Buy Ajanta Pharma Ltd For the Target Rs.3,667 by Choice Broking Ltd
Revenue and EBITDA in Line with Estimates; PAT Miss Not Concerning with New Product Launches in India
* Revenue increased by 3.7% YoY but declined by 3.4% QoQ to INR 11.5 Bn (vs. consensus estimates of INR 11.6 Bn).
* EBITDA rose 2.2% YoY and 3.1% QoQ to INR 3.2 Bn. EBITDA margin contracted 42bps YoY but expanded 177bps QoQ to 28.0% (vs. consensus estimates of 27.3%).
* PAT grew 10.9% YoY and 7.6% QoQ to INR 2.3 Bn (vs. consensus estimates of INR 2.8 Bn), with a PAT margin of 20.3%.
India Business surpasses IPM growth with strong performance and new therapy expansions
AJP’s India Business continues to outperform the Indian Pharmaceutical Market (IPM), which grew at 8%, with the company’s growth at 12% as per IQVIA MAT Dec’24. Furthermore, the company has expanded into two new therapy areas – Nephrology and Gynaecology – launching 12 products during the quarter. These new segments have a combined market size of INR 160 Bn, and we expect the company to leverage this opportunity for growth. We expect the company to maintain its outperformance against the IPM, which is projected to grow at 8% in FY25.
Asia and Africa Branded Generics on Track for Double-Digit Growth
The branded generics business, encompassing both Asia and Africa, now accounts for ~38% of total revenue. We expect the company to continue its strong double-digit growth in both regions, driven by a robust product pipeline and expanding market share. The company is also focusing on enhancing its presence in countries where its footprint is currently small.
View and Valuation: We have increased our FY26/27 EPS estimates by 1.3%/2.0% and maintained our 'BUY' rating with a target price of INR 3,667, applying a 31x multiple (unchanged), which is higher than peers due to the company’s better return ratios and EPS growth. We anticipate the company will benefit from strong double-digit growth in branded generics, above-market growth in its Indian business, and new product launches in the US. Furthermore, the company is shifting its focus away from the uncertain Africa Institutional business. We also expect margin improvements driven by changes in product mix and enhanced operational efficiency.
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SEBI Registration no.: INZ 000160131
