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Momentum in branded business buoys numbers…

About the stock: Ajanta Pharma is a focused player in branded, which constitutes ~70% of the overall sales which are spread across geographies including India

As of FY21, overall exports: domestic formulations ratio was at 70:30

Among exports Asia accounts for ~35% of export formulations, Africa 33% & US 32%. The company also participates in anti-malarial tenders in Africa (included in Africa)

Q3FY22 Results: Strong numbers in-line with estimates amid strong traction in India and Africa branded business

Sales were up 11.9% YoY to | 837.9 crore

EBITDA was at | 239.6 crore, steady YoY with margins at 28.6%

Adjusted PAT was at | 191.8 crore (up 8.6% YoY)

What should investors do? Ajanta’s share price has grown by ~1.28x over the past five years (from ~| 1696.55 in February 2017 to ~| 2177 levels in February 2022)

Maintain BUY rating on the stock with focused approach

Target Price and Valuation: Valued at | 2605 i.e. 26x P/E on FY24E EPS of | 100.1

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 | 9800

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