To get yourself familiar with Ajanta Pharma read my opening post about the company. In last year review sent to premium subscribers, we had projected below
There was steep degrowth in Africa Institutional business and Branded generics, Also in Asia, they underperformed their own expectations resulting in modest growth. India business outperformed their own expectations (even mine) and USA business did very well too.
Three reds meant that they had their first topline decline in the last 15 years. The beauty of doing predictions is to get humbled very quickly in markets. In my 2017 review send to subscribers I had pasted projections from brokerage houses in the end note, I am reproducing them below
What was not baked in estimates was visible in price, The PE derating clearly told in advance that market doesn’t expect company do well and as it happens many times price discounts the performance for next 24-36 months in advance
Having spent enough time on past lets now review the current year
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Ophthalmology (14% growth vis-à-vis segment growth of 9%)
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Cardiology (18% growth visà-vis segment growth of 10%)
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Pain Management (22% growth vis-à-vis segment growth of 9%)
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Dermatology (13% growth vis-à-vis segment growth of 13%)
The company has reinvested most of its cash generated from operations (Last 5 years) back in the building infrastructure (~70%) and capability (INR ~1350 crores out of ~2000 crores). I assumed that the Capex will be lower for this year however management is possibly foreseeing growth and that’s why investing now. We need to wait and watch if this is value accretive expenditure
Future
From ICICI Direct research report there is some guidance available as I could not get anything from Annual report and company doesn’t do any conference calls
The company guided for 10-11% of revenues growth for FY20.
- India, Africa and Asia branded expected to grow 10-11% in FY20.
- Africa tender business expected to decline 15%
- US business expected to grow 25% in FY20
Margins would improve from the current levels of 19% as capacity utilization improves. So we are looking at about INR ~2300 crores topline and INR ~460 crores bottom line. The Market is valuing it fairly and It will become a tempting add at ~INR 7000 – 7500 Crore M-cap (Current Mcap at time of writing this in June 2019 is INR ~8300 Crores)
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