Buy Ajanta Pharmaceuticals Ltd For Target Rs.1520 - ICICI Direct
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About the stock: Ajanta Pharma is a focused player in branded generics, which constitutes ~72% of overall sales, spread across geographies including India.
* As of Q4FY23, overall exports: domestic formulations ratio was at 67:33
* Among exports, Asia accounts for ~41% of export formulations, Africa 26% and the US ~34%. The company also participates in anti-malarial tenders in Africa (included in Africa)
Q4FY23 Results: Revenues beat estimates but margins missed.
* Revenues grew 1.3% YoY to ~| 882 crore mainly driven by Domestic business as well as US generics both of which grew ~17% YoY
* EBITDA came in at ~ | 150 crore, down ~28% YoY with margins at ~17%. Adjusted for forex loss margins were at ~20%
* Adjusted PAT was at ~| 122 crore
What should investors do? Ajanta’s share price has grown at 10.3% CAGR in the past three years.
* We maintain BUY as it remains a compelling play on branded generics (~72% exposure) with strong execution track record and financials
Target Price and Valuation: Valued at | 1520 i.e. 22x P/E on FY25E EPS of | 69.2.
Key triggers for future price performance:
* Focus on maximum number of first time launches with focus on new drug delivery system (NDDS) in the domestic branded formulations space
* In emerging markets, front-end marketing for direct interaction with doctors
* Calculated focus, healthy margins, return profile and judicious capital allocation
* Margins are likely to improve amid operational leverage, expected softening of raw material cost and incremental focus on branded business
Alternate Stock Idea: Apart from Ajanta, we like Indoco Remedies.
* Indoco manufactures and markets branded formulations and APIs for the domestic and export markets
* BUY with a target price of | 440
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