Ajanta Pharma has been one of the greatest wealth creator stocks. In the last five years (01.11.2009), the stock has given a phenomenal return of 6025%. In the last 3 years (01.11.2011), the return is 1604%. In the last one year, the stock has given a return of 113%.
Ajanta Pharma reported robust Q2FY15 results. The sales grew 20.5% yoy to Rs 337.3 cr while the EBITDA margins increased to 32.8% v/s 30.1% in Q2FY14 and 31.2% in Q1FY15. For the full year, the management has maintained its sales growth guidance of 20% (at constant currency of Rs 60/$) and 30% EBITDA margins.
Ajanta Pharma is presently quoting at Rs. 1900, at a P/E of 24.77. On the issue as to what investors should do now with Ajanta Pharma, brokerages are divided:
ICICI Direct – Buy for target of Rs. 2151:
ICICI Direct has in its report dated 22.09.2014 (issued prior to the Q2FY15 results) called Ajanta Pharma a “compelling investment argument”. It recommends a buy on the basis that the company is well poised to foray into the US market, especially once the newly constructed Dahej plant gets USFDA approval. It expects revenues, EBITDA and net profit to grow at a CAGR of 24%, 20% and 17%, respectively.
Nirmal Bang – Hold with a price target of Rs. 2150:
Nirmal Bang has arrived at the same price target as ICICI Direct but have recommended a ‘Hold’ instead of a buy. Nirmal Bang has factored in 21% growth with 30.2% EBITDA for FY15 (against 32% margins in 1HFY15), on constant currency. It points out that the company has healthy balance sheet (debt:equity is 0.1x) and strong return ratios (more than 30%). The stock has re-rated substantially in last three years and considering the growth momentum and improving profitability, it can sustain at these valuations. Given the continuous out-performance, healthy outlook, investors can hold shares for price target of Rs 2150 (18x of FY17E EPS), Bang says.
IndiaNivesh – Sell with a price target of Rs. 1,569:
IndiaNivesh has advised a sell on the basis that:
“We maintain our earnings estimates for FY15/FY16 and price target of Rs. 1,569 based on 17x FY16E EPS of Rs92.3. We remain confident on business model of AJP due to superior historical performance as well as key drivers in place to maintain momentum going forward. However, the current valuation of 24.1x FY15E and 20.5x FY16E earnings seems to have moved ahead of fundamentals. Hence we downgrade the stock to SELL from HOLD.”
Disclosure: I have Ajanta Pharma in my portfolio and will continue to hold it. If there is a correction, I intend to add to that position
IndiaNivesh saks on poor target. How can reputed broker like it can carelessly give negative target for performing business ?
Sometime it’s like brokers artificially push small investors to sell so that brokers can buy it on lower prices. Ajanta is already known for operator influenced stock instead of investor’s choice. Obviously Ajanta deserves investors and not operators.
Ok. What is your view on Caplin Point and Suven short to mid term?
In short to mid term anything can happen. Long term story for Suven is very strong.
Ajanta Pharma quoted @ Rs 19 on 31st March 2005
has given a whopping return of 9753% at cmp of rs 1872
e&oe
Jacob Mathew
If I had a company that was heavily dependent upon the value of the Rupee, I’d sell. This company is to exports dependent and if the Rupee rallies, bye bye profits.
Why only Ajanta, this rule applies to many export sectors especially the whole of IT & Pharma.
Bhs
I seriously doubt about your understanding with Ajanta. It is not dependent on USD. It exports to other countries as well and foreign currency is backed by hedging.
Well Jatin, all the reports above state that it will profit only if the value of dollar is 61 Rupees, not Yen, or Pounds, or taka. I don’t think I have misunderstood anything.