Ajanta Pharma

(New stock recommendation from paulasset.com)

Buy within Rs-400

Target- Rs-500-600 within 7-8 months and double within 2 years

Company Introduction:-
Ajanta Pharma is a specialty pharmaceutical company engaged in the development, manufacture and
commercialization of pharmaceutical products. Ajanta operates with 5 state-of-the art manufacturing
facilities that produce high quality pharmaceutical products.

Financial Performance (Yearly)

Mar,12 Mar,11 Mar,10 Mar,09 Mar,08 Mar,07
Total Sales 604.27 457.15 381.67 319.48 285.13 238.69
Y-O-Y growth 32.18% 19.78% 19.47% 12.05% 19.46% 15.86%
Net profit 66.49 46.45 28.54 21.38 17.79 13.95
Y-O-Y growth 43.14% 62.75% 33.49% 20.18% 27.53% 34.91%
Earning per share 28.185 19.685 12.095 9.06 7.54 5.915
EPS Y-OY Growth 43.18% 62.75% 33.50% 20.16% 27.47% 35.05%
Book Value 116.085 92.05 75.12 64.975 57.305 51.51
BV Y-O-Y growth 26.11% 22.54% 15.61% 13.38% 11.25% 10.01%
Operating profit margin 22.03 19.73 19.13 19.34 16.41 15.11
Debt/Equity ratio 0.6 0.73 1.16 1.58 1.23 0.9
Net profit Margin 10.98 10.13 7.45 6.66 6.22 5.72
Dividend Payout ratio 15.34 14.64 16.74 16.01 19.24 19.98
ROE(%) 24.45 21.54 16.22 14.05 13.25 11.36
ROCE(%) 23.86 18.18 14.36 12.73 13.56 13.04
Stock price(as on average
basis) 290 130 90 33 50 42
P/E 10.29 6.60 7.44 3.64 6.63 7.10
P/B 2.50 1.41 1.20 0.51 0.87 0.82
Dividend(Rs) 3.75 2.5 1.75 1.25 1.25 1
Increase in dividends% 50.00% 42.86% 40.00% 0.00% 25.00% 33.33%
Cash flow from operation 44.97 112.27 99.38 33.8 15.98
 Financial Performance (Quarterly)
Y-O-Y Y-O-Y Y-O-Y Y-O-Y
Sep,12 increase Jun,2012 increase Mar,2012 increase Dec,2011 increase
Total Sales 186.37 37.92% 174.05 36.71% 176.1 39.93% 163.9 36.01%
Net profit 21.88 84.64% 19.58 56.26% 23.6 35.09% 18.51 54.90%
EPS 9.27 84.48% 8.295 56.21% 10 35.04% 7.845 54.89%
Profit
Margin 11.74% 11.25% 13.40% 11.29%

Major Positive points

Huge and consistent growth rate in top line and bottom line. Most importantly the growth is
not fueled by debt. Debt to equity ratio is at comfortable level 0.6. Management is also
confident in future growth and expansion plan.
Recent improvement in ROE (Return on Equity) and ROCE (Return on capital employed)
which shows the operational efficiency of management.
Still traded at reasonable valuation TTM P/E at around 10-11 while the sector P/E is at around
28-30 .All the mid cap Pharma stocks are also trading at higher valuation than that of Ajanta
Pharma. So there is a huge scope of P/E re-rating in near future.
Recent addition of some high margin products pays well. Operating Profit Margin as well as
Net profit margin is increasing.

Negative:-
Trading volume is low. So the counter may experience major price volatility.

Shareholding Pattern
Jun' 12 Mar' 12 Dec' 11 Sep' 11
Promoter 71.84 70.13 68.92 66.82
FII 1.29 0.59 0 0.72
DII 0 0.01 0.02 0.03
Others 26.87 29.27 31.06 32.43

Promoters are increasing their holding rapidly. This reflects high confidence in the future
prospects of the company.

Conclusion:-
Industry above growth rate, new product pipeline, superior return ratios and above all reasonable
valuation makes Ajanta Pharma an attractive bet. From current level (Rs-375-400) it can generate
100% return within 2 years.