Buy Ajanta Pharma Ltd For Target Rs.3,730 by Prabhudas Liladhar Capital Ltd
AJP’s Q1FY27 EBITDA grew strongly by 20% YoY (INR 4.54bn; 27.9% OPM) which was 3% above our estimates. The beat was aided by higher Domestic and Africa business revenues and margins. The recent in-licensing agreement with Biocon for marketing semaglutide in 26 countries across RoW markets is good fit given its strong existing franchise across these markets. Further AJP’s play on high growth branded generics (BGx) market spread across India, Asia and Africa which contributed 70% to total revenue in FY26. Strong annual free cash flow of INR8–10bn further supports sustained investments and potential inorganic opportunities, reinforcing medium-term growth visibility. Our FY27E and FY28E EPS stands increased by 2-5%. Overall, we expect EBITDA/PAT CAGR of 18% over FY26-28E with healthy RoE/RoCE of 25%/31% in FY27E. At CMP, AJP is trading at 30x P/E and 20x EV/EBITDA as of FY28E. Maintain BUY rating with revised TP of INR3,725/share (32x FY28E EPS).
Strong revenues across geographies: AJP reported revenue growth of 25% YoY to INR 16.3bn, we est INR 15.3bn. Domestic business grew by 24.4% YoY to INR 5.1bn. Exports increased by 26% YoY to INR 11bn. US business declined 7% QoQ at USD 51mn. Branded Africa business grew by 29% YoY to INR 2.9bn. Institutional business was up 84% YoY to INR 700mn. Branded Asia business declined by 16% YoY due to ongoing middle east issues. GMs improved, EBITDA above estimates: EBITDA adj for forex stood at INR 4.54bn, up 20% YoY, 3% above our estimates.
GMs improved 100bps YoY and 130bps QoQ to 79.6%. EBITDA margin stood at 27.9%, down 100bps YoY. Other expenses came at INR 4.6bn, up 33% YoY and 15% QoQ. Staff costs continue to remain elevated up 26% YoY. R&D expenses were up 18% YoY to INR 660mn, 4.1% of sales. Resultant PAT at INR 3.34bn up 30% YoY. EPS at INR 26.5/share
Conference Call Highlights
India: Contributes 32% of the overall revenues. Therapy mix: Cardio (37%), Opthal (29%), Derma (22%), Pain (10%), Gynaec (1%), Nephro (1%). Chronic portfolio contributed 65% of the revenues. Trade generic contributed INR 480Mn flat YoY. 11% of the portfolio is covered under NLEM. Launched 8 new products in Q1FY27. MR strength strength at 3,750. PCPM INR 0.45mn as on date. Management confident about achieving mid-teens India growth.
Branded Africa: Contributes 18% of the overall revenues. It delivered growth of 29% YoY in Q1FY27 driven by product launches, productivity improvement and deeper market penetration. Management expects growth to normalize below the exceptional Q1FY27. Guided for high double-digit growth in FY27E.
Asia: Branded Asia contributes 16% of the revenues. Q1FY27 remained weak due to Middle east related logistics disruption. These shipments are expected to recognise in Q2FY27E. Strong rebound expected with high double digit growth guidance. US generics: It consists 30% of the overall sales. Launched 2 products during the quarter. FY27 ANDA filing guidance stands at 5–7 filings. Mgmt continues to guide for mid-single to high single digit growth for FY27E in CC.
Other highlights: New geography expansion is currently at product selection and registration stage and is expected to contribute over the next 3–5 years. Freight cost run rate is expected to remain broadly stable. Q1 saw minimal raw material cost inflation impact due to existing inventory. FY27 CapEx guidance maintained at ~INR 4bn. Around INR 3bn will be spent on Pithampur plant expansion, while ~INR 1bn is maintenance capex. R&D spend guided for 5% levels in FY27E. Exhibit 1: Quarterly Estimates (INR Mn) Q1FY27E YoY gr. (%) Q2FY27E Y
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