MOSL: AJANTA PHARMA (INITIATING COVERAGE)-Promising growth trajectory-Key drivers intact for superior growth

​Ajanta Pharma (initiating coverage): Promising growth trajectory; Key drivers intact for superior growth, despite aberration in short term

(AJP IN, Mkt Cap USD2.3b, CMP INR1760, TP INR2028, 15% Upside, Buy)

• Ajanta Pharma (AJP) is a specialty pharmaceuticals company engaged in the development, manufacture and marketing of finished dosages. It started with repacking of products in 1973, and moved from OTC products to prescription-based products for the Indian market. It has established itself as a strong specialty player in the domestic market in Ophthalmology, Dermatology and Cardiology. In addition, it has strong presence in the international markets of Africa and Asia, and continues to build a strong foundation for the US market.
• We expect AJP to be on a high-growth path in the US market, led by a healthy product pipeline and annual filings of ~12-15 ANDAs over next 2-3 years, subject to subsequent approvals. From INR40m in FY15, US revenues are expected to reach INR1.9b by FY17.
• Over FY11-16, AJP delivered a phenomenal 30% CAGR in domestic formulations sales, as against industry CAGR of 14-15%. We believe that AJP’s good pace of product launches, leading position in some products and improving MR efficiency should help it to outperform, despite industry growth lowering to 11-12%.
• AJP has made good strides in the Africa and Asia markets, is one of the leading companies in the anti-malaria business in East Africa, and has outperformed industry growth in branded generics in the Franco Africa and Asia regions. Although a brief pause is expected over the near term, we believe the long-term drivers remain intact to support sustainable growth.