Ajanta Pharma Stock Analysis

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Let’s delve deeper into Ajanta Pharma Stock Analysis.

Overview

Ajanta Pharma Limited is a multinational specialty pharmaceutical company (with a Market Cap of 14494 Cr) based in India. The company was founded in 1973 and is headquartered at Mumbai, Maharashtra.

Ajanta Pharma has been involved in the development, production, and marketing of a variety of branded, generic formulations.

This includes branded generics in developing Asian and African markets, generics in established US markets, and institutional sales. Main growth drivers for the business include customized market-specific product portfolio, many first-to-market products, constantly new ANDA (abbreviated new drug application) approvals.

Ajanta operates state-of-the-art manufacturing facilities in India and Mauritius.

The company also has an advanced Research & Development Centre for finished formulations and Active Pharmaceutical Ingredient (API) synthesis of different dosage forms. Ajanta Pharma employs over 7,000+ people worldwide and products are sold in over 30 countries.

The company runs three divisions — prescription medications, OTC, and institutional sales.

They treat in medical fields such as cardiology, ophthalmology, and dermatology and manufacture various types of medication such as tablets, injections, ointments, and powders.

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Sales % by Geographies

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Economic and Industry Outlook

As per IMF projections, due to the COVID-19 pandemic, the global economy is projected to contract by 3% in 2020 and to grow by 5.8% in 2021 as economic activity normalizes, helped by policy support. Growth of Emerging Economies is estimated to contract by 1% in 2020 and bounce back to 6.6% in 2021.

India is expected to register a 1.9% growth in 2020 and 7.4% in 2021. The Pharma industry is one of the fastest-growing industries in the world.

Its role has become far more critical amidst the fight against COVID -19 pandemic.

Global Pharma invoice spending touches 1.2 trillion US$ this year with Brazil, India recorded the highest CAGR in the last 5 years.

As per the IQVIA, in 2019, the Indian Pharmaceutical Market (IPM) stood at about USD 22 billion, growing at 9.5% CAGR for 2014-19. The rest of the World markets grew by a 5-year CAGR of 4.8% to USD 71 billion in 2019.

The company outgrew IPM recording 13% growth Vs 11% for the industry.

Risks

There is a high level of uncertainty created by the pandemic and the time required for things to get normal. The extent to which the COVID-19 pandemic will impact the operations and financial results is dependent on future developments, which are highly uncertain. This is a major risk in the immediate

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future and its long-term impact needs to be assessed. Other risks can be regulatory, competitive, forex, data security breach, and economic environment like trade wars, etc.

Key Managerial Personnel

  • Mr. Yogesh M. Agrawal, Managing Director
  • Mr. Rajesh M. Agrawal, Joint Managing Director) Mr. Arvind Agrawal, Chief Financial Officer
  • Mr. Gaurang Shah, Company Secretary

Shareholding Pattern

Promoters hold about 70.51%, FIIs about 8.23%, Public about 8.41%, GOI about 0.74% and the rest is with MFs, Financial institutions, and others.

Financial Analysis Using Ratios

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The Company achieved a growth of 26% in Consolidated Revenue from Operations over the previous year, while Consolidated Profit After Tax grew at 21%. Exports contributed around 70% of the business.

As we can see, Net Profit/ Share is in a constant mode around in the 50s but other profitability and solvency ratios are on the decline since the last 5 years. A positive is that the company has a D/E ratio of nearly zero that shows no or negligible amount of debt.

Ajanta Pharma vs. Industry

Stock’s last 1-year return stood at a staggering 73.68% vs NIFTY Pharma’s return of 43.83%. The company’s FY21 Q1 results were up by 21%.

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The company’s PE (Price to Earnings) ratio looks good and has a scope to grow but PB (Price to Book value) ratio is higher than the industry average, this means that price is higher if we compare to the book value of the industry.

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Takeaways from the latest news and annual report

  • As of June 2020, pledged shares stood at 16.1% (as % of promoters share), down 1.2% from the previous quarter, a positive sign.
  • As a part of the Aatmnirbhar Bharat initiative, the government may increase PLI (Production linked Incentive) in the pharma sector, positive.
  • ICICI Direct, Motilal Oswal gave a strong buy rating with a target of 1810, 1815 respectively with stock is trading at a 52-week high, positive.
  • Expanding business with emphasis on building infrastructure to be future-ready and to keep tab with the growing needs by building new manufacturing and R&D facilities, positive.
  • Credit Analysis and Research Limited (CARE) have assigned rating Care A1+ for working capital facilities and Care AA for long term borrowings, which indicates a very strong/high degree of safety regarding the timely payment of financial obligations, positive.
  • Financial ratios indicate declining productivity, negative.

Watch: Ajanta Pharma Stock Analysis by Billon Dollar Valuation

This post has been written by Anshul Galav for FinMedium Research Desk.

Cover Image: Share Market Classes, Pune

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