Ajanta Pharma May2015

Result Update
May 11, 2015

Rating matrix
Ajanta Pharmaceuticals (AJAPHA)
Rating
Buy
Target
| 1488
Target Period
12-15 months
Potential Upside
17%
Maintains growth tempo
Whats Changed?
Target
Changed from | 1288 to | 1488
EPS FY16E
Changed from | 41.5 to | 45.6
EPS FY17E
Changed from | 51.1 to | 53.1
Rating
Unchanged
Quarterly Performance
Revenue
EBITDA
EBITDA (%)
Adj. Net Profit
Q4FY15
368.8
140.8
38.2
90.8
Q4FY14
311.1
112.3
36.1
71.4
YoY (%)
18.6
25.3
205 bps
27.2
Q3FY15
362.6
131.4
36.2
82.9
QoQ (%)
1.7
7.1
192 bps
9.5
Key Financials
(|crore)
FY14
FY15E
FY16E
FY17E
1208.3
1462.3
1735.9
2071.7
EBITDA
368.8
509.5
598.9
704.4
Net Profit
233.9
338.4
402.7
469.6
26.5
38.3
45.6
53.1
FY14
FY15E
FY16E
FY17E
47.9
33.1
27.8
23.9
M.Cap/ Revenues (x)
9.5
7.8
6.6
5.5
EV to EBITDA (x)
9.5
7.8
6.5
5.3
Price to book (x)
18.9
13.9
10.7
8.6
Revenues
EPS (|)
Valuation summary
PE (x)
RoNW (%)
39.4
41.9
38.5
35.9
RoCE (%)
44.9
50.6
48.7
46.4
Stock data
Particular
Amount
Market Capitalisation
| 11203 crore
Debt (FY17E)
| 57 crore
Cash & cash equivalents (FY17E)
| 577 crore
EV
| 10683 crore
52 week H/L
1380/400
Equity capital
| 17.7 crore
Face value
|2
Price performance (%)

Ajanta Pharma
Ipca Labs
Torrent Pharma
1M
2.2
-2.3
-2.8
3M
34.5
1.8
11.7
| 1268
6M
75.8
-5.3
27.9
1Y
215.4
-25.4
90.0
Research Analyst
Siddhant Khandekar
siddhant.khandekar@icicisecurities.com
Mitesh Shah
mitesh.sha@icicisecurities.com
Nandan Kamat
nandan.kamat@icicisecurities.com
ICICI Securities Ltd | Retail Equity Research
Revenues grew 18.6% YoY to | 368.8 crore vs. I-direct estimate of

| 358.9 crore on the back of higher-than-expected export growth (up
18.9% to | 245 crore)
EBITDA margins improved 261 bps YoY to 38.2%, higher than Idirect estimate of 35.2%. EBITDA increased 27.3% YoY to | 140.7
crore vs. I-direct estimate of | 126.4 crore
Adjusted net profit increased 30.3% YoY to | 91.3 crore, higher than
our estimate (| 86.4 crore) driven by strong operational performance
Domestic formulations - Focus on new launches, few therapies
Domestic formulations constitute 32.7% of the total consolidated turnover
(FY15). The main distinguishing factor compared to its peers is the
uncanny knack of launching maximum number of first time launches with
focus on new drug delivery system (NDDS). Of 181 actively marketed
brands, 127 brands were first in India. The focus on specialty therapies
and niche product led APL to post strong growth at 26.5% CAGR in FY1015, far higher than industry growth of ~12%. Going ahead we expect
domestic formulations to grow at a CAGR of 23% in FY15-17E to | 724.6
crore driven by a mix of existing products + new launches.
Exports traction mainly from emerging markets
Export formulations constitute 65% of the total consolidated turnover
(FY15). APL is currently deriving almost its entire export revenues from
emerging regions like Africa (Franco Africa), Asia and LatAm having a
presence in more than 35 countries. As opposed to the common practice
of forging alliances with regional pharmaceutical players, APLs front-end
marketing team interacts directly with doctors. The company has
consistently introduced new products in these markets. Overall, export
formulations have grown at a CAGR of 29.4% in FY10-15 to | 952 crore.
We expect exports to grow at a CAGR of 17.3% between FY15 and FY17E
to | 1309 crore driven by consistent product launches.
Low profile but focused; US foray important for scalability
With focus on niche therapies in domestic formulations and a calculated
approach in the exports market, APL remains an interesting candidate
from the midcap pharma space with high growth rates, strong margins,
commendable return ratios and lighter balance sheet. Defying the normal
trend of targeting the developed markets for generic generics initially, the
company focused on branded generics in the semi-regulated markets. At
this juncture, the company is well poised to foray in the US market
especially once the newly constructed Dahej plant gets USFDA approval.
The company has filed 25 ANDAs with the USFDA and received two
product approvals.
FMCG attributes in pharma mould justify high valuation; maintain BUY
The company has maintained its strong growth trajectory in Q4 with a
marked improvement in operating margins. In domestic formulations, the
company continues to register robust growth. In the exports space, both
the Philippines and Franco-African markets continue to thrive on the back
of consistent product launches and base business growth. On the margin
front, the company is constituently improving its margins on the back of
an improved product mix (management guidance 32-34% EBITDA).
Brand focus, consistent growth, strong margins, robust return ratios and
debt-free status are some of the core attributes of Ajanta. We have
ascribed a target price of | 1488 i.e. 28x FY17E EPS of | 53.1.
Variance analysis
Q4FY15 Q4FY15E
368.8
358.9
Revenue
Q4FY14
311.1
Q3FY15
362.6
100.3
48.2
82.7
YoY (%) QoQ (%)

18.6
1.7
Raw Material Expenses

Employee Expenses
Other Expenditure
103.3
50.8
74.0
98.7
47.7
86.1
88.7
37.7
72.3
Total Operating Expenditure

EBITDA
EBITDA (%)
228.1
140.8
38.2
232.5
126.4
35.2
198.7
112.3
36.1
Interest
Depreciation
Other income
PBT before EO
Less: Exceptional Items
PBT
Tax
MI & Share of loss/ (gain) asso.
Adj. Net Profit
1.1
12.6
2.3
129.5
6.5
123.0
38.7
0.0
90.8
1.3
12.3
10.6
123.4
0.0
123.4
37.0
0.0
86.4
2.2
14.9
3.0
98.3
1.8
96.5
26.4
0.0
71.4
1.2
12.6
3.6
121.2
-2.7
123.9
39.2
0.0
82.9
-52.3
-15.4
-23.0
31.7
264.4
27.5
46.4
0.0
27.2
-12.5
0.0
-35.4
6.8
LP
-0.7
-1.3
0.0
9.5
Key Metrics
Domestic
114.0
127.1
95.0
132.0
20.0
-13.6
225.7
206
223
18.9
9.9
Exports
245
Source: Company, ICICIdirect.com Research
16.4
34.9
2.3
3.0
5.5
-10.5
231.2
14.8
-1.3
131.4
25.3
7.1
36.2 205 bps 192 bps
Comments
Growth in revenues was on account of 26% growth in domestic formulation and
19% growth in export formulations
Reduction in other expenditure as percentage of revenue by 320 bps YoY was

mainly due to lower R&D and selling cost
Improvement in margin was mainly due to contraction in other expenditure as

percentage of sales
Strong adjusted net profit growth was mainly due to a robust operational
performance and increase in other income
The growth was driven by therapies like cardiology (37%), ophthalmology (31%)
and dermatology (11%)
The growth was mainly driven by 30% YoY growth in African business
Change in estimates
(| Crore)
Revenue
EBITDA
EBITDA Margin (%)
Old
1,767.7
FY16E
New % Change
1,735.9
-1.8
565.7
32.0
Old
2,183.3
FY17E
New % Change
2,071.7
-5.1
598.9
34.5
5.9
250 bps
687.7
31.5
704.4
34.0
2.4
250 bps
PAT
366.4
402.7
EPS (|)
41.5
45.6
9.9
9.9
455.1
51.5
469.6
53.1
3.2
3.2
Comments
We have trimmed down our revenue expectations on the back of a slowdown in export
growth owing to higher base
We have revised upward our EBITDA margin expectations on the back of an
improvement in operational efficiency, better product mix and rupee depreciation
Assumptions
(| crore)
Branded - domestic
FY14
319.0
FY15
417.6
Institutions- domestic
Exports Total
66.0
793.0
61.4
951.8
Current
FY16E
FY17E
529.5
663.2
61.4
1,113.3
61.4
1,309.1
Earlier
FY16E
FY17E
534.5
701.5
53.0
1,238.0
63.0
1,380.4
Comments
FY17 reduction in domestic revenues estimates due to a slowdown in Derma portfolio
Reduction in total export sales on the back of a slowdown in growth owing to higher
base
Page 2
Company Analysis
Established in 1973, APL is mainly into exports as well as domestic
formulations. As of FY15, the exports-domestic formulation ratio stood at
65:35. The company owns five manufacturing facilities - four in
Aurangabad, Maharashtra and one in Mauritius. Of these five facilities,
only one in Aurangabad is an API facility while the rest are all
formulations. The consolidated revenues, EBITDA and PAT have grown at
a CAGR of 29%, 46% and 58%, respectively, in FY10-15. APL had come
out with a maiden IPO in March 2000. It raised | 68 crore, which was
earmarked for capacity expansion and debt repayment.
Domestic formulations constitute 35% of the total consolidated turnover
(FY15). This segment has been further segregated into two subsegments- 1) branded formulations and 2) institutional business. Initially,
the company was catering to the institutional business. The institutional
sub-segment accounts for ~13% of domestic formulations and is mainly
confined to government and institutional tenders. It is only in the last 10
years that the focus has shifted to the branded formulations business,
which now accounts for ~87% of domestic formulations.
The company focuses on only a few so called specialty therapies
ophthalmology, dermatology and cardiology. Together, these therapies
constitute ~79% of domestic branded formulations. The company
invested heavily in the technology and field force, especially in the first
five years, after the changed focus. The focus was also to offer a novel
delivery system. From | 17 crore in FY05, branded formulations have
grown at a CAGR of 38% to | 417.6 crore in FY15. Till date, the company
has launched 181 products out of which 127 are first time launches. The
current MR strength is ~2500. Overall, domestic formulations have grown
at a CAGR of 26.5% in FY10-15 to | 479 crore. The company has only one
product under the National List of Essential Medicines (NLEM) 2011 list.
Export formulations constitute 65% of the total consolidated turnover
(FY15). Exports are mainly confined to emerging markets and constitute
branded generics. APL exports its products in ~35 emerging markets
with a significant presence in Franco African countries and Philippines.
Africa accounts for ~56% of export formulations followed by Asia. The
company also participates in anti-malarial tenders in Africa. APL operates
through 450+ MRs in these emerging markets and owns a portfolio of
1445 registered brands in these markets encompassing major therapies
such as anti-infectives, anti-malarials, ophthalmic, dermatology,
cardiovascular, GI etc. The company also has a marginal presence in Latin
America. APL has also forayed into regulated markets such as US where it
has filed 25 ANDAs, received approvals for two and launched one
product. Overall export formulations have grown at a CAGR of 29.4%
between FY10 and FY15 to | 951.8 crore.
Ajanta Pharma has five subsidiaries including one step down subsidiary in
Mauritius, Philippines and the US. The Mauritius subsidiary with an
independent manufacturing base mainly caters to the Franco African
markets. The subsidiary in Philippines, which is a marketing arm, caters to
the Philippines market. The US subsidiary is an administrative office to
facilitate US operations.
We expect revenues to grow at a CAGR of 19% to | 2071.7 crore in FY1517E, on the back of strong growth in both exports and domestic
formulation segments. Exports are likely to grow at a CAGR of 17.3% to
Page 3
| 1309.1 crore during the same period to be driven by growth in the

legacy export markets of Africa & Asia and commencement of US
shipments. Similarly, the domestic formulations segment is likely to
register a CAGR of 23% to | 724.6 crore during the same period, to be
driven by branded formulations.
Exhibit 1: Revenue growth trend
2500
2071.7
(| crore)
2000
1735.9
1462.3
1500
1208.3
930.8
1000
500
407.7
504.9
677.4
0
FY10
FY11
FY12
FY13
FY14
FY15
FY16E
FY17E
Revenues
Domestic formulations The India business contributed ~35% of sales.

APL operates in the branded (prescription: Rx, 87% of domestic sales)
and tender business (13% of domestic sales). In the branded space, it has
a presence in fast growing specialty therapies viz. ophthalmology,
dermatology, chronic therapies such as cardiovascular (CVS) while in the
acute space it has a marginal presence in pain management and
gastrointestinal. APL currently markets 181 brands through 2500 medical
representatives (MRs) covering 3 lakh doctors.
Over the years, the company has developed a knack of launching
maximum number of first launches with focus on new drug delivery
system (NDDS). APL was one of the very few companies to launch
products such as Metoprolol (CVS), Rosuvastatin + Clopidogrel (CVS),
Hydroquinone + Mometasone + Tretinoin (Derma), etc. in the Indian
market. The companys first differentiated (NDDS) product Nimesulide
(Pain) daily once was launched under the brand name Nimlodi in FY02.
Out of 181 actively marketed brands, 127 were first launches in India. The
focus on specialty therapies and niche product led APL to post a strong
CAGR of 26.5% in FY10-15, which is far higher than the industry growth
of ~12% (AIOCD data).
As per the latest AIOCD data, APL ranks 41st in the Indian pharmaceutical
market with a market share 0.50%. Currently, only 12% of total domestic
sales are under NLEM. They are mainly from the CVS category.
The company markets CVS, ophthalmology and dermatology products
under the divisions Anvaxx, Illuma and Ansca. Till FY15, it has launched
58 brands in dermatology, 61 brands in ophthalmic and 32 brands in CVS.
Of this, 40, 51 and 11 were first launches in India. The company launches
~20 new products every year including line extensions. We expect
company to continue with15-20 product launches every year. Overall, we
expect domestic sales to grow at a CAGR of 23% to | 724.6 crore in FY1517E.
Page 4
Exhibit 2: Domestic formulation growth likely to be at CAGR of 23% in FY15-17E

800.0
724.6
700.0
590.9
600.0
479.0
500.0
385.0
400.0
300.0
200.0
148.0
170.0
FY10
FY11
227.0
292.0
100.0
0.0
FY12
FY13
FY14
FY15
FY16E
FY17E
Total Domestic
Formulation exports
Exports account for 65% of revenues. APL currently derives almost its
entire export revenues from emerging regions like Africa (Franco Africa),
Asia and LatAm having a presence in more than 35 countries. Exports
have grown at 29.4% CAGR in FY10-15.
The company markets its products through a team of 450+ MRs. At
present, the company is marketing 200+ products in these regions. In all,
the company owns 1445 registered brands while another 1609 brands are
under registration.
APLs success story in emerging markets was carved out of the so called
differentiated approach. According to this, products were developed on
the basis of unmet medical needs in a particular geography. As a result,
the product basket varied from nation to nation. Similarly, the company
resorted to a different strategy of product marketing. As opposed to the
common practice of forging alliances with local/regional pharmaceutical
players, APLs front-end marketing team interacts directly with doctors.
The company has consistently introduced new products in these markets.
Overall, we expect export sales to grow at a CAGR of 17.3% to | 1309.1
crore in FY15-17E.
Exhibit 3: Exports to grow at CAGR of 17.3% in FY15-17E
1309.1
1400.0
1113.3
1200.0
951.8
1000.0
793.0
800.0
629.0
600.0
400.0
262.0
328.0
445.0
200.0
0.0
FY10
FY11
FY12
FY13
FY14
FY15
FY16E
FY17E
Total Exports
Page 5
Exhibit 4: Derma sales(domestic) to grow at CAGR of 20% in FY15-17E

200.0
168.1
Exhibit 5: Cardio sales(domestic) to grow at 27.5% CAGR in FY15-17E

400.0
140.1
36.0
47.0
62.0
100.0
79.0
116.7
236.8
200.0
0.0
FY10
FY11
FY12
189.4
FY13
Derma
FY14
FY15
FY16E
FY17E
32.0
35.0
49.0
FY10
FY11
FY12
104.0
72.0
145.7
0.0
FY13
FY14
FY15
FY16E
FY17E
Cardio
Source: Company, ICICIdirect.com, Research
Exhibit 6: Ophthalmic sales (domestic) growing at 25% CAGR in FY15-17E

200.0
180.1
Exhibit 7: Institutional domestic business

200.0
144.1
115.3
85.0
35.0
37.0
46.0
64.0
45.0
39.0
FY10
FY11
53.0
54.0
FY12
FY13
66.0
61.4
61.4
61.4
FY14
FY15
FY16E
FY17E
0.0
0.0
FY10
FY11
FY12
FY13
FY14
FY15
FY16E
FY17E
Institutional Domestic
Ophthalmic
Exhibit 8: Africa sales export growth at 12.6% CAGR in FY15-17E
Exhibit 9: Asia exports growth at 15.8% CAGR in FY15-17E

550.7
600.0
800.0
700.0
600.0
500.0
400.0
300.0
200.0
100.0
0.0
440.0
107.0
170.0
256.0
529.2
591.3
484.2
670.6
410.6
400.0
337.0
263.0
340.0
200.0
148.0
149.0
FY10
FY11
179.0
0.0
FY10
FY11
FY12
FY13
FY14
FY15
FY16E
FY17E
FY12
FY13
FY15
FY16E
FY17E
Asia
Africa
FY14
Page 6
Exhibit 10: EBITDA to grow at CAGR of 17.6% in FY15-17E

800
700
34.8
30.5
600
500
(| crore)
40
704.4
23.8
(%)
400
20.8
19.1
18.9
300
34.5
598.9
34.0
509.5
100
77.1
96.3
FY10
FY11
32
28
24
368.8
20
16
221.6
200
36
12
140.7
8
4
0
0
FY12
FY13
FY14
EBITDA
FY15
FY16E
FY17E
EBITDA Margins (%)
Exhibit 11: Net profit to grow at CAGR of 17.8% in FY15-17E

469.6
500
450
400
350
19.4
(| crore)
300
(%)
200
150
50
22.7
16
8.3
34.0
50.7
12.0
11.4
10.0
12
112.1
77.3
24
20
233.9
250
100
402.7
23.2
23.1
338.4
28
8
4
0
FY10
FY11
FY12
FY13
FY14
Net Profit
FY15
FY16E
FY17E
Net Profit Margins (%)
Exhibit 12: Trends in return ratios

58
50.6
50
44.9
(%)
42
36.2
34
26
25.9
21.9
22.2
18
10
18.4
13.7
FY10
41.9
39.4
48.7
46.4
38.5
35.9
28.5
17.1
FY11
FY12
FY13
RoCE (%)
FY14
FY15
FY16E
FY17E
RoNW (%)
Page 7
Exhibit 13: Trends in quarterly financials

(| crore)
Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 YoY (%) QoQ (%)
Net Sales
172.7
171.8
183.7
225.7
249.2
215.4
270.8
292.6
301.1
280.8
331.2
356.3
360.4
19.7
1.1
Other operating income
3.4
2.3
2.7
3.7
0.2
3.6
9.1
8.3
9.9
6.7
6.1
6.3
8.5
-14.4
34.8
Revenues
176.1
174.1
186.4
229.3
249.4
218.9
279.8
300.9
311.1
287.5
337.3
362.6
368.8
18.6
1.7
Dec/(Inc) in stock-in-trade
-18.8
15.5
-6.7
-2.7
-17.5
16.1
27.3
-4.7
-31.6
12.5
-19.7
1.9
14.5
-146.0
677.0
Consumtion of RM & packing mate
78.0
44.4
60.4
80.0
99.4
50.8
57.2
86.0
105.9
57.8
103.4
86.6
73.3
-30.7
-15.3
Purcahsed of traded good
6.0
5.3
6.6
8.0
7.5
7.6
8.5
10.1
14.4
10.0
12.9
11.9
15.5
7.1
30.5
RM Cost
65.2
65.1
60.3
85.2
89.4
74.6
92.9
91.5
88.7
80.3
96.7
100.3
103.3
16.5
3.0
% of Revenue
37.0
37.4
32.3
37.2
35.8
34.1
33.2
30.4
28.5
27.9
28.7
27.7
28.0 -51 bps
35 bps
Gross Profit
110.9
108.9
126.1
144.1
160.1
144.4
186.9
209.4
222.3
207.2
240.7
262.3
265.5
19.4
1.2
Gross Profit Margin (%)
63.0
62.6
67.7
62.8
64.2
65.9
66.8
69.6
71.5
72.1
71.3
72.3
72.0
51 bps -35 bps
Employee Cost
24.9
25.6
27.5
27.8
34.5
33.9
37.4
38.4
37.7
42.8
44.5
48.2
50.8
34.9
5.5
% of Revenue
14.1
14.7
14.7
12.1
13.8
15.5
13.3
12.8
12.1
14.9
13.2
13.3
13.8 167 bps
49 bps
Other expenditure
46.2
46.2
55.3
55.7
56.5
59.4
65.4
71.8
72.3
74.6
85.4
82.7
74.0
2.3
-10.5
% of Revenue
26.2
26.5
29.6
24.3
22.6
27.1
23.4
23.9
23.3
26.0
25.3
22.8
20.1 -320 bps -274 bps
Total Expenditure
136.3
137.0
143.2
169.5
181.0
165.8
195.2
203.6
200.5
197.8
226.6
231.2
228.1
13.8
-1.3
% of Revenue
77.4
78.7
76.8
73.9
72.6
75.7
69.8
67.7
64.5
68.8
67.2
63.8
61.8 -261 bps -191 bps
EBITDA
39.8
37.1
43.2
59.8
68.4
53.1
84.6
97.2
110.6
89.7
110.7
131.4
140.7
27.3
7.1
EBITDA Margin (%)
22.6
21.3
23.2
26.1
27.4
24.3
30.2
32.3
35.5
31.2
32.8
36.2
38.2 261 bps 191 bps
Other income
-2.0
9.8
0.4
0.5
6.3
4.8
5.8
4.0
3.0
8.6
14.7
3.6
2.3
-23.0
-35.4
Interest
-1.7
16.0
4.6
3.4
5.4
1.6
2.2
2.2
2.2
1.4
1.3
1.2
1.1
-52.3
-12.5
Depreciation
8.2
7.8
7.9
8.1
9.0
8.6
9.0
9.5
14.9
12.0
12.2
12.6
12.6
-15.4
0.0
PBT (bef Excep's)
31.2
23.1
31.1
48.9
60.4
47.7
79.3
89.6
96.5
84.8
111.9
121.2
129.4
34.1
6.7
Exceptional Items
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.1
1.2
2.7
-6.5
PBT
31.2
23.1
31.1
48.9
60.4
47.7
79.3
89.6
96.5
84.9
113.1
123.9
123.0
27.4
-0.7
Tax
7.7
3.5
9.3
16.3
33.3
15.2
23.5
27.2
26.4
26.2
34.5
39.2
38.7
46.4
-1.3
Tax rate (%)
24.5
15.3
29.7
33.4
55.1
31.8
29.6
30.3
27.4
30.9
30.5
31.6
31.4 407 bps -19 bps
PAT
23.6
19.6
21.9
32.6
27.1
32.5
55.8
62.4
70.1
58.7
78.6
84.7
84.3
20.3
-0.5
PAT Margin (%)
13.4
11.2
11.7
14.2
10.9
14.9
19.9
20.7
22.5
20.4
23.3
23.4
22.9
32 bps -51 bps
SWOT Analysis
Strengths - Industry beating growth on a consistent basis, focused
approach in the exports space, high return ratios, and knack of launching
new products on a consistent basis
Weakness - Product concentration
Opportunities- US generics space
Threats - Extension of NLEM scope to include some of its flagship
products, government driven price controls in some of the export markets
Page 8
Conference call highlights
The company has guided for 32-34% EBITDA margins for FY16
with 16-18% revenue growth. In the domestic market, it expects
~25% YoY growth while in exports APL expects 14-15% growth
on a higher base
Ajanta Pharma has launched six new products in India during this
quarter, out of which one was first to market launch
The global field force strength has gone up from 450 to 572 in
FY15
The African division has 1118 registered brands, 1106 brands
under registration, with a field force of 257. Major segments in
African markets are antibiotic, anti-malarial and ortho
Asian markets have 294 registered brands, 360 brands under
registration and 315 MRs
In this quarter, five new products were launched in African
markets and nine in the Asian markets
Total 25 ANDAs have been filed in the US market, out of which
two have been approved. Sales during this quarter accounted for
| 1 crore. The company expects | 7-8 crore revenues from US
sales in FY16
APL plans to file more than six ANDAs every year. The expected
size of ANDAs filed till now is approximately US$1.5 billion
Capex guidance is at | 180-200 crore in FY16
The tax rate is expected to remain at the current level (full tax) but
will go down in FY17 by 300-400 bps due to commencement of
the Savli facility
Page 9
Valuation
The Q3 numbers have once again demonstrated Ajantas consistency in
delivering above average numbers both in India as well as abroad. In
domestic formulations, the company continues to register robust growth.
In the exports space, both Philippines and Franco-African markets
continue to thrive on the back of consistent product launches and base
business growth. On the margin front, the company is constituently
improving its margin on the back of improved product mix. We expect
revenues, EBITDA and net profit to grow at a CAGR of 19%, 17.6% and
17.8%, respectively. We have ascribed a target price of | 1488, based on
28x of FY17E EPS of | 53.1.
Exhibit 14: One year forward PE
1600
1400
1200
1000
(|)
800
600
400
200
Price
15.3x
12.7x
10.0x
7.4x
Mar-15
Sep-14
Mar-14
Sep-13
Mar-13
Sep-12
Mar-12
Sep-11
Mar-11
Sep-10
Mar-10
Sep-09
Mar-09
Sep-08
Mar-08
Sep-07
Mar-07
Sep-06
Mar-06
4.1x
Exhibit 15: One year forward PE of company vs. CNX Pharma Index
Ajanta
Mar-15
Jul-14
Nov-14
Mar-14
Nov-13
Jul-13
Mar-13
Jul-12
Nov-12
Mar-12
Jul-11
Nov-11
Mar-11
Jul-10
Nov-10
Mar-10
Nov-09
Jul-09
Mar-09
Jul-08
Nov-08
Mar-08
Jul-07
Nov-07
Mar-07
Jul-06
Nov-06
Mar-06
45
40
35
30
25
20
15
10
5
0
CNX Pharma
Exhibit 16: Valuation
FY14
FY15
FY16E
FY17E
Revenues
(| crore)
1178
1431
1704
2034
Growth
(%)
30
31
32
38
EPS
(|)
26.5
38.3
45.6
53.1
Growth
(%)
109
45
19
17
P/E EV/EBITDA
(x)
(X)
47.9
30.4
33.1
21.8
27.8
18.4
23.9
15.4
RoNW
(%)
39.4
41.9
38.5
35.9
Page 10
RoCE
(%)
44.9
50.6
48.7
46.4
Company snapshot
Target Price: | 1488
1,600
1,400
1,200
1,000
800
600
400
200
Apr-16
Jan-16
Oct-15
Jul-15
Apr-15
Jan-15
Oct-14
Jul-14
Apr-14
Jan-14
Oct-13
Jul-13
Apr-13
Jan-13
Oct-12
Jul-12
Apr-12
Jan-12
Oct-11
Jul-11
Apr-11
Jan-11
Oct-10
Jul-10
Apr-10
Jan-10
Oct-09
Jul-09
Apr-09
Jan-09
Source: Bloomberg, Company, ICICIdirect.com Research
Key events
Date
Jun-08
Event
Commissions dedicated R&D facility in Kandivali, Mumbai
Mar-09
Enters the Philippines market via incorporation of a subsidiary
Mar-09
USFDA approves Paithan faciliy
Mar-10
Acquires formulation facility near Aurangabad to cater to ROW markets
Dec-12
Enters regulated markets with first product approval in the US and one for Europe.
Mar-13
Launches first product in the US
Jan-15
Board approves subdivision of sharesfrom | 5 to | 2
Top 10 Shareholders
Rank
1
2
3
4
5
6
7
8
9
10
Name
Gabs Investments Pvt. Ltd.
Agrawal (Rajesh)
Agrawal (Yogesh Mannalal)
Agrawal (Mannalal B)
Agrawal (Purushottam B)
Agrawal (Madhusudan B)
Agrawal (Vimal & Mamata)
Matthews International Capital Management, L.L.C.
Agrawal (Madhusudan B) HUF
Agrawal (Mannalal B) HUF
Shareholding Pattern
Latest Filing Date % O/S Position (m) Position Chan
31-Mar 9.54
8.39
0
31-Mar 7.29
6.41
0
31-Mar 7.26
6.38
0
31-Mar 6.15
5.41
0
31-Mar 6.13
5.39
0
31-Mar 6.13
5.39
0
31-Mar 5.84
5.14
0
31-Mar 3.58
3.15
0.47
31-Mar
3.5
3.08
0
31-Mar 3.48
3.06
0
(in %)
Promoter
FII
DII
Others
Mar-14 Jun-14 Sep-14 Dec-14 Mar-15

73.6
73.6
73.8
73.8
73.8
3.8
7.9
7.4
7.3
7.6
0.1
0.8
1.3
1.5
1.6
22.5
17.7
17.5
17.4
17.0
Source: Reuters, ICICIdirect.com Research
Recent Activity
Buys
Investor name
Matthews International Capital Management, L.L.C.
Grandeur Peak Global Advisors, LLC
Motilal Oswal Asset Management Company Ltd.
APG Asset Management
The Vanguard Group, Inc.
Value
9.25m
4.59m
4.48m
1.30m
0.68m
Shares
0.47m
0.36m
0.23m
0.11m
0.07m
Sells
Investor name
Agarwal (Narendra Kumar)
Van Eck Associates Corporation
SBI Funds Management Pvt. Ltd.
Daiwa Asset Management (India) Private Limited
Value
-22.34m
-5.82m
-1.73m
-1.33m
Shares
-1.13m
-0.39m
-0.09m
-0.07m
Source: Reuters, ICICIdirect.com Research
Page 11
Financial summary
Profit and loss statement
(Year-end March)/ (| crore)
Revenues
Growth (%)
Raw Material Expenses
Gross Profit
Gross Profit Margins (%)
Employee Expenses
Other Expenditure
Total Expenditure
EBITDA
Growth (%)
Interest
Depreciation
Other Income
PBT before Exceptional Items
Less: Exceptional Items
PBT
Total Tax
PAT before MI
MI & Profit from associates
PAT
Growth (%)
EPS (|)
| Crore
FY13
930.8
37.4
302.6
628.2
67.5
123.2
283.5
709.3
221.6
57.4
19.1
34.2
8.5
176.8
0.0
176.8
64.7
112.1
0.0
112.1
45.1
12.7
FY14
1,208.3
29.8
345.5
862.8
71.4
157.0
337.1
839.6
368.8
66.4
8.7
43.9
13.7
329.9
0.0
329.9
96.0
233.9
0.0
233.9
108.6
26.5
FY15E
1,462.3
21.0
410.4
1,051.9
71.9
200.9
341.5
952.8
509.5
38.2
5.0
49.7
28.6
483.4
0.0
483.4
145.0
338.4
0.0
338.4
44.7
38.3
FY16E
1,735.9
18.7
477.4
1,258.5
72.5
243.0
416.6
1,137.0
598.9
17.5
4.6
52.8
33.8
575.3
0.0
575.3
172.6
402.7
0.0
402.7
19.0
45.6
FY17E
2,071.7
19.3
580.1
1,491.6
72.0
290.0
497.2
1,367.3
704.4
17.6
3.4
70.7
40.5
670.8
0.0
670.8
201.2
469.6
0.0
469.6
16.6
53.1
Cash flow statement

Profit After Tax
Add: Depreciation
(inc)/Dec in Current Assets
inc/(Dec) in Current Liabilities
Others
CF from Operating activities
Long term Loans & Advances
Other Investments
Liquid Investments
(Purchase)/Sale of Fixed Assets
Deferred Tax Liability
Long Term Provision
Others
CF from Investing activities
(inc)/Dec in Secured Loan
(inc)/Dec in Unsecured Loan
Dividend & Dividend tax
Others
CF from Financing activities
Net Cash Flow
Cash and Cash equ. at beginning
Cash
| Crore
FY13
112.1
34.2
5.4
44.4
0.0
196.1
0.0
0.0
0.0
-70.5
6.6
0.0
0.0
-69.6
-76.8
1.8
-17.1
0.0
-92.2
34.4
11.4
46.3
FY14
233.9
43.9
-81.9
26.7
0.0
222.6
0.0
0.0
-55.0
-131.8
-0.7
0.0
0.0
-179.9
10.4
-5.0
-41.2
0.0
-35.8
6.9
46.3
60.4
FY15E
338.4
49.7
-85.2
64.7
0.0
367.6
0.0
0.0
-50.0
-125.0
0.0
0.0
0.0
-184.9
-28.0
0.0
-124.0
0.0
-152.0
30.6
60.4
90.9
FY16E
402.7
52.8
-103.7
82.8
0.0
434.6
0.0
0.0
-50.0
-200.0
0.0
0.0
0.0
-258.6
-25.0
0.0
-165.4
0.0
-190.4
-14.4
90.9
76.6
FY17E
469.6
70.7
-109.2
105.8
0.0
536.8
0.0
0.0
-50.0
-125.0
0.0
0.0
0.0
-186.5
-20.0
0.0
-206.7
0.0
-226.7
123.5
76.6
200.1
FY13
FY14
FY15E
FY16E
FY17E
12.7
16.6
44.5
5.2
6.2
26.5
31.4
67.2
6.8
10.0
38.3
43.9
91.4
10.3
12.0
45.6
51.6
118.3
8.7
16.0
53.1
61.1
148.0
22.6
20.0
23.8
19.2
12.0
59
60
52
1.7
30.5
28.0
19.4
48
63
39
1.8
34.8
33.8
23.1
50
60
40
1.7
34.5
33.8
23.2
55
59
45
1.6
34.0
33.0
22.7
55
58
50
1.6
28.5
36.2
38.4
39.4
44.9
59.9
41.9
50.6
78.7
38.5
48.7
87.8
35.9
46.4
81.6
99.9
12.3
2.3
12.2
28.5
47.9
9.5
2.0
9.5
18.9
33.1
7.8
1.8
7.8
13.9
27.8
6.5
1.6
6.6
10.7
23.9
5.3
1.6
5.5
8.6
0.3
0.6
2.2
1.3
0.2
0.4
2.4
1.6
0.1
0.2
2.2
1.5
0.1
0.1
1.9
1.2
0.0
0.1
2.0
1.3
Balance sheet
| Crore

Equity Capital
Reserve and Surplus
Total Shareholders funds
Total Debt
Deferred Tax Liability
Long Term Provision
Minority Interest
Source of Funds
FY13
11.8
381.6
393.4
124.6
23.7
2.5
3.0
547.2
FY14
17.7
575.6
593.3
130.0
23.0
2.5
2.8
751.6
FY15E
17.7
790.0
807.6
102.0
23.0
2.5
3.8
938.9
FY16E
17.7
1,027.3
1,045.0
77.0
23.0
2.5
4.8
1,152.3
FY17E
17.7
1,290.1
1,307.8
57.0
23.0
2.5
4.8
1,395.1
Total Gross Block

Accumulated Depreciation
Net Block
Capital WIP
Fixed Assets
Investments
Long term Loans & Advances
Other Non current assets
Inventory
Debtors
Loans and Advances
Other Current Assets
Cash
Total Current Assets
Creditors
Provisions
Other current libilities
Total Current Liabilities
Net Current Assets
Application of Funds
438.4
165.9
272.5
12.5
285.0
8.5
48.6
7.1
147.6
150.5
24.0
0.7
46.3
369.1
131.7
19.9
19.5
171.1
198.0
547.2
490.3
210.9
279.4
93.6
372.9
63.5
39.2
8.8
155.4
202.2
46.4
0.6
60.4
465.0
124.5
42.7
30.5
197.8
267.3
751.6
550.3
260.6
289.7
158.6
448.3
113.5
50.1
8.8
196.0
235.2
57.2
1.4
90.9
580.8
156.8
62.7
42.9
262.4
318.4
938.9
610.3
313.3
297.0
298.6
595.5
163.5
59.6
8.8
256.8
275.5
59.6
1.7
76.6
670.2
210.1
84.0
51.1
345.3
324.9
1,152.3
820.3
384.0
436.3
213.6
649.8
213.5
71.2
8.8
306.4
323.2
71.2
2.0
200.1
902.9
278.6
111.4
61.0
451.0
451.9
1,395.1
Key ratios
(Year-end March)
Per share data (|)
EPS
Cash EPS
BV
Cash per Share
DPS
Operating Ratios (%)
EBITDA margins
PBT margins
Net Profit margins
Inventory days
Debtor days
Creditor days
Asset turnover ratio (x times)
Return Ratios (%)
RoE
RoCE
RoIC
Valuation Ratios (x)
P/E
EV / EBITDA
EV / Revenues
Market Cap / Revenues
Price to Book Value
Solvency Ratios
Debt/EBITDA
Debt / Equity
Current Ratio
Quick Ratio
Page 12
ICICIdirect.com coverage universe (Healthcare)

ICICIdirect Healthcare coverage Universe
I-Direct CMP TP
Company
Code
(|)
(|)
Rating M Cap
(| Cr)
FY14
EPS (|)
PE(x)
EV/EBITDA (x)
RoCE (%)
RoNW (%)
FY15E FY16E FY14 FY15E FY16E FY14 FY15E FY16E FY14 FY15E FY16E FY14 FY15E FY16E
Ajanta Pharma
AJAPHA
1268 1488 BUY
11901.3
26.5
38.3
45.6
47.9
33.1
27.8
32.3
23.4
19.7
44.9
40.6
38.1
39.4
32.8
28.9
Apollo Hospitals
APOHOS
1187 1455 BUY
16379.8
22.8
26.8
36.8
52.1
44.3
32.3
25.7
22.8
16.1
11.6
12.0
15.5
10.6
11.5
14.2
Aurobindo Pharma
AURPHA
1285 1303 BUY
28.6
Biocon
BIOCON
Cadila Healthcare
36364.2
47.3
57.4
70.5
27.2
22.4
18.2
18.7
15.5
12.6
24.1
23.4
24.4
31.3
31.6
447 HOLD
8537.2
20.7
20.1
22.5
35.1
29.2
32.4
21.2
21.1
18.0
12.2
10.7
11.7
13.7
15.2
12.4
CADHEA
1690 1634 HOLD
34724.3
39.2
51.1
66.2
43.1
33.1
25.5
30.7
22.9
17.9
15.9
19.0
21.7
23.4
24.6
25.4
Cipla
CIPLA
654.7
50767.6
17.3
15.9
21.7
37.9
41.1
30.1
24.2
21.9
17.6
15.5
14.2
17.6
13.8
11.3
14.2
Dr Reddy's Labs
DRREDD
3237 3332 HOLD
56331.4 126.7 130.7 150.5
26.5
25.6
22.3
17.0
15.8
13.9
19.2
18.7
20.1
23.7
19.9
19.5
Glenmark Pharma
GLEPHA
835.8
824 HOLD
22565.2
20.0
21.5
34.0
41.8
38.9
24.6
19.1
20.6
13.6
16.0
17.1
23.5
18.3
17.4
22.8
Indoco Remedies
INDREM
334
375 BUY
3130.8
6.3
9.5
13.3
53.1
35.1
25.0
26.5
18.0
13.9
16.6
21.8
28.1
12.6
16.4
19.4
Ipca Laboratories
IPCLAB
622 HOLD
7958.0
37.9
25.6
31.8
16.6
24.6
19.8
10.5
13.8
13.2
27.6
16.1
17.8
24.4
14.7
16.0
Jubilant Life Sciences
VAMORG
Lupin
LUPIN
Natco Pharma
NATPHA
2073 1354 HOLD
Sun Pharma
SUNPHA
940.3 1036 BUY
Torrent Pharma
TORPHA
1198 1165 HOLD
Unichem Laboratories
UNILAB
199.3
434
630.5
170
648 HOLD
138 SELL
2559.4
6.8
-6.5
20.0
24.9 -26.3
1770 1866 BUY
78862.6
41.0
54.4
61.0
43.2
206 HOLD
32.5
8.5
6.4
11.6
5.6
10.1
4.5
7.6
4.2
-3.5
7.6
29.0
27.1
20.7
18.6
34.5
34.7
32.0
26.5
27.4
24.6
6727.9
30.3
32.5
44.9
58.4
54.4
39.4
38.8
32.2
25.9
15.3
16.7
18.7
14.1
13.5
16.1
224876.6
29.0
34.8
39.9
32.4
27.0
23.6
23.1
22.5
19.2
32.4
31.2
28.8
27.0
25.3
23.1
20539.4
39.2
47.2
50.4
30.5
25.4
23.8
21.8
19.3
15.5
28.5
21.4
26.7
34.9
32.4
28.0
1821.3
18.7
6.1
13.0
10.7
32.9
15.3
10.1
16.7
10.4
15.7
6.4
12.9
20.7
6.8
13.8
Page 13
RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns

ratings to its stocks according to their notional target price vs. current market price and then categorises them
as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional
target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;
Pankaj Pandey
Head Research
pankaj.pandey@icicisecurities.com
ICICIdirect.com Research Desk,

ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai 400 093
research@icicidirect.com
Page 14
ANALYST CERTIFICATION
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Ajanta Pharma May2015

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Result Update

May 11, 2015

Ajanta Pharmaceuticals (AJAPHA)

Maintains growth tempo

Changed from | 1288 to | 1488

Changed from | 41.5 to | 45.6

Changed from | 51.1 to | 53.1

M.Cap/ Revenues (x)

Price to book (x)

Cash & cash equivalents (FY17E)

Price performance (%)

ICICI Securities Ltd | Retail Equity Research

Revenues grew 18.6% YoY to | 368.8 crore vs. I-direct estimate of

YoY (%) QoQ (%)

Raw Material Expenses

Total Operating Expenditure

Reduction in other expenditure as percentage of revenue by 320 bps YoY was

Improvement in margin was mainly due to contraction in other expenditure as

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

ICICI Securities Ltd | Retail Equity Research

| 1309.1 crore during the same period to be driven by growth in the

Source: Company, ICICIdirect.com Research

Domestic formulations The India business contributed ~35% of sales.

ICICI Securities Ltd | Retail Equity Research

Exhibit 2: Domestic formulation growth likely to be at CAGR of 23% in FY15-17E

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Exhibit 4: Derma sales(domestic) to grow at CAGR of 20% in FY15-17E

Exhibit 5: Cardio sales(domestic) to grow at 27.5% CAGR in FY15-17E

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com, Research

Exhibit 6: Ophthalmic sales (domestic) growing at 25% CAGR in FY15-17E

Exhibit 7: Institutional domestic business

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com Research

Exhibit 8: Africa sales export growth at 12.6% CAGR in FY15-17E

Exhibit 9: Asia exports growth at 15.8% CAGR in FY15-17E

ICICI Securities Ltd | Retail Equity Research

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com Research

Exhibit 10: EBITDA to grow at CAGR of 17.6% in FY15-17E

EBITDA Margins (%)

Source: Company, ICICIdirect.com Research

Exhibit 11: Net profit to grow at CAGR of 17.8% in FY15-17E

Net Profit Margins (%)

Source: Company, ICICIdirect.com Research

Exhibit 12: Trends in return ratios

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Exhibit 13: Trends in quarterly financials

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Conference call highlights

ICICI Securities Ltd | Retail Equity Research

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com Research

Exhibit 16: Valuation