MOSL: AJANTA PHARMA (Buy)-Global Fund allocation to drive anti-malaria business
​AJANTA PHARMA: Global Fund allocation to drive anti-malaria business
(AJP IN, Mkt Cap USD1.6b, CMP INR1156, TP INR1605, 38% Upside, Buy)
With the Global Fund expected to award a tender for institutional anti-malaria (insti-AM) medicines in the near term, we tried to analyze the probable impact on Ajanta Pharma's (AJP) business in the event of intensification in competition.
The companies prequalified by the World Health Organization (WHO) for the institutional anti-malaria business from the Global Fund are the same as in the previous tender process. However, we note that the reduction in the Global Fund business to Ipca Laboratories (IPCA) due to US FDA regulatory restrictions has provided business opportunities for other players, including AJP. In addition, increased allocation by the Global Fund in 2015-17 drove strong growth for AJP.
Our scenario analysis indicates that the probable downside in AJP's business if competition intensifies due to the re-entry of IPCA in the institutional anti-malaria business would be to the tune of INR400-450m, which amounts to 6% of its Africa sales and 3% of overall sales. Although the amount committed by donors has remained stable, the incremental business is subject to allocation by the Global Fund.
On overall basis, we expect AJP to deliver a CAGR of 14% in revenue and 11% in earnings over FY17-20. We value AJP at 25x FY19E EPS of INR64.2, maintaining our price target to INR1,605 and also our Buy rating.
Ajanta Pharma Limited. Ajanta Pharma Limited is a holding company. The Company is a specialty pharmaceutical company engaged in developing, producing and marketing a range of branded and generic formulations. Its business includes branded generics in emerging markets of Asia and Africa, generics in the developed markets of the United States and Institutional sales. The branded generics business is spread in India and over 30 emerging countries across Africa, Commonwealth of Independent States (CIS), the Middle East and South East Asia. The Company serves a range of therapeutic segments, such as anti-biotic, anti-malarial, anti-diabetic, cardiology, gynecology, orthopedics, pediatric, respiratory and general health products. Ajanta has six formulations manufacturing facilities located in India and 1 in Mauritius. In addition, the Company also has an API manufacturing facility located at Waluj, India. The Company's subsidiaries include Ajanta Pharma (Mauritius) Ltd., and Ajanta Pharma USA Inc.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.