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Result Synopsis

Ajanta management reiterated robust growth expectation across branded generic markets of Asia and Africa though it appears Q1 performance may not be completed replicated across quarters. Domestic business should see the impact of Met XL NLEM inclusion recede as volumes rebound (Q1 cardiac growth of 14% vs 5% on 12mth MAT basis in June). US business has been caught in a range due to lack of approvals which might could be change in H2 and next fiscal as company alluded to spate of approvals in H2. While branded exports would see benefit of higher MR count that can drive growth, management is not looking to add to MR count in any significant manner in domestic business. Margin expectation for FY25/26 remains intact adjusted for onetime Rs300mn gratuity provision taken in Q1. We believe margin can inch towards 30% next fiscal as healthy branded business growth and revival in US would drive expansion with limited opex growth. High degree of certainty associated with revenue and margin delivery supports our target multiple tweak to 32x from 30x and we reiterate ADD with TP Rs2,750 (earlier Rs2,550

Result Highlights

Healthy operating performance as revenues inline while margin beat expectations Sales up 12% YoY driven by India (+10% YoY) and branded Africa business (+45% YoY) Cardiac growth at 5% is half of IPM growth of 11% on a MAT June’24 basis; albeit Cardiac appears on recovery path as Q1 growth at 14% is ahead of category rise of 12%. As expected, derma is the fastest growing category at 2.5x IPM with 17% rise YoY on 12-mth MAT basis in June. US business declined ~13% QoQ though up 12% YoY as we reckon lack of meaningful approvals keeps a lid on sequential growth Gross margin inches up 130bps YoY and 170bps QoQ likely on strong Africa branded performance OPM up 228bps on gross margin support aided by ~8% YoY decline in other expenses ex-R&D (-7% YoY); freight impact appears muted Strong operational beat filtered through PAT – up 18% YoY PAT surged 74% YoY on a strong topline performance and margin rebound from lows of last year

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