequently, across therapies, the company has been able
to price products higher, thanks to its thrust on innovative products and better brand
equity amongst specialists. First-time launches generate ~25% of the company‟s domestic
sales.
Exhibit 5:Therapy-wise product competition dynamics
Source: Company, Equirus Securities
Exhibit 6:Premium pricing across therapies
Source: Company, Equirus Securities
Resultant, the company has been able to consistently beat domestic market growth,
including in individual therapies.
93
66
31
19
65
0
10
20
30
40
50
60
70
80
90
100
Only Ajanta 1-5 players 5-10 Players 11-15 Players 16 and above
Products
0
5
10
15
20
25
30
35
40
45
50
Only Ajanta 1-5 players 5-10 Players 11-15 Players 16 and above
Pain Management Cardiology Ophthalmology Dermatology
0
10
20
30
40
50
60
Pain Management Cardiology Ophthalmology Dermatology
(Rs) Above Avg Below Avg
Ajanta Pharmaceuticals Absolute – ADD Relative – Benchmark 6% ATR in 18 months
January 18, 2018 Analyst: Bharat Celly (+919998580991) / Praful Bohra (+91-9819915604) Page 5 of 29
Exhibit 7: AJP consistently outpaced IPM growth
Source: Company, Equirus Securities
Low market share provides growth headroom
AJP‟s market share in existing therapies remains low, offering huge growth potential. Given
its first-to-market niche launches along with favorable IPM (Indian pharmaceutical market)
dynamics, we expect the company to beat IPM growth going forward as well. We expect a
14% CAGR for AJP over 2017-2020.
The company‟s performance in the dermatology therapy has been lackluster due to
declining sales of Melacare (Rs 300mn vs. a peak of Rs 630mn). As Melacare seems to have
stabilized at current levels, we expect AJP to revive growth in this therapy.
Exhibit 8:Therapy-wise size and market share
Therapy wise sales Therapy Size
(Rs. Bn) % of IPM sales
Ajanta FY17
Sales (Rs. Bn)
Ajanta Share in
Overall therapy
Cardiac 136 12% 2.52 2%
Dermatology 83 7% 1.42 2%
Ophthalmology 22 2% 1.54 7%
Pain mngmnt 91 8% 0.45 0%
Source: AIOCD, Company, Equirus Securities
Exhibit 9:Sales/market share of AJP’s top-10 products
Brand Names Therapy Sep' 17 sales Rs. mn Market-share
Met XL Cardiac 834 2.8%
Atorfit CV Cardiac 506 7.2%
Melacare Derma 490 6.9%
RosufitCv Cardiac 217 3.1%
Feburic Ortho 202 3.1%
Met XL AM Cardiac 183 2.8%
Soft Drops Ophthal 107 2.7%
Rosustar Gold Cardiac 89 2.4%
Cinod Cardiac 85 2.1%
Olapat Ophthal 69 1.5%
Source: AIOCD, Company, Equirus Securities
Sales force productivity to improve
AJP‟s sales force productivity is relatively lower versus other companies, mainly due to its
specialty focus (four therapies) vs. peers with a presence in several therapies, including
OTC. We however expect an improvement in sales-force productivity per month from Rs.
0.17mn to Rs. 0.25mn over the next three years driven by growth in existing products and
niche launches in the domestic market.
Exhibit 10:Ajanta domestic vis-a-vis peers
Company No of First to
market
MR
Productivity
Top-10
products
(% sales)
Sales CAGR
(FY12-17) MRs
Sun Pharma 283 8.4 18% 22% 9200
Lupin 54 5.8 19% 15% 6600
Torrent 70 4.7 34% 17% 4208
Ajanta 150 2.0 38% 27% 3000
Dr. Reddy's 68 4.0 27% 12% 5778
Cadila 141 4.5 24% 11% 7199
Cipla 146 7.2 24% 12% 8000
Source: Company, Equirus Securities
15%
10% 10% 10% 12%
14%
4%
38%
29% 29%
36%
26%
23%
12%
0%
5%
10%
15%
20%
25%
30%
35%
40%
FY12 FY13 FY14 FY15 FY16 FY17 1HFY18
IPM Ajanta Pharmaceuticals
Ajanta Pharmaceuticals Absolute – ADD Relative – Benchmark 6% ATR in 18 months
January 18, 2018 Analyst: Bharat Celly (+919998580991) / Praful Bohra (+91-9819915604) Page 6 of 29
IPM to likely grow at 11% CAGR over next 3-4 years
Faster growth in chronic therapies has driven domestic growth in the past. Chronic
therapies grew by 18% during 2011-16, while acute therapies at 10% during the period.
Going forward as well, chronic therapies are set to outstrip acute therapies, with overall
IPM pegged to grow at an 11% CAGR.
Exhibit 11:IPM expected to continue to grow at ~11.5% CAGR
Source: Equirus Securities
Penetration of medicines in the Indian market remains low; the average per capita
spends on medicines in India at US$ 15-25/year is 80% lower than that for emerging
markets (US$ 117/year).
IPM growth would be mainly driven by (1) increasing insurance coverage, (2) increasing
disposable incomes, (3) rising prevalence of chronic diseases, (4) improvement in medical
facilities, (5) population growth and (6) a rise in healthcare awareness.
Exhibit 12:Global per capita pharmaceutical spending
Source: Sun Pharmaceutical annual report, Equirus Securities
Exhibit 13:Key growth drivers in the domestic market
Source: Sun Pharmaceuticals annual report, Equirus Securities
73% 66%
63% 27%
34%
37%
2011 2016 2021
Acute Chronic
613489
1110021
1922063
1955
776 739 577 513
295 117
25
0
500
1,000
1,500
2,000
2,500
US Canada Japan EUs Australia SouthKorea
EmergingMarkets
India
(US$)
Ajanta Pharmaceuticals Absolute – ADD Relative – Benchmark 6% ATR in 18 months
January 18, 2018 Analyst: Bharat Celly (+919998580991) / Praful Bohra (+91-9819915604) Page 7 of 29
Africa business - Expected to remain muted
AJP‟s Africa business is expected to remain muted in FY19 over FY18 and gradually inch up
from FY20 onwards led by growth in the branded business in Anglo and Franco Africa. The
tender business however is set to remain flattish over the next three years owing to (a) flat
fund allocation from Global Fund and other funding agencies for malaria treatment in
African Markets and (b) IPCA‟s re-entry resulting in lower tender allocation for AJP.
Anti-malarial tender business (25% of total revenues) to remain flat over FY19-FY21
Overall funding from global institutions for the treatment of malaria has been stable over
the last 3-4 years. Of the total malaria fund, allocation towards the African region has also
been stable over the past years. Major funding sources are Global Fund, followed by USAID
(PMI) and Government of Endemic Countries.
Exhibit 14:Total malaria spend worldwide; contribution of global fund highest
Source: WHO, Equirus Securities
Of total malaria spends worldwide, the highest allocation is towards the African region,
ranging from 65-74% over the last six years; this translates into US$ 1.8bn-1.98bn over 2010-
16.
Exhibit 15:Allocation towards Africa has been highest over the years
Source: WHO, Equirus Securities
We believe overall funds available for the treatment of malaria increased by ~8.5% in 2015
over 2010, from US$ 385mn to US$ 418mn. This was despite a ~US$ 40mn decline in overall
Global Fund allocation to US$ 155mn, as the reduction was fully compensated by USAID
PMI.
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
2010 2011 2012 2013 2014 2015 2016
(US$ Bn) Total Malaria spend Government SpendGlobal Fund USAIDGlobal fund % of total - RHS
0%
10%
20%
30%
40%
50%
60%
70%
80%
2010 2011 2012 2013 2014 2015 2016
African contries Other regions
Ajanta Pharmaceuticals Absolute – ADD Relative – Benchmark 6% ATR in 18 months
January 18, 2018 Analyst: Bharat Celly (+919998580991) / Praful Bohra (+91-9819915604) Page 8 of 29
Exhibit 16: Global fund (largest contributor) allocation towards treatments reduced
Global Fund Government USAID (PMI)
2015
2010
Source: WHO, Equirus Securities
21%28%51%
Treatment Health System Prevention
17%
24% 59%
6%
88%
6%
32%
15%
53%
21%
28%
51%
9%
61%
30%
20%
17% 63%
Ajanta Pharmaceuticals Absolute – ADD Relative – Benchmark 6% ATR in 18 months
January 18, 2018 Analyst: Bharat Celly (+919998580991) / Praful Bohra (+91-9819915604) Page 9 of 29
During 2013-2017, overall capital inflow for Global Fund has stagnated. Spends towards
malaria were in the range of 24-31% of total funds raised. For the next three years, Global
Fund has allocated US$ 3.23bn (or US$ 1bn annually), in line with 2017 funding.
Exhibit 17:Global Fund allocation towards malaria out of total fund (mn USD)
Source: Global fund, Equirus Securities
Over the years, malaria funding was much below WHO‟s GTS (global technical strategy for
Malaria) level of US$ 6.5bn despite a marginal increase in malaria cases from 2014 through
2016. Meanwhile, the per pill price of ACT combination viz. AL (most preferred first-line
therapy) remained stable despite volatility in base compound prices. Thus with overall
funding reducing and price per pill remaining largely stable resulted in a proportionate
decline in disbursements of ACT pills/medicines.
Exhibit 18: Malaria cases increased post 2014
Source: WHO, Equirus Securities
Exhibit 19:Artemisnin compound prices remained stable against AL
Source: Global fund, Equirus Securities
2.75
3.08
2.62
3.34
3.96
2.88
3.19 3.54
3.88
0%
5%
10%
15%
20%
25%
30%
35%
40%
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
2009 2010 2011 2012 2013 2014 2015 2016 2017
Malaria Allocation Total Global Fund spend
% of Total fund towards Malaria
237
225
217
210 210 211
216
195
200
205
210
215
220
225
230
235
240
2010 2011 2012 2013 2014 2015 2016
(Mn)
0
10
20
30
40
50
60
2010 2011 2012 2013 2014 2015 2016
(Rs) AL Price per 30 *12 pack Artemisnin price per 100 gram
Ajanta Pharmaceuticals Absolute – ADD Relative – Benchmark 6% ATR in 18 months
January 18, 2018 Analyst: Bharat Celly (+919998580991) / Praful Bohra (+91-9819915604) Page 10 of 29
Exhibit 20:ACT treatment declines post 2013
Source: Global fund, Equirus Securities
Exhibit 21:AL and AS-AQ hold highest share in ACT treatments courses disbursed
Source: Company, Equirus Securities
Pending USDFA issues forced IPCA‟s exit amid no allocation from Global Fund, benefitting
AJP and other WHO-qualified suppliers. AJP stated that it received benefits of Rs 600mn in
FY16, which are unlikely to accrue going ahead with IPCA‟s re-qualification as preferential
supplier and possibly allocation from Global Fund. However, dynamics of the allocation are
not available yet.
Cipla, Novartis and Ajanta hold the highest market share in Global Fund purchase orders in
2016. However, the entry of IPCA could have a bearing on all these companies.
Exhibit 22: Cipla received maximum purchase orders of AL therapy in 2016
Source: Company, Equirus Securities
158 187
279
332
392
331 311
0
50
100
150
200
250
300
350
400
450
2009 2010 2011 2012 2013 2014 2015
(Mn)
0
5,00,00,000
10,00,00,000
15,00,00,000
20,00,00,000
25,00,00,000
30,00,00,000
35,00,00,000
40,00,00,000
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
AL AS-AQ (FDC) AS+AQ (Co-B) Others
IPCA 4%
Ajanta 13%
Novartis 18%
Strides Shasun 6%
Quality Chemicals (Under License
from Cipla) 45%
Cipla Ltd 10%
Macleods Pharma Ltd. 4%
Ajanta Pharmaceuticals Absolute – ADD Relative – Benchmark 6% ATR in 18 months
January 18, 2018 Analyst: Bharat Celly (+919998580991) / Praful Bohra (+91-9819915604) Page 11 of 29
Exhibit 23:IPCA tender revenues decline owing to pending USFDA issues
Source: Company, Equirus Securities
Thus, we expect overall tender revenues to decline in FY19 over FY18 and remain constant
thereon. Africa tender business should contribute Rs 3bn annually for the next three years
i.e. FY19-FY21.
Africa branded biz - Hit by currency volatility; stability to foster growth
African countries with large pharmaceutical markets are largely dependent on crude, and
were hurt due to a dip in crude prices over last year. This had a rub-off impact on AJP as
well, with the company reporting a revenue decline.
Nigeria saw the maximum impact of a decline in crude prices, with its currency declining by
~28% yoy, while SA rand fell by ~13%. However, with oil prices stabilizing or inching up from
here on, African markets should see a growth recovery.
Exhibit 24: African countries with large pharma markets saw currency depreciation
against INR
Source: Company, Equirus Securities
As currencies stabilize, and disposable incomes and insurance penetration levels increase,
the overall pharmaceutical market would grow at ~10.5% CAGR over the next
3-4 years and become a US$ 45bn market by 2020 (as per Mckinsey report). We expect
AJP‟s branded Africa business to grow at 15% CAGR over the next three years vs. 24% CAGR
over FY13-FY17.
Exhibit 25:Revenue hit by economic slowdown; stabilization may fuel growth ahead
Source: Company, Equirus Securities
4392
2599
1480
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
FY14 FY15 FY16
(Rs. Mn)
27%
-7% -5% -7%
2%
-13%
-4% -4%
17%
-29%
1% 1% 0% 0%
-8%
1%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
Algeria Nigeria Kenya Ivory Coast Libya SouthAfrica
Tusania Morcco
FY16 FY17
39% 41%
-1%
8%
15% 15%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
0
500
1000
1500
2000
2500
3000
3500
4000
4500
FY14 FY15 FY16 FY17 FY18 FY19 FY20
Revenues (Rs. Mn) Growth yoy (%)
Ajanta Pharmaceuticals Absolute – ADD Relative – Benchmark 6% ATR in 18 months
January 18, 2018 Analyst: Bharat Celly (+919998580991) / Praful Bohra (+91-9819915604) Page 12 of 29
Asia business - Middle East Asia and Central Asia to remain a drag
Under the Asia business (20% of revenues), AJP is present in 30 countries across therapies
such as Anti-Diabetics, Anti-biotic, Anti-Malarial, Cardiology, Gynecology, Orthopedics,
Pediatrics, Respiratory, and general health products. The company deploys a sales force of
650 people for the business.
The business has been growing at a healthy rate in the past, but declined in FY17 owing to
currency devaluation and repatriation issues in the Middle East Asia and Central Asia.
Therefore, the company took a conscious decision and calibrated its sales to these
countries. About ~30% of the Southeast Asia business is generated from the Philippines,
which continued to grow despite 10% currency depreciation during FY17.
Central Asia and Middle East Asia remain areas of concern, largely owing to non-availability
of US dollars and repatriation issues. Central Asia has been seeing non-convertibility issues
since quite some time now, while issues in the Middle East should resolve with oil prices
stabilizing.
In South East Asia, we expect Philippines to continue growing at a higher rate, while the
remaining market to post tepid growth. We expect overall Asia market to grow at 10% each
in FY19 and FY20.
Exhibit 26:Philippines peso declines by 10% against INR
Source: Company, Equirus Securities
Exhibit 27:Asia dipped owing to economies woes; expecting growth from FY19
Source: Company, Equirus Securities
1.15
1.20
1.25
1.30
1.35
1.40
1.45
1.50
01-0
4-2
015
01-0
6-2
015
01-0
8-2
015
01-1
0-2
015
01-1
2-2
015
01-0
2-2
016
01-0
4-2
016
01-0
6-2
016
01-0
8-2
016
01-1
0-2
016
01-1
2-2
016
01-0
2-2
017
01-0
4-2
017
01-0
6-2
017
01-0
8-2
017
01-1
0-2
017
19%
30% 29%
15%
-9%
-1%
10% 10%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
0
1000
2000
3000
4000
5000
6000
FY13 FY14 FY15 FY16 FY17 FY18E FY19E FY20E
Revenues (Rs. Mn) Growth yoy (%)
Ajanta Pharmaceuticals Absolute – ADD Relative – Benchmark 6% ATR in 18 months
January 18, 2018 Analyst: Bharat Celly (+919998580991) / Praful Bohra (+91-9819915604) Page 13 of 29
US business - Bleak visibility over future launches
AJP has successfully launched few low-competition products in the past, which shored up
revenues from Rs 40mn in FY15 to Rs 1.85bn in FY17. However, amid a tough pricing
environment and competition in one of its niche launches, gZegerid, 1HFY18 revenues
declined to Rs 800mn from 1.04bn in 2HFY17.
Exhibit 28: US revenues, mainly driven by gZegerid and gAxert, declined with
additional competition in both products
Source: Company, Equirus Securities
We expect revenues to revive in 2H on the back of full-quarter contribution from gComtan
and gRelpax, along with contribution from high-value gKapvay launched in Nov‟17. All
combined are expected to contribute US$ 6mn in 2H.
Visibility over future launches is bleak as majority of AJP‟s filings are through Para-II/III
routes. Thus, competition dynamics and contribution from the pipeline is uncertain. The
company has 16 ANDAs awaiting approval and two tentative approvals, gVesicare and
gViagra, at present. As AJP has para-III filings on both, they are likely to be commoditized
launches along with other competitors after the patent expiry. Both are likely to be un-
meaningful opportunities and contribute US$ 2-3mn annually each.
In Para-IV filings, other ANDAs in the pipeline include Cialis and Sensipar. As none of these
products is complex in nature and the number of filers in both is above 10, we expect these
to be commoditized launches with contribution limited to US$ 1mn annually.
Amid a tough pricing environment in the US, overall realizations have declined over the
past. Pricing (realization) is expected to remain low going forward as well with an
expedited USFDA approval process, strengthening purchasing power of buyers (payers) and
an increase in the number of players.
Considering the overall challenging environment in the US, we expect average contribution
from an ANDA to be limited to US$ 1.5mn. However, AJP will benefit from USFDA‟s
expedited ANDA approval review process (GDUFA target action date of 11 months). Thus,
with AJP‟s target of filing ANDAs for 10-15 products annually and with 16 ANDAs in the
pipeline, we expect the spate of launches to continue and the company to continue
launching 7-10 products each year.
Exhibit 29:US revenues expected to grow at 17.5% CAGR
Source: Company, Equirus Securities
0
200
400
600
800
1000
1200
1400
1600
1800
2000
FY15 FY16 FY17 1H FY18
Revenues
Singulair Granules
Competition in
Zegerid tablets and
price erosion in
base, compensated
partially by launch
of Abilify and month
launch of Comtan
and Relpax
Axert,
Zegerid Tablet,
Zegerid Powder
0
500
1,000
1,500
2,000
2,500
3,000
3,500
FY15 FY16 FY17 FY18E FY19E FY20E
(US$ Mn)
(US$ Mn)
Ajanta Pharmaceuticals Absolute – ADD Relative – Benchmark 6% ATR in 18 months
January 18, 2018 Analyst: Bharat Celly (+919998580991) / Praful Bohra (+91-9819915604) Page 14 of 29
Exhibit 30:US pipeline
Brand
Name
Active
Ingredient
Brand
Sales USD
No. of generic
players Approval stays Likely launch
Ajanta
annualized
sales
Comments
Vesicare SOLIFENACIN
SUCCINATE 530 1; Teva TA 1QFY20 1.3
Only 1 patent left expiring on 19-May-2019. Ajanta, Cadila, Glenmark has tentative
approval. However, it seems all have Para III as no Para IV litigation is present. Thus we
expect it to be commoditized launch in May-2019. Teva Para IV got settled and as per the
settlement Teva can launch a month before patent expiry.
Cialis TADALAFIL 782 Expecting;
Commoditized Pending 3QFY19 1.2
Teva is FTF. Later 10 other companies (inc. Ajanta) filed Para IV. All 11 have settled the
litigation. As per the settlement companies can launch by 27-Sep-2018 (based on press
release by Lilly). Thus expecting it to be commoditized launch.
Sensipar CINACALCET
HYDROCHLORIDE 330
Expecting;
Commoditized Pending 1QFY19 0.8
Teva was FTF and lost the litigation on latest patent ' 068 expiring on 8th Mar, 2018. Later
patent 405 and '595 were issued on which 15 companies inc. Ajanta, Aurobindo, Sun, Cipla,
Cadila Dr Reddy, Lupin, Piramal filed Para IV. Ajanta, hetero, Micro, Sun, Breckenridge
settled. Settlement terms are unknown. In case, if Teva launches on 8th Mar, 2018, we
expect all settlements to get triggered and launch their product. Rest still undergoing
litigation
Viagra SILDENAFIL
CITRATE 1300
Expecting;
Commoditized TA 1QFY21 3.3
15 companies haved filed an ANDA, out of which 11 companies already have Tentative
approval (inc. Ajanta). 8 companies have settled and as per the settlement they can launch
after the expiry of Teva's 180 day exclusivity i.e. Jun-2019. Ajanta, Dr Reddy, Aurobindo
haven't filed Para IV and thus won't be able to launch prior to latest patent expiry i.e. April-
2020.
Relpax ELETRIPTAN
HYDROBROMIDE 295 5 players Approved Launched 3.0
All the patents have expired. An Green stone (AG), Ajanta, Mylan, Cadila and Teva have
launched their generic version. Product has seen steep price erosion of ~90%.
Comtan ENTACAPONE 59 6 players Approved Launched 3.5
Sun, Wockhardt, Macleods, Aurobindo and AJP have launched their generic versions. AJP has
recently launched in Nov-2017. Mylan and Sandoz had launched their AG version. 1 Patent
remaining to expire, however, Innovator is no longer protecting the patent thus generics can
launch on approval.
Kapvay CLONIDINE
HYDROCHLORIDE 66 6 players Approved Launched 5.0
Six companies, viz. Lupin, Actavis (Teva), Amneal, Anchen, Xiamen and Ajanta have secured
approval. AJP has recently entered the market. All patents have expired and generics can
launch on approval. Lupin has not yet launched the drug
Source: Company, Equirus Securities
Ajanta Pharmaceuticals Absolute – ADD Relative – Benchmark 6% ATR in 18 months
January 18, 2018 Analyst: Bharat Celly (+919998580991) / Praful Bohra (+91-9819915604) Page 15 of 29
Financial Profile
Healthy topline growth to continue
Revenue growth has slowed down over the last couple of years with FY18E growth expected
to be 1% owing to (1) a higher base, (2) a slowdown in Africa and Asia branded business due
to currency volatility, (3) additional competition and price erosion in the US portfolio, (4) a
decline in Melacare revenues, and (5) impact of demonetization and GST implementation.
Growth revival is expected over the coming year with new launches in the US market,
stabilizing currency of African and Asian economies and continued outperformance in the
domestic market.
Exhibit 31: Revenues to grow at 10% CAGR between FY17-FY20E
Source: Company, Equirus Securities
Gross margins to remain strong on higher branded, lower tender biz
We expect gross margins to remain strong at FY17 levels of ~79% over FY18-FY20E. Gross
margins will remain largely intact despite a decline in contribution from low-margin Africa
malaria tender business and an increase in high-margin branded generic business (from 64%
in FY17 to 72% in FY20E) as it will get completely offset by the low-margin US business. As
we expect commoditized launches in the US market, margins are likely to be in the range
of 40-45%. Domestic business margins will strengthen with own manufacturing (third-party
manufacturing to come down to 15-20% from 45% in FY17) with commercialization of the 2nd
phase of Guwahati facility.
Exhibit 32:Gross margin to hold up at current levels
Source: Company, Equirus Securities
EBITDA margins to contract on higher costs/overheads
We expect a ~250bps contraction in EBITDA margins over FY17-FY20E due to an increase in
R&D expenses, partial utilization of the Dahej facility and negative impact of operating
leverage. Opex is set to increase at ~10.5% CAGR vs. 8.5% CAGR in revenues over FY17-20E.
R&D expenses, at Rs 1.5bn in FY17 (~7.5% of sales), are expected to go up to 9.5% of sales
(Rs 2.4bn) in FY20E as (a) the company is looking to file 12-15 ANDAs each year, and (b)
AJP‟s continued focus to launch niche products in the domestic market would warrant
clinical trials.
37%
30%
22%
19%
14%
1%
10%
15%
0%
5%
10%
15%
20%
25%
30%
35%
40%
0
5000
10000
15000
20000
25000
30000
FY13 FY14 FY15 FY16 FY17 FY18E FY19E FY20E
Sales (Rs. Mn) Growth (%)
76.3%
79.3% 79.6%
79.3% 79.3%
74%
75%
76%
77%
78%
79%
80%
FY16 FY17 FY18E FY19E FY20E
Ajanta Pharmaceuticals Absolute – ADD Relative – Benchmark 6% ATR in 18 months
January 18, 2018 Analyst: Bharat Celly (+919998580991) / Praful Bohra (+91-9819915604) Page 16 of 29
Exhibit 33:R&D costs to remain high towards developing ANDAs for the US market
Source: Company, Equirus Securities
Exhibit 34: EBITDA margin to decline from FY17 levels
Source: Company, Equirus Securities
Working capital position to increase with increase in US business
AJP business has revived its business over the past with a transition from low-margin
tender, OTC business to higher-margin branded generic business. This is also reflected in its
working capital requirement, with overall cash cycle days declining to 76 days in FY17 from
93 days in FY12. However, we expect overall cash cycle days to increase marginally with
traction in the US business, which has higher working capital requirements.
Exhibit 35:Cash-cycle days improved over years; likely to remain at current levels
Source: Company, Equirus Securities
4% 5%
6%
8%
9% 9% 10%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
0
500
1000
1500
2000
2500
3000
FY14 FY15 FY16 FY17 FY18E FY19E FY20E
Rs. Mn % of sales
31%
34%
34%
34%
30%
31%
32%
27%
28%
29%
30%
31%
32%
33%
34%
35%
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
FY14 FY15 FY16 FY17 FY18 FY19 FY20
Rs. Mn % of Sales
0
20
40
60
80
100
120
140
160
180
FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E FY20E
Payable days
Receivable days
Inventory days
Ajanta Pharmaceuticals Absolute – ADD Relative – Benchmark 6% ATR in 18 months
January 18, 2018 Analyst: Bharat Celly (+919998580991) / Praful Bohra (+91-9819915604) Page 17 of 29
Capex to remain in range of Rs. 3bn; funding through internal accruals
In line with FY18, AJP is expected to incur a capex of Rs 3bn each in FY19 and FY20, mainly
towards Dahej and Paithan expansions (~Rs 1.2bn annually), a new corporate office
(Rs 0.75bn), a new R&D site and regular maintenance expenditure (~Rs 1bn-1.25bn
annually). Projects will be funded through internal accruals.
Some of the above-referred investments won‟t yield any returns, while a few would start
contributing post FY20, thus denting AJP‟s return ratios.
Exhibit 36:Operating cash flows to remain strong; could easily fund capex
Source: Company, Equirus Securities
*FY17 saw robust jump in operating cash flows owing to launch of gZegerid and gAxert.
Declining tax rate to aid PAT and return ratios
AJP‟s tax rate increased significantly soon after FY12 as it exhausted carried forward
losses. Tax rates moved up to 29-30% of PBT, but are expected to decline with
commercialization of the Dahej and Guwahati facilities which are built in a SEZ. The
Guwahati facility is 100% tax-exempt for 10 years, while Dahej is 100% tax exempt for the
first 5 years, and 50% exempt for the subsequent 5 years. Resultant, FY18/FY19/FY20E
tax rates are expected to be ~24%/23%/22%.
Exhibit 37: Tax rates to decline with Guwahati and Dahej facilities
commercialization
Source: Company, Equirus Securities
Return ratios to decline
AJP‟s ROE/ROIC are expected to decline to 27%/27% in FY20 from 37%/37% in FY17 owing to
a slowdown in revenue growth, lower profitability margins due to negative operating
leverage and partial utilization of Dahej facility. Some of the investments currently done by
the company are expected to yield returns not any time before FY20.
Exhibit 38:ROE/Core ROIC declining due to slowdown in earnings growth
Source: Company, Equirus Securities
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
FY14 FY15 FY16 FY17 FY18E FY19E FY20E
(Rs. Mn)
0%
5%
10%
15%
20%
25%
30%
35%
40%
FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E FY20E
Tax rate
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
FY14 FY15 FY16 FY17 FY18E FY19E FY20E
ROE (%) ROIC (%)
Ajanta Pharmaceuticals Absolute – ADD Relative – Benchmark 6% ATR in 18 months
January 18, 2018 Analyst: Bharat Celly (+919998580991) / Praful Bohra (+91-9819915604) Page 18 of 29
Forecast: Key Assumptions & Sensitivity
Exhibit 39:Key Assumptions
Particulars (Rs. Mn) FY17 FY18E FY19E FY20E
Domestic 6140 6618 7807 9065
Africa 7120 7160 6728 7176
Asia 4180 4190 4819 5397
USA 1850 1716 2144 3438
Source: Company, Equirus Securities
Investment risks and concerns
NLEM expansion: Applicability or expansion of NLEM (National List of Essential
Medicines) may lead to price cuts in the portfolio.
Delay in key approvals: AJP plans to expedite ANDA filings, which are likely to get
approved within in a year owing to the latest GDUFDA timelines. Any delay can
impact our future earnings estimates.
Regulatory risks: Any adverse action by any regulator (USFDA, WHO) can affect the
company‟s existing as well as future revenues
Currency fluctuations: INR appreciation against currencies of economies where AJP
operates can hit profitability as well as viability of the business.
Adverse Government intervention: Any change in policies (like outsourcing the
manufacturing base) could likely hurt revenues as AJP generates 15% of domestic
revenues via products manufactured through third parties.
Exhibit 40: Sensitivity Analysis; Impact on EBITDA/PAT if margins drop by 100bps
Particulars (Rs. Mn) FY18E FY19E FY20E
Impact EBITDA -3% -3% -3%
Impact on PAT 4% 0% -3%
Source: Company, Equirus Securities
Corporate Governance
Composition: AJP‟s Board of Directors comprises 9 directors, including 7 non-executive
directors, of which 5 are Independent Directors. There are 3 Directors belonging to the
promoter‟s family, and all are executive. Composition of the Board of Directors is in
compliance with the stipulated requirement for independent functioning of the Board.
Background: All Independent Directors possess requisite qualification and are highly
experienced and qualified in their respective fields. No Director is a member of more
than 10 committees or a Chairman of more than 5 committees in public listed companies,
where they are Directors.
Meeting frequency of Independent Directors and Board of directors: Independent
Directors meet at least once a year every fiscal, in the absence of AJP‟s Executive
Directors, to discuss the company‟s affairs. Additionally, the Board of Directors met eight
times during FY17 against the stipulated requirement of four times to discuss strategic
plans.
Auditor: From FY18, AJP has roped in BSR & co LLP (KPMG) as auditor, replacing Kapoor
and Parekh Associates.
Disclosure norms: As per our preliminary study, we do not find any issues on this front.
The company follows disclosure norms as stipulated by the listing agreement of the
exchanges and is timely in coming up with quarterly results and other disclosures.
However, management doesn‟t conduct quarterly earnings calls.
Ajanta Pharmaceuticals Absolute – ADD Relative – Benchmark 6% ATR in 18 months
January 18, 2018 Analyst: Bharat Celly (+919998580991) / Praful Bohra (+91-9819915604) Page 19 of 29
Valuations
AJP currently trades at 31x/26x/21x P/E and an EV/EBITDA of 21x/19x/16x on our
FY18/19/20 estimates – at premium valuations vs. other pharmaceutical companies as it
derives most of its revenues from the branded generics segment (expected to grow
further going forward), which is far more sustainable than the US business (pure generic
business). AJP growth was hit in FY18, but should revive in the coming years; however,
this is partially factored into the current price (+28% over last 3 months). We initiate
coverage with ADD and a Jun‟19 TP of Rs 1,648 set at 27x P/E.
Exhibit 41:TTM P/E vs. 2 year forward EPS Growth
Source: Company, Equirus Securities
Exhibit 42:TTM EV/EBITDA vs. 2 year forward EBITDA Growth
Source: Company, Equirus Securities
Exhibit 43:TTM P/B vs. 2 year forward ROE
Source: Company, Equirus Securities
0%
10%
20%
30%
40%
50%
60%
70%
80%
0
500
1000
1500
2000
2500
3000
Mar-
08
Sep-0
8
Mar-
09
Sep-0
9
Mar-
10
Sep-1
0
Mar-
11
Sep-1
1
Mar-
12
Sep-1
2
Mar-
13
Sep-1
3
Mar-
14
Sep-1
4
Mar-
15
Sep-1
5
Mar-
16
Sep-1
6
Mar-
17
Sep-1
7
Mar-
18
Sep-1
8
Mar-
19
Sep-1
9
5x
10x
20x
30x
40x EPS Growth
-10%
0%
10%
20%
30%
40%
50%
60%
70%
80%
-50000
0
50000
100000
150000
200000
250000
300000
Mar-
08
Sep-0
8
Mar-
09
Sep-0
9
Mar-
10
Sep-1
0
Mar-
11
Sep-1
1
Mar-
12
Sep-1
2
Mar-
13
Sep-1
3
Mar-
14
Sep-1
4
Mar-
15
Sep-1
5
Mar-
16
Sep-1
6
Mar-
17
Sep-1
7
Mar-
18
Sep-1
8
Mar-
19
Sep-1
9
4x
8x
12x
16x
22x
EBITDA Growth
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
0
500
1000
1500
2000
2500
3000
3500
4000
4500
Mar-
08
Sep-0
8
Mar-
09
Sep-0
9
Mar-
10
Sep-1
0
Mar-
11
Sep-1
1
Mar-
12
Sep-1
2
Mar-
13
Sep-1
3
Mar-
14
Sep-1
4
Mar-
15
Sep-1
5
Mar-
16
Sep-1
6
Mar-
17
Sep-1
7
Mar-
18
Sep-1
8
Mar-
19
Sep-1
9
1x
3x
5x
7x
10x
1x
3x
5x
7x
10x
1x
3x
5x
7x
10x
RoE
Ajanta Pharmaceuticals Absolute – ADD Relative – Benchmark 6% ATR in 18 months
January 18, 2018 Analyst: Bharat Celly (+919998580991) / Praful Bohra (+91-9819915604) Page 20 of 29
Peer Evaluation:
Sales CAGR
in %
EBITDA
CAGR in %
Earnings
CAGR in % EV/Sales EV/EBITDA P/E Price/ Book value ROE in %
Company Name FY17-FY20 FY17-FY20 FY17-FY20 FY17 FY18 FY19 FY17 FY18 FY19 FY17 FY18 FY19 FY17 FY18 FY19 FY17 FY18 FY19
Ajanta Pharmaceutical 9% 6% 7% 6.7 6.6 5.9 19.3 21.6 19.3 27 31 27 9 7 6 37% 25% 25%
Alkem Laboratories Ltd. 12% 15% 12% 4.6 4.3 3.7 25.4 24.8 19.9 29 33 25 6 6 6 23% 17% 19%
Alembic Pharmaceuticals 9% 10% 10% 3.3 3.5 2.9 16.7 19.9 15.2 25 32 24 5 5 4 23% 16% 18%
Aurobindo Pharmaceuticals 8% 7% 5% 2.6 2.4 2.2 11.6 10.0 9.7 16 15 15 4 3 3 28% 24% 20%
Cadila Healthcare 15% 31% 28% 5.1 4.2 3.7 25.3 17.7 12.7 32 26 18 6 5 4 23% 23% 27%
Cipla Ltd. 14% 23% 39% 3.5 3.1 2.6 20.4 14.9 12.2 47 26 20 4 3 3 8% 14% 16%
Dr. Reddy's Laboratories Ltd. 11% 23% 28% 2.7 2.5 2.1 15.9 14.3 9.1 34 33 18 3 3 3 10% 10% 15%
Eris Lifesciences Ltd. 28% 29% 27% 15.0 11.4 8.3 38.3 30.4 22.0 44 34 26 19 12 8 44% 46% 41%
Granules India Ltd. 20% 21% 18% 2.9 2.7 2.2 13.6 12.7 10.3 19 17 15 3 3 3 21% 20% 19%
IPCA Ltd. 11% 18% 27% 2.4 2.4 2.0 17.4 18.8 12.5 38 39 23 3 3 3 8% 7% 11%
Lupin Ltd. 2% 0% -4% 2.7 3.1 2.8 11.1 14.7 13.2 16 25 23 3 3 3 21% 12% 11%
Natco Pharmaceuticals 3% -4% -9% 9.2 8.0 7.5 26.5 18.2 20.9 34 23 28 11 8 7 35% 39% 25%
Sun Pharmaceutical Industries Ltd. 7% 1% -1% 4.2 4.6 3.7 13.0 21.8 14.6 20 40 26 4 4 3 20% 9% 13%
Torrent Ltd. 11% 10% 8% 4.3 4.2 3.5 18.2 18.4 15.7 26 27 23 6 5 4 24% 19% 19%
Source: Company, Equirus Securities
Ajanta Pharmaceuticals Absolute – ADD Relative – Benchmark 6% ATR in 18 months
January 18, 2018 Analyst: Bharat Celly (+919998580991) / Praful Bohra (+91-9819915604) Page 21 of 29
Business overview
AJP derives majority of its revenues from Africa (~37%) followed by the domestic market
(~32%), Asia (~22%), USA (10%) and LATAM. In Africa, it caters to both institutional tenders
as well as the branded business, while the company sells only branded generics in Asia and
the domestic market.
Exhibit 44: Sales breakup for FY17 revenues
Source: Company, Equirus Securities
Domestic business: AJP‟s domestic revenues are largely generated from cardiology (41%),
followed by ophthalmology (25%), dermatology (23%), pain management (7%) and the
institutional business (3%). The company‟s focus has been on innovation, which is evident
from the number of innovative products introduced in the domestic market. Of 200+
launches in the domestic market so far, 70% are first-time market introductions.
AJP‟s domestic business is a strategic initiative taken in 2005, when the company decided
to move to prescription-based drugs from OTC and the tender business. Over time, the
proportion of tender revenues declined from 18% in FY13 to 3% in FY17.
Exhibit 45:Therapy-wise FY17 domestic revenues breakup
Source: Company, Equirus Securities
Africa Business: AJP‟s 60% Africa sales comes from the tender business, while the
remaining 40% are from branded generic business in Anglo and Franco Africa. Franco Africa
is estimated to be 70% of Africa‟s braded business, and the remaining 30% of Africa branded
business is sourced from Anglo Africa. AJP‟s focus has been only on Franco Africa over the
years, and was ranked among top-10 companies in Franco Africa. AJP conducts majority of
Africa‟s branded operations through its Mauritius subsidiary, which also houses a
manufacturing facility.
In 2015, AJP ventured into Anglo African countries through its subsidiary in Nigeria. As most
Anglo African countries are crude dependent, currencies saw steep erosion. Thereby
impacted the growth of incumbent companies.
Domestic 32%
Africa 37%
Asia 22%
USA 10%
LATAM 0%
Ophthalmology 25%
Cardiology 41%
Dermatology 23%
Pain Management
7%
Institutional 3%
Ajanta Pharmaceuticals Absolute – ADD Relative – Benchmark 6% ATR in 18 months
January 18, 2018 Analyst: Bharat Celly (+919998580991) / Praful Bohra (+91-9819915604) Page 22 of 29
Exhibit 46:Africa business breakup
Source: Company, Equirus Securities
Asia Business: Asia contributes ~22% of Ajanta‟s revenues. Philippines constitutes 30% of
the Asia business, while rest comes largely from CIS and East Asia countries. Asia business
grew at 15% CAGR between FY13-FY17, largely driven by Philippines (21% CAGR) which grew
from 23.5% of sales to ~30% of Asia sales. Lately Asia was impacted owing to currency
volatility, leading to a decline in FY17 over FY16.
Exhibit 47:Asia business grew at 15% CAGR over FY13-FY17
Source: Company, Equirus Securities
USA operations began in 2013; constitutes 10% of revenues: AJP launched 16 products in
the USA till date, out of 21 approved by the USFDA. It has 16 ANDAs which are still awaiting
approval and 2 TA. US revenues has seen sharp jump over the past with the launch of few
niche launches, gAxert and gZegerid, which later declined owing to additional competition
in these products. The company has recently secured approval for gKapvay, gComtan and
gRelpax, which could be meaningful opportunities and possibly could revive revenues.
Exhibit 48:USA revenues saw robust jump with low competition introduction
Source: Company, Equirus Securities
Africa
Branded
(40%)
Institutional
Tender (40%)
Anglo Africa
(30%)
Franco Africa
(70%)
2390 3110 4020 4610 4180
19%
30% 29%
15%
-9%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
FY13 FY14 FY15 FY16 FY17
Rs. Mn Growth (%)
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
FY15 FY16 FY17
(Rs. Mn)
Ajanta Pharmaceuticals Absolute – ADD Relative – Benchmark 6% ATR in 18 months
January 18, 2018 Analyst: Bharat Celly (+919998580991) / Praful Bohra (+91-9819915604) Page 23 of 29
Exhibit 49: Company History
Source: Company, Equirus Securities
Key Management Profile:
Mr. Yogesh Agarwal- Managing Director:
Mr. Yogesh Agrawal is the Managing Director of Ajanta Pharma. A management graduate
from Johnson & Wales University, USA, he joined the company in 1996 and grew-up the
ranks to become the Managing Director. It is under his leadership that Ajanta Pharma
made a corporate turnaround and emerged as a leading branded generic player from
India having strong footprint in its chosen markets. He spearheads Ajanta's foray in the
regulated and emerging international markets. His passion towards research and
development has fuelled the company‟s growth.
Mr. Rajesh Agarwal – Joint MD
Rajesh Agrawal is the Jt. MD of Ajanta Pharma. A graduate in Business Studies from
University of Buckingham, UK and MBA from Bentley College, USA, he joined the company
in 1999. He has transformed Ajanta's domestic business to one of the best performing
market for the company. Under his leadership, Ajanta has emerged as a specialty focused
company, especially in India and has improved its rank in the domestic market
significantly. His keen focus on new products and strategizing has made Ajanta a leading
player in the segments of cardiology, dermatology and ophthalmology in a very short
period.
2017Inaugurated & commissioned 1st phase at a new facility in Guwahati, Assam, India
USFDA completes inspection at Dahej plant without any observations
2014
Income growth of 30% and profit growth of 62% CAGR over last 5 years.
2nd Dedicated R&D Centre set up in Kandivli for India and Emerging markets.
Inaugurated a new facility in Dahej, Bharuch, Gujarat, India
2013 Began sales in USA
2012 Ranked among top 10 pharmaceutical companies in Franco Africa
2011Emerged as strong specialty player in domestic market in Ophthalmology,
Dermatology, and Cardiology with many brands holding leadership position.
2010Entered Philippines market with unique product portfolio through Ajanta Pharma
Philippines inc.
2009
Bought a manufacturing facility at Chitegaon to fuel company‟s growth
API facility set up in Waluj for captive consumption
1st Generic company in the world to get WHO Geneva Pre-qualification for Anti-Malarial drugs.
2007 Set-up dedicated fully equipped R&D facility in Mumbai
2005Strategic shift from OTC to innovative specialized prescription products in Ophthalmology,
Dermatology, & Cardiology
2000 Got listed on NSE and BSE
1995 Established subsidiary in Mauritius with manufacturing facility
1992 Foray in international market.
1989 Launched block buster OTC products „30+‟ in India.
1986 Started Production at 2nd Manufacturing facility in Paithan, India.
1979Launched branded OTC (over the counter) products
1st Manufacturing facility set up in Chikalthana, India.
1973 Ajanta started with re-packaging of generic products
Ajanta Pharmaceuticals Absolute – ADD Relative – Benchmark 6% ATR in 18 months
January 18, 2018 Analyst: Bharat Celly (+919998580991) / Praful Bohra (+91-9819915604) Page 24 of 29
Consolidated Quarterly Earnings Forecast and Key Drivers Rs in Mn 1Q17A 2Q17A 3Q17A 4Q17A 1Q18A 2Q18A 3Q18E 4Q18E 1Q19E 2Q19E 3Q19E 4Q19E FY17A FY18E FY19E FY20E
Revenue 4,759 5,158 5,331 4,768 4,731 5,404 5,013 5,070 5,170 5,718 5,679 5,714 20,016 20,219 22,281 25,616 Cost of Goods Sold 994 1,166 1,064 923 936 1,090 1,041 1,065 1,040 1,171 1,197 1,204 4,146 4,133 4,611 5,290
Employee Cost 703 722 774 755 867 894 900 900 949 979 986 986 2,954 3,561 3,899 4,328
Other Expenditure 1,083 1,174 1,263 1,087 1,151 1,102 1,150 1,141 1,243 1,190 1,242 1,232 4,496 4,544 4,908 5,398 Research & Development Expenditure
320 370 450 390 470 480 451 456 465 515 511 514 1,530 1,858 2,005 2,433
User Defined Subsidiary Expense 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 EBITDA 1,660 1,727 1,780 1,614 1,307 1,837 1,471 1,508 1,471 1,863 1,744 1,779 6,890 6,123 6,857 8,165 Depreciation 130 140 0 189 134 146 151 151 174 174 174 174 612 582 695 806 EBIT 1,530 1,588 1,780 1,425 1,173 1,692 1,320 1,357 1,298 1,689 1,570 1,605 6,278 5,541 6,162 7,360 Interest 4 3 8 9 1 1 2 2 2 2 2 2 35 5 6 6 Other Income 55 67 192 24 15 92 78 78 121 121 121 121 239 264 483 653 PBT 1,580 1,651 1,964 1,440 1,187 1,783 1,396 1,434 1,417 1,809 1,689 1,725 6,482 5,800 6,639 8,007 Tax 385 345 385 300 239 464 335 344 326 416 389 397 1,413 1,383 1,527 1,721 PAT bef. MI & Assoc. 1,196 1,307 1,579 1,140 948 1,319 1,061 1,090 1,091 1,393 1,301 1,328 5,068 4,418 5,112 6,285 Minority Interest 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Profit from Assoc. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Recurring PAT 1,196 1,307 1,579 1,140 948 1,319 1,061 1,090 1,091 1,393 1,301 1,328 5,068 4,418 5,112 6,285 Extraordinaries 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Reported PAT 1,196 1,307 1,579 1,140 948 1,319 1,061 1,090 1,091 1,393 1,301 1,328 5,068 4,418 5,112 6,285
EPS (Rs) 13.51 14.77 17.85 12.89 10.71 14.91 12.00 12.32 12.33 15.74 14.70 15.01 57.29 49.94 57.79 71.04
Key Drivers
Domestic 1,620 1,580 1,540 1,400 1,430 1,780 1,792 1,615 1,841 2,043 2,065 1,858 6,140 6,618 7,807 9,065 USA 100 710 590 450 540 260 446 470 514 563 655 655 1,850 1,716 2,388 3,438 Africa 1,940 1,750 2,110 1,320 1,680 2,180 1,650 1,650 1,576 1,780 1,686 1,686 7,120 7,160 6,728 7,176 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - -
Sequential Growth (%)
Revenue 11 % 8 % 3 % -11 % -1 % 14 % -7 % 1 % 2 % 11 % -1 % 1 % - - - - Cost of Goods Sold 4 % 17 % -9 % -13 % 1 % 16 % -4 % 2 % -2 % 13 % 2 % 1 % - - - - EBITDA 17 % 4 % 3 % -9 % -19 % 41 % -20 % 3 % -2 % 27 % -6 % 2 % - - - - EBIT 17 % 4 % 12 % -20 % -18 % 44 % -22 % 3 % -4 % 30 % -7 % 2 % - - - - Recurring PAT 8 % 9 % 21 % -28 % -17 % 39 % -20 % 3 % 0 % 28 % -7 % 2 % - - - -
EPS 8 % 9 % 21 % -28 % -17 % 39 % -20 % 3 % 0 % 28 % -7 % 2 % - - - -
Yearly Growth (%)
Revenue 22 % 17 % 12 % 11 % -1 % 5 % -6 % 6 % 9 % 6 % 13 % 13 % 14 % 1 % 10 % 15 % EBITDA 35 % 12 % 9 % 14 % -21 % 6 % -17 % -7 % 13 % 1 % 19 % 18 % 17 % -11 % 12 % 19 % EBIT 36 % 11 % 17 % 9 % -23 % 7 % -26 % -5 % 11 % 0 % 19 % 18 % 16 % -12 % 11 % 19 % Recurring PAT 39 % 26 % 39 % 3 % -21 % 1 % -33 % -4 % 15 % 6 % 23 % 22 % 22 % -13 % 16 % 23 %
EPS 39 % 26 % 39 % 3 % -21 % 1 % -33 % -4 % 15 % 6 % 23 % 22 % 22 % -13 % 16 % 23 %
Margin (%)
EBITDA 35 % 33 % 33 % 34 % 28 % 34 % 29 % 30 % 28 % 33 % 31 % 31 % 34 % 30 % 31 % 32 % EBIT 32 % 31 % 33 % 30 % 25 % 31 % 26 % 27 % 25 % 30 % 28 % 28 % 31 % 27 % 28 % 29 % PBT 33 % 32 % 37 % 30 % 25 % 33 % 28 % 28 % 27 % 32 % 30 % 30 % 32 % 29 % 30 % 31 %
PAT 25 % 25 % 30 % 24 % 20 % 24 % 21 % 21 % 21 % 24 % 23 % 23 % 25 % 22 % 23 % 25 %
Ajanta Pharmaceuticals Absolute – ADD Relative – Benchmark 6% ATR in 18 months
January 18, 2018 Analyst: Bharat Celly (+919998580991) / Praful Bohra (+91-9819915604) Page 25 of 29
Consolidated Financials P&L (Rs Mn) FY17A FY18E FY19E FY20E
Balance Sheet (Rs Mn) FY17A FY18E FY19E FY20E
Cash Flow (Rs Mn) FY17A FY18E FY19E FY20E
Revenue 20,016 20,219 22,281 25,616 Equity Capital 177 177 177 177 PBT 6,482 5,800 6,639 8,007
Op. Expenditure 13,126 14,096 15,424 17,450 Reserve 15,500 18,884 21,604 24,947 Depreciation 612 582 695 806
EBITDA 6,890 6,123 6,857 8,165 Networth 15,677 19,061 21,781 25,124 Others 700 0 0 0
Depreciation 612 582 695 806 Long Term Debt 322 322 322 322 Taxes Paid 1,428 1,383 1,527 1,721
EBIT 6,278 5,541 6,162 7,360 Def Tax Liability 305 305 305 305 Change in WC -285 -261 -486 -818
Interest Expense 35 5 6 6 Minority Interest 0 0 0 0 Operating C/F 6,081 4,739 5,321 6,273
Other Income 239 264 483 653 Account Payables 1,396 1,393 1,554 1,783 Capex -3,004 -3,000 -3,000 -3,000
PBT 6,482 5,800 6,639 8,007 Other Curr Liabi 528 528 528 528 Change in Invest -914 0 0 0
Tax 1,413 1,383 1,527 1,721 Total Liabilities & Equity 18,227 21,608 24,489 28,062 Others 10 0 0 0
PAT bef. MI & Assoc. 5,068 4,418 5,112 6,285 Net Fixed Assets 5,892 10,758 12,208 15,003 Investing C/F -3,908 -3,000 -3,000 -3,000
Minority Interest 0 0 0 0 Capital WIP 3,393 945 1,800 1,200 Change in Debt -746 0 0 0
Profit from Assoc. 0 0 0 0 Others 476 476 476 476 Change in Equity 0 0 0 0
Recurring PAT 5,068 4,418 5,112 6,285
Inventory 2,110 2,216 2,442 2,807 Others -1,322 -1,034 -2,393 -2,941
Extraordinaires 0 0 0 0 Account Receivables 3,218 3,324 3,663 4,211 Financing C/F -2,068 -1,034 -2,393 -2,941
Reported PAT 5,068 4,418 5,112 6,285 Other Current Assets 762 809 891 1,025 Net change in cash 105 705 -72 331
FDEPS (Rs) 57.3 49.9 57.8 71.0 Cash 2,376 3,081 3,010 3,341 RoE (%) 37 % 25 % 25 % 27 %
DPS (Rs) 13.0 10.0 23.1 28.4 Total Assets 18,227 21,608 24,489 28,062
RoIC (%) 35 % 25 % 24 % 26 %
CEPS (Rs) 64.2 56.5 65.6 80.1 Non-cash Working Capital 4,167 4,427 4,914 5,732
Core RoIC (%) 37 % 27 % 26 % 27 %
FCFPS (Rs) 24.9 19.7 26.3 37.0 Cash Conv Cycle 76.0 79.9 80.5 81.7 Div Payout (%) 0 % 23 % 47 % 47 %
BVPS (Rs) 177.2 215.4 246.2 284.0 WC Turnover 4.8 4.6 4.5 4.5 P/E 26.8 30.7 26.5 21.6
EBITDAM (%) 34 % 30 % 31 % 32 % FA Turnover 2.2 1.7 1.6 1.6 P/B 8.7 7.1 6.2 5.4
PATM (%) 25 % 22 % 23 % 25 % Net D/E -0.1 -0.1 -0.1 -0.1 P/FCFF 61.7 77.8 58.3 41.4
Tax Rate (%) 22 % 24 % 23 % 22 % Revenue/Capital Employed 1.4 1.1 1.1 1.1 EV/EBITDA 19.3 21.6 19.3 16.2
Sales Growth (%) 14 % 1 % 10 % 15 %
Capital Employed/Equity 1.1 1.0 1.0 1.0
EV/Sales 6.7 6.6 5.9 5.2
FDEPS Growth (%) 22 % -13 % 16 % 23 %
Dividend Yield (%) 0.8 % 0.7 % 1.5 % 1.9 %
TTM P/E vs. 2 yr forward EPS growth TTM EV/EBITDA vs. 2 yr forward EBITDA growth TTM P/B vs. 2 yr forward RoE
0%
20%
40%
60%
80%
0
500
1000
1500
2000
2500
3000
Mar
-08
Sep
-08
Mar
-09
Sep
-09
Mar
-10
Sep
-10
Mar
-11
Sep
-11
Mar
-12
Sep
-12
Mar
-13
Sep
-13
Mar
-14
Sep
-14
Mar
-15
Sep
-15
Mar
-16
Sep
-16
Mar
-17
Sep
-17
Mar
-18
Sep
-18
Mar
-19
Sep
-19
5x
10x
20x
30x
40x
EPS Growth
-10%0%10%20%30%40%50%60%70%80%
-50000
0
50000
100000
150000
200000
250000
300000
Mar
-08
Sep
-08
Mar
-09
Sep
-09
Mar
-10
Sep
-10
Mar
-11
Sep
-11
Mar
-12
Sep
-12
Mar
-13
Sep
-13
Mar
-14
Sep
-14
Mar
-15
Sep
-15
Mar
-16
Sep
-16
Mar
-17
Sep
-17
Mar
-18
Sep
-18
Mar
-19
Sep
-19
4x
8x
12x
16x
22xEBITDA Growth
0%
10%
20%
30%
40%
50%
0
1000
2000
3000
4000
5000
Mar
-08
Sep
-08
Mar
-09
Sep
-09
Mar
-10
Sep
-10
Mar
-11
Sep
-11
Mar
-12
Sep
-12
Mar
-13
Sep
-13
Mar
-14
Sep
-14
Mar
-15
Sep
-15
Mar
-16
Sep
-16
Mar
-17
Sep
-17
Mar
-18
Sep
-18
Mar
-19
Sep
-19
RoE
1x
3x
5x
7x
10x
Ajanta Pharmaceuticals Absolute – ADD Relative – Benchmark 6% ATR in 18 months
January 18, 2018 Analyst: Bharat Celly (+919998580991) / Praful Bohra (+91-9819915604) Page 26 of 29
Historical Consolidated Financials
P&L (Rs Mn) FY14A FY15A FY16A FY17A
Balance Sheet (Rs Mn) FY14A FY15A FY16A FY17A
Cash Flow (Rs Mn) FY14A FY15A FY16A FY17A
Revenue 12,083 14,736 17,494 20,016 Equity Capital 177 177 177 177 PBT 3,299 4,645 5,589 6,482
Op. Expenditure 8,396 9,683 11,623 13,126 Reserve 5,756 8,868 11,732 15,500 Depreciation 439 516 444 612
EBITDA 3,688 5,052 5,871 6,890 Networth 5,933 9,044 11,909 15,677 Others -1,421 -1,723 -2,400 700
Depreciation 439 516 444 612 Long Term Debt 1,154 837 1,021 322 Taxes Paid 937 1,461 1,615 1,428
EBIT 3,249 4,536 5,426 6,278 Def Tax Liability 258 185 219 305 Change in WC 745 817 1,244 -285
Interest Expense 87 59 49 35 Minority Interest 0 0 0 0 Operating C/F 2,124 2,794 3,261 6,081
Other Income 137 168 212 239 Account Payables 1,245 1,091 1,456 1,396 Capex -1,312 -1,036 -2,975 -3,004
PBT 3,299 4,645 5,589 6,482 Other Curr Liabi 903 277 276 528 Change in Invest -658 -611 778 -914
Tax 960 1,462 1,433 1,413 Total Liabilities & Equity 9,494 11,434 14,880 18,227 Others 93 63 106 10
PAT bef. MI & Assoc. 2,339 3,183 4,156 5,068 Net Fixed Assets 2,794 2,870 4,507 5,892 Investing C/F -1,878 -1,584 -2,091 -3,908
Minority Interest 0 0 0 0 Capital WIP 936 1,702 2,398 3,393 Change in Debt 57 -581 218 -746
Profit from Assoc. 0 0 0 0 Others 564 650 342 476 Change in Equity 0 0 0 0
Recurring PAT 2,339 3,183 4,156 5,068 Inventory 1,554 1,590 2,046 2,110 Others -258 -471 -1,391 -1,322
Extraordinaires 0 0 0 0 Account Receivables 2,022 2,588 3,724 3,218 Financing C/F -201 -1,052 -1,173 -2,068
Reported PAT 2,339 3,183 4,156 5,068 Other Current Assets 470 596 662 762 Net change in cash 45 159 -2 105
EPS (Rs) 26.4 36.0 47.0 57.3 Cash 1,154 1,438 1,202 2,376
RoE (%) 47 % 43 % 40 % 37 %
DPS (Rs) 4.0 11.3 8.0 13.0
Total Assets 9,494 11,434 14,880 18,227
RoIC (%) 37 % 37 % 36 % 35 %
CEPS (Rs) 31.4 41.8 52.0 64.2 Non-cash Working Capital 1,898 3,406 4,700 4,167 Core RoIC (%) 40 % 42 % 39 % 37 %
FCFPS (Rs) 3.5 14.1 13.6 24.9 Cash Conv Cycle 57.3 84.4 98.1 76.0 Div Payout (%) 0 % 0 % 0 % 0 %
BVPS (Rs) 67.1 102.2 134.6 177.2 WC Turnover 6.4 4.3 3.7 4.8
P/E 58.0 42.6 32.6 26.8
EBITDAM (%) 31 % 34 % 34 % 34 % FA Turnover 3.2 3.2 2.5 2.2 P/B 22.9 15.0 11.4 8.7
PATM (%) 19 % 22 % 24 % 25 % Net D/E 0.0 -0.1 0.0 -0.1 P/FCFF 440.1 108.4 112.4 61.7
Tax Rate (%) 29 % 31 % 26 % 22 % Revenue/Capital Employed 1.9 1.7 1.5 1.4 EV/EBITDA 36.7 26.7 23.0 19.3
Sales growth (%) 30 % 22 % 19 % 14 %
Capital Employed/Equity 1.5 1.3 1.2 1.1
EV/Sales 11.2 9.1 7.7 6.7
FDEPS growth (%) 109 % 36 % 31 % 22 %
Dividend Yield (%) 0.3 % 0.4 % 0.5 % 0.8 %
Ajanta Pharmaceuticals Absolute – ADD Relative – Benchmark 6% ATR in 18 months
January 18, 2018 Analyst: Bharat Celly (+919998580991) / Praful Bohra (+91-9819915604) Page 27 of 29
Equirus Securities
Research Analysts Sector/Industry Email
Equity Sales E-mail
Abhishek Shindadkar IT Services [email protected] 91-22-43320643 VishadTurakhia [email protected] 91-22-43320633
Ashutosh Tiwari Auto, Metals & Mining [email protected] 91-79-61909517 Subham Sinha [email protected] 91-22-43320631
Depesh Kashyap Mid-Caps [email protected] 91-79-61909528 Sweta Sheth [email protected] 91-22-43320634
Devam Modi Power & Infrastructure [email protected] 91-79-61909516 Viral Desai [email protected] 91-22-43320635
Dhaval Dama FMCG, Mid-Caps [email protected] 91-79-61909518 Dealing Room E-mail
Manoj Gori Consumer Durables [email protected] 91-79-61909523 Ashish Shah [email protected] 91-22-43320662
Maulik Patel Oil and Gas [email protected] 91-79-61909519 IleshSavla [email protected] 91-22-43320666
Praful Bohra Pharmaceuticals [email protected] 91-79-61909532 Manoj Kejriwal [email protected] 91-22-43320663
Rohan Mandora Banking & Financial Services [email protected] 91-79-61909529 Dharmesh Mehta [email protected] 91-22-43320661
Associates E-mail Sandip Amrutiya [email protected] 91-22-43320660
Ankit Choudhary [email protected] 91-79-61909533 Compliance Officer E-mail
Bharat Celly [email protected] 91-79-61909524 Jay Soni [email protected] 91-79-61909561
Harshit Patel [email protected] 91-79-61909522 Corporate Communications E-mail
Meet Chande [email protected] 91-79-61909513 MahdokhtBharda [email protected] 91-22-43320647 Parva Soni [email protected] 91-79-61909521
Pranav Mehta [email protected] 91-79-61909514
Ronak Soni [email protected] 91-79-61909525 Samkit Shah [email protected] 91-79-61909520
Shreepal Doshi [email protected] 91-79-61909541
Varun Baxi [email protected] 91-79-61909527
Vikas Jain [email protected] 91-79-61909531
Rating & Coverage Definitions: Absolute Rating • LONG : Over the investment horizon, ATR >= Ke for companies with Free Float market cap >Rs 5 billion and ATR >= 20% for rest of the companies • ADD: ATR >= 5% but less than Ke over investment horizon • REDUCE: ATR >= negative 10% but <5% over investment horizon • SHORT: ATR < negative 10% over investment horizon Relative Rating • OVERWEIGHT: Likely to outperform the benchmark by at least 5% over investment horizon • BENCHMARK: likely to perform in line with the benchmark • UNDERWEIGHT: likely to under-perform the benchmark by at least 5% over investment horizon Investment Horizon Investment Horizon is set at a minimum 3 months to maximum 18 months with target date falling on last day of a calendar quarter. Lite vs. Regular Coverage vs. Spot Coverage We aim to keep our rating and estimates updated at least once a quarter for Regular Coverage stocks. Generally, we would have access to the company and we would maintain detailed financial model for Regular coverage companies. We intend to publish updates on Lite coverage stocks only an opportunistic basis and subject to our ability to contact the management. Our rating and estimates for Lite coverage stocks may not be current. Spot coverage is meant for one-off coverage of a specific company and in such cases, earnings forecast and target price are optional. Spot coverage is meant to stimulate discussion rather than provide a research opinion.
Registered Office:
Equirus Securities Private Limited
Unit No. 1201, 12th Floor, C Wing, Marathon Futurex,
N M Joshi Marg, Lower Parel,
Mumbai-400013.
Tel. No: +91 – (0)22 – 4332 0600
Fax No: +91- (0)22 – 4332 0601
Corporate Office:
3rd floor, House No. 9,
Magnet Corporate Park, Near Zydus Hospital, B/H Intas Sola Bridge,
S.G. Highway Ahmedabad-380054
Gujarat
Tel. No: +91 (0)79 - 6190 9550
Fax No: +91 (0)79 – 6190 9560
© 2017 Equirus Securities Private Limited. All rights reserved. For Private Circulation only. This report or any portion hereof may not
be reprinted, sold or redistributed without the written consent of Equirus Securities Private Limited
Ajanta Pharmaceuticals Absolute – ADD Relative – Benchmark 6% ATR in 18 months
January 18, 2018 Analyst: Bharat Celly (+919998580991) / Praful Bohra (+91-9819915604) Page 28 of 29
Analyst Certification
I, Bharat Celly/Praful Bohra, author to this report, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject company or companies and its or their
securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Disclosures
Equirus Securities Private Limited (ESPL) having Corporate Identification Number U65993MH2007PTC176044 is registered in India with Securities and Exchange Board of India (SEBI) as a trading member on the
Capital Market (Reg. No. INB231301731), Futures & Options Segment (Reg. No.INF231301731) of the National Stock Exchange of India Ltd. (NSE) and on Cash Segment (Reg. No.INB011301737) of Bombay Stock
Exchange Limited (BSE).ESPL is also registered with SEBI as Research Analyst under SEBI (Research Analyst) Regulations, 2014 (Reg. No. INH000001154), as a Portfolio Manager under SEBI (Portfolio Managers
Regulations, 1993 (Reg. No. INP000005216) and as a Depository Participant of the Central Depository Services (India) Limited (Reg. No. IN-DP-324-2017). There are no disciplinary actions taken by any regulatory
authority against ESPL. ESPL is a subsidiary of Equirus Capital Pvt. Ltd. (ECPL) which is registered with SEBI as Category I Merchant Banker and provides investment banking services including but not limited to
merchant banking services, private equity, mergers & acquisitions and structured finance.
As ESPL and its associates are engaged in various financial services business, it might have: - (a) received compensation (except in connection with the preparation of this report) from the subject company for
investment banking or merchant banking or brokerage services in the past twelve months;(b) managed or co-managed public offering of securities for the subject company in the past twelve months; or (c) have
received a mandate from the subject company; or (d) might have other financial, business or other interests in entities including the subject company (ies) mentioned in this Report. ESPL & its associates, their
directors and employees may from time to time have positions or options in the company and buy or sell the securities of the company (ies) mentioned herein. ESPL and its associates collectively do not own (in
their proprietary position) 1% or more of the equity securities of the subject company mentioned in the report as the last day of the month preceding the publication of the research report. ESPL or its Analyst or
Associates did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ESPL nor
Research Analysts have any material conflict of interest at the time of publication of this report. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or
brokerage service transactions. ESPL has not been engaged in market making activity for the subject company.
The Research Analyst engaged in preparation of this Report:-
(a) has not received any compensation from the subject company in the past twelve months; (b) has not managed or co-managed public offering of securities for the subject company in the past twelve months;
(c) has not received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months; (d) has not received any compensation for products
or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months; (e) has not received any compensation or other benefits from the
subject company or third party in connection with the research report; (f) might have served as an officer, director or employee of the subject company; (g) is not engaged in market making activity for the
subject company.
This document is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution,
publication, availability or use would be contrary to law, regulation or which would subject ESPL and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein
may or may not be eligible for sale in all jurisdictions or to a certain category of investors. Persons in whose possession of this document are required to inform themselves of, and to observe, such applicable
restrictions. Please delete this document if you are not authorized to view the same. By reading this document you represent and warrant that you have full authority and all rights necessary to view and read this
document without subjecting ESPL and affiliates to any registration or licensing requirement within such jurisdiction.
This document has been prepared solely for information purpose and does not constitute a solicitation to any person to buy, sell or subscribe any security. ESPL or its affiliates are not soliciting any action based
on this report. The information and opinions contained herein is from publicly available data or based on information obtained in good faith from sources believed to be reliable but ESPL provides no guarantee as
to its accuracy or completeness. The information contained herein is as on date of this report, and is subject to change or modification and any such changes could impact our interpretation of relevant
information contained herein. While we would endeavour to update the information herein on reasonable basis, ESPL and its affiliates, their directors and employees are under no obligation to update or keep the
information current. Also there may be regulatory, compliance, or other reasons that may prevent ESPL and its group companies from doing so. This document is prepared for assistance only and is not intended
to be and must not alone be taken as the basis for an investment decision. Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an
investment in the securities of companies referred to in this document including the merits and risks involved. This document is intended for general circulation and does not take into account the specific
investment objectives, financial situation or particular needs of any particular person. ESPL and its group companies, employees, directors and agents accept no liability, and disclaim all responsibility, for the
consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. ESPL/its affiliates do and seek to do business with
companies covered in its research report. Thus, investors should be aware that the firm may have conflict of interest.
A graph of daily closing prices of securities is available at http://www.nseindia.com/ChartApp/install/charts/mainpage.jsp and www.bseindia.com (Choose a company from the list on the browser and select the
“three years” period in the price chart).
Ajanta Pharmaceuticals Absolute – ADD Relative – Benchmark 6% ATR in 18 months
January 18, 2018 Analyst: Bharat Celly (+919998580991) / Praful Bohra (+91-9819915604) Page 29 of 29
Disclosure of Interest statement for the subject Company Yes/No If Yes, nature of such interest
Research Analyst‟ or Relatives‟ financial interest No
Research Analyst‟ or Relatives‟ actual/beneficial ownership of 1% or more No
Research Analyst‟ or Relatives‟ material conflict of interest No
Disclaimer for U.S. Persons
ESPL/its affiliates are not a registered broker–dealer under the U.S. Securities Exchange Act of 1934, as amended (the“1934 act”) and under applicable state laws in the United States. In addition Equirus is not a
registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the “Acts”), and under applicable state laws in the United States.
Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by Equirus, including the products and services described herein are not available to or intended
for U.S. persons. The information contained in this Report is not intended for any person who is a resident of the United States of America or a resident of any jurisdiction, the laws of which imposes prohibition
on soliciting the securities business in that jurisdiction without going through the registration requirements and/ or prohibit the use of any information contained in this report. This Report and its respective
contents do not constitute an offer or invitation to purchase or subscribe for any securities or solicitation of any investments or investment services and/or shall not be considered as an advertisement tool. "U.S.
Persons" are generally defined as a natural person, residing in the United States or any entity organized or incorporated under the laws of the United States. US Citizens living abroad may also be deemed "US
Persons" under certain rules.