Buy Ajanta Pharmaceuticals Ltd : India growth drives steady numbers - ICICI Direct
Buy Ajanta Pharmaceuticals Ltd For Target Rs.2695
India growth drives steady numbers…
About the stock: Ajanta Pharma is mainly into domestic as well as exports formulations. As of FY21, the exports: domestic formulations ratio was at 70:30
* Domestic formulations constitute 30% of the total consolidated turnover and is segregated into branded formulations & institutional business
* Asia accounts for ~35% of export formulations, Africa 33% & US 32%. The company participates in anti-malarial tenders in Africa (included in Africa).
Q1FY22 Results: Ajanta reported good Q1FY22 results.
* Sales were up 11.9% YoY to | 748 crore
* EBITDA in Q1FY22 was at | 220 crore, down 1% YoY with margins at 29.4% Consequent PAT was at | 173.8 crore (up 17.6% YoY)
What should investors do?
Ajanta’s share price has grown by ~1.4x over the past five years (from ~| 1502 in June 2016 to ~| 2148 levels in June 2021).
* We retain our BUY rating on the stock
Target Price and Valuation: We value Ajanta at | 2695 i.e. 30x P/E on FY23E EPS
Key triggers for future price performance:
* Focus on launching maximum number of first time launches with focus on new drug delivery system (NDDS)
* In emerging markets, front-end marketing for direct interaction with doctors.
* Calculated focus, healthy margins, return profile and lighter balance sheet are some key differentiators for Ajanta
* Margins are likely to improve amid operational leverage.
Alternate Stock Idea: Apart from Ajanta, in healthcare coverage we like Sanofi
* Strong growth in top brands, measured new launches (including innovative launches) besides strong balance sheet and comfort on corporate governance front are key attributes of the company
* BUY with a target price of | 9750
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