US TO DRIVE GROWTH

The company will also look to improve its performance in the domestic market, which accounts for a third of its revenues. The company has been growing at double the rate of the Indian pharma sector growth for FY12-FY16. While Ajanta Pharma’s growth has come down in FY17, it is still higher than the industry growth. The company will look to improve its growth in the cardiology, ophthalmology and dermatology segments (which account for over 70 per cent of domestic sales). A higher share of branded sales and new launches should help it to maintain its outperformance. What could play spoilsport on the growth front is the Africa business, which at 38 per cent is its largest sales segment. While the institutional anti-malarial segment helped to grow 45 per cent annually between FY12 and FY16, the pace is expected to slow down given higher base as well as lower funds available (with institutional customers such as the WHO) for procuring the medicines from drugmakers such as Ajanta Pharma. Going ahead though, growth in the African market could come from branded generic business in the antibiotic, anti-infective and cardiovascular system segments, especially from West Africa, where the company has a sizeable presence.

While analysts expect overall performance to be strong, the stock at the current levels is trading at 27 times its FY18 estimates which is expensive. Investors should await a correction to accumulate this scrip.