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* Ajanta Pharma (AJP) is engaged in manufacturing and marketing of formulations products. It has presence in India, Africa, Asia and US market.
* AJP sales has been growing better than IPM growth. AJP generates majority of its domestic sales from four key therapeutic segments i.e. CVS, Ophthal, Derma and Pain Management where AJP shown outperformance over IPM growth.
* Domestic business is expected to clock 11% CAGR over FY19- 21E (against industry growth of 8-9%) led by new launches and volume growth while US to grow 25-30% YoY led by small base and new launches.
* We expect sales and PAT growth at a CAGR of 10% and 14%, respectively over FY19-21E with EBITDA margin improvement of 125bps to 28.8% over the same period.
* We believe that AJP’s long-term fundamentals continue to remain healthy driven by healthy growth in India/Asia and US. We maintain our BUY recommendation on the stock with a Target Price of Rs1,200, valuing at 21x FY21E EPS of Rs57.1.
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