Motilal Oswal’s research report on Ajanta Pharma
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.
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