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Our view

Ajanta Pharma performed in line with expectation on revenues and margin. We see a firm margin trajectory over next three years driven by 1) India rebound in FY22 and revival in US from FY23 2) MR rationalization to improve productivity and be beneficial for domestic margin. Domestic business to benefit from over 20 launches last year which have not been fully monetized and promoted; hence we stick to our 14% India growth in current fiscal. US sales could be impacted near term due to curtailed launches as filings were impacted last year. Albeit, US seen back on track with 17‐18% growth next fiscal. Company affirmed margin at ~30% could be maintained and indeed, we reckon, can inch up to 31‐32% especially if volumes ramp after Guwahati capex. We factor in FY24 estimates and roll over an unchanged target 26x PE on FY24 EPS to arrive at a revised TP Rs2,620 (from Rs2,130). We presume a smaller base and share of US revenues would preempt some of the margin volatility seen at peers. BUY stays.

Result Highlights

* India revenues driven by reopening and low base of last year in derma and ophthalmic  

* US sales essentially flat qoq; see some impact of lower launches this year (<10% growth)

* Rationalization of MR led to improved productivity; other branded markets to sport steady growth

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