Ajanta Pharma Ltd - Research Report

Private Client Research




Pharmaceuticals & Drugs


Ajanta Pharma Ltd

Pharmaceuticals & Drugs

April 20, 2020

Sensex: 31743.08

CNX Nifty: 9282.30


BSE: 532331

Reco Price
Rs. 1491


April 20, 2020



CNX Nifty








Stock Data

CMP (Rs)
Face value (Rs)
52 Week Range (Rs)
1545.00 - 825.00
Market cap (Rs Crores)
Price To Book Value (x)
P/E Ratio (x)

One Year indexed Stock Performance

Ajanta Pharma Ltd Sensex
Ajanta Pharma Ltd
Return (%)


(in %)

+91 22 6639 3000



Ajanta Pharma is a specialty pharmaceutical company engaged in development, manufacturing and marketing of quality finished dosages. Committed to 'Serve Health Care Needs Worldwide', Ajanta produces a comprehensive range of specialty products targeting different therapeutic segments for treatment of patients, customised to each market. The company's business includes Branded Generics in emerging markets of Asia and Africa, Generics in the developed markets of USA and Institution sales comprising a wide range of products in more than 30 countries. It has also invested in the US market, which is expected to generate meaningful revenues over the next few years. The management has ramped up filings with regulatory authorities in different countries and has several pending approvals.

Branded generics and exports to lead the growth

Investment thesis

De-risked business model
Ajanta has de-risked its business through diversification of its portfolio across markets, segments and products. The company has strong presence in the domestic market, Asia and Africa through its branded generics business and is improving its presence in US generics market. This helps reduce concentration risk. Currently, India accounts for 30% of revenue. Asia Africa and US account for 18%, 23% and 29% of revenue respectively.

Branded business to lead growth
Ajanta Pharma has been able to achieve attractive margins since 75% of its business comprises of branded generics. A higher proportion of branded business imparts visibility and sustainability to earnings growth. Additional capacities in India will drive growth and improve margins, with increased in-house manufacturing.

Strong operating performance
Ajanta posted very encouraging numbers for Q3 and 9M FY20; for Q3 FY20 consolidated Revenue, EBITDA, PAT grew by 35%, 88%, 61% respectively; for 9M FY20, Revenue, EBITDA and PAT grew by 24%, 25%, 14% respectively. Total exports sales for 9M FY20 grew by 32% y-o-y. US generic sales saw robust growth of 80%.

US generic business to witness robust growth
The company’s US business saw 80% growth in revenue for 9MFY20; Q3 FY20 witnessed growth of 140% y-o-y led by new product launches and gain in market share in existing products. US now contributes 29% of sales as compared to 21% in 9M FY19. The company has invested heavily to grow its US business and currently markets 28 products with 23 ANDAs (Abbreviated New Drug Applications) awaiting approval. We expect US generics business to contribute meaningfully as the company aims to file 10-12 ANDAs and launch 7-8 products every year. We see low regulatory risks as recently, two of its US FDA approved plants received Establishment Inspection Reports (EIRs).

Covid-19 impact
Ajanta Pharma is a specialty pharmaceutical company engaged in development, manufacturing and marketing of quality finished dosages. The company produces a comprehensive range of specialty products targeting different therapeutic segments for treatment of patients. While pharmaceutical manufacturing is exempted from the lockdown, the company could face short term issues like non-availability of labour or supply related issues. The company is debt free, with cash and investments at Rs.270 crore.

Slowdown in ANDA approvals

USFDA inspections with unfavourable result will lead to delay in approvals. The company has 23 ANDAs pending approval and it plans to file 10-12 ANDAs every financial year.

Currency volatility
Currency volatility in the Asian and African countries can lead to pressure in branded business.



The Indian pharmaceuticals market supplies over 50 per cent of global demand for various vaccines, 40 per cent of generic demand in the US and 25 per cent of all medicine in UK. Indian drugs are exported to more than 200 countries in the world, with the US as the key market. Pharmaceutical exports from India, which include bulk drugs, intermediates, drug formulations, biological, Ayush & herbal products and surgical reached US$ 19.14 billion in FY19 and US$ 10.8 billion in FY20 (up to November 2019). The exports are expected to reach US$ 20 billion by 2020.
Generic drugs account for 20 per cent of global exports in terms of volume, making the country the largest provider of generic medicines globally and expected to expand even further in coming years. Based on moving annual turnover, Anti-Infectives (13.6 per cent), Cardiac (12.4 per cent), Gastro Intestinals (11.5 per cent) had the biggest market share in the Indian pharma market in 2018. Indian pharma companies received a total of 415 product approvals in 2018 and 73 tentative approvals.

Profit & Loss Statement:- (Consolidated)

(Rs Crores)

Particulars FY16 FY17 FY18 FY19 FY20 E FY21 E
Net Sales 1749.00 1983.00 2126.00 2055.00 2507.00 2908.00
Expenses 1161.00 1292.00 1467.00 1489.00 1846.00 2123.00
EBITDA 589.00 691.00 658.00 567.00 661.00 785.00
% Margin 34.00% 35.00% 31.00% 28.00% 26.00% 27.00%
D&A 44.00 61.00 60.00 72.00 94.00 113.00
EBIT 545.00 630.00 598.00 495.00 567.00 672.00
Other Income 20.00 20.00 24.00 21.00 40.00 40.00
Interest 5.00 1.00 - 1.00 10.00 10.00
Profit Before Tax 559.00 648.00 623.00 514.00 597.00 702.00
Tax 143.00 141.00 154.00 127.00 149.00 176.00
Tax Rate % 26.00% 22.00% 25.00% 25.00% 25.00% 25.00%
PAT 416.00 507.00 469.00 387.00 448.00 527.00
% Margin 24.00% 26.00% 22.00% 19.00% 18.00% 18.00%
EPS 46.99 57.30 52.98 44.12 51.03 60.04
Source: Stockaxis Research, Company Data


With new capacities and approvals in place, Ajanta Pharma has improved growth visibility significantly. The company witnessed robust growth in US generics and exports business in 9MFY20. It is set to improve margins led by operating leverage benefits from in-house manufacturing. We initiate 'Buy' on Ajanta Pharma, given its strong profitability, return ratios, with capex almost complete and benefits likely to accrue from FY21. We value Ajanta pharma at 32x FY21 earnings and arrive at target price of Rs.1,940.