Ajanta Pharma - G-Zegerid, a good opportunity for Ajanta: AnandRathi Institutional Research

Ajanta Pharma - G-Zegerid, a good opportunity for Ajanta; Buy with a target price of Rs 1784

We expect at least $13m-15m in Ajanta's annual sales of g-Zegerid. The Zegerid-related patent (7399772) expired on 15th Jul'16. Channel checks suggest a sharp rise in market size due to price hikes in the past year. We are positive about the company based on steady growth in its domestic formulations and as its US growth plans are on track. We maintain a Buy, with a target of Rs.1,784, based on 25x FY18e earnings.

Larger market for g-Zegerid, a surprise. Zegerid, a combination of omeprazole and sodium bicarbonate, is used to treat certain stomach and esophagus problems. Channel checks indicate a market of $306m, primarily driven by price hikes in the past year.

Reasonable sales for Ajanta from g-Zegerid due to little competition. At present Par Pharm is the only generics company for this product. Dr. Reddy's has launched g-Zegerid recently. The only Zegerid-related patent expired mid-Jul'16. Based on market size and competition, we expect at least $13m-15m for Ajanta from this product. The US brought $2.7m sales for Ajanta in FY16. G-Zegerid would enable it to considerably increase its base sales in the US market.

US growth story on track. Ajanta has 11 ANDA approvals (cumulative), and 14 pending approval. Currently, it supplies the US from its Aurangabad facility. Capex at Dahej to cater to the US market has already been completed and regulatory filing batches are ongoing. Based on its product pipeline we expect healthy US sales growth, subject to regulatory approval.

Valuation. At the CMP of Rs.1,600, the stock trades at 27.8x FY17e EPS of Rs.57.6 and 22.4x FY18e EPS of Rs.71.3. We are positive about Ajanta based on its sustained outperformance in the domestic formulations market and a healthy ANDA pipeline. We maintain a Buy, with a target of Rs.1,784, based on 25x FY18e earnings.

Shares of AJANTA PHARMA LTD. was last trading in BSE at Rs.1777.2 as compared to the previous close of Rs. 1725.6. The total number of shares traded during the day was 50141 in over 4638 trades.

The stock hit an intraday high of Rs. 1785 and intraday low of 1720.1. The net turnover during the day was Rs. 88356500.

Source : Equity Bulls

Keywords