Buy Aanjaneya Lifecare: PN Vijay

One can buy Aanjaneya Lifecare with a target of Rs 850, says PN Vijay, Portfolio Manager.

Vijay told CNBC-TV18, "Aanjaneya Life did its public issue last year. It is a mid size pharma company and they had a very strong footprint in API (Active Pharmaceutical Intermediaries). What they were doing was on a contract manufactured some of the biggies like Cipla and Wockhardt and they have specialization in anti-malarial. So they have built up a very strong business on that and recently they also did a merger with Apex Drugs, which has given them a very strong foothold and improvement in the top line and the bottom-line without too much of an increase in the capital."
He further added, "Earlier this year they decided to go for formulations in a forward integration and they have a very strong presence in anti-malarials, which has a strong demand both overseas and India. So they have a very good business model, very integrated right on the value chain and also a good mixture of domestic formulations and APIs."
"I don’t see much risk in this business and the thing about Aanjaneya is that at the some time you would remember in Matrix Laboratories they get bought out because they have been started by first generation entrepreneurs. I can imagine a business model like this getting very attractive next 2-3 years for a big player and the PE multipliers are very unchallenging quoting at about 14-15 times 2013 earnings, so about 25% discount to some of the other midcap pharma companies. So I am giving this a buy with a target of about Rs 850."
"The only risk is they have got a bit of debt on their balance sheet. It is very unusual to see pharma companies have debt. Not too much but the debt is a bit worrying in case the ramp up formulations gets a bit slow then the debt may hit the bottom-line." Disclosure: It is safe to assume that the stocks discussed have been recommended to clients but no personal holding.