Buy Ajanta Pharma Ltd for the Target Rs 4,250 by Prabhudas Liladhar Ltd
Strong beat; Growth across branded generic markets
AJP’s Q2FY27 EBITDA grew strongly by 47% YoY (INR 5.43bn; 30.2% OPM) which was sharply above our estimates. The beat was aided by higher revenues across branded generic markets. 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 FY28E and FY29E EPS stands increased by 3-6%. Overall, we expect EBITDA/PAT CAGR of 20% over FY26-29E with healthy RoE/RoCE of 25%/31% in FY27E. At CMP, AJP is trading at 29x P/E and 20x EV/EBITDA as of FY28E. Maintain BUY rating with revised TP of INR4,250/share (32x Sept 2028E EPS).
Broad-based revenue growth across markets:
AJP reported revenue growth of 32.5% YoY to INR 17.9bn, we est INR 16.1bn. Domestic business grew by 17% YoY to INR 5bn. Exports increased by 41% YoY to INR 12.8bn. US business was largely flat QoQ and was up 29% YoY at USD 51mn. Branded Africa business grew by 41% YoY to INR 3.2bn. Some spillover of Q1FY27 also aided higher revenues. Institutional business grew sharply YoY to INR 1.16bn vs INR 700mn in Q1FY27 and INR 320mn in Q2FY26. Branded Asia business improved by 18% YoY to INR 3.6bn.
EBITDA beat estimates, margins at +30%:
EBITDA stood at INR 5.43bn, up 47% YoY and 20% QoQ. GMs improved 190bps YoY but declined 130bps QoQ to 78.5%. EBITDA margin stood at 30.2%, up 300bps YoY and 230bps QoQ above our est. Other expenses came at INR 4.8bn, up 36% YoY and 3% QoQ. Staff costs continue to remain elevated up 21% YoY. Other income stood at INR 374mn which includes forex gain. R&D expenses were up 14% YoY to INR 720mn, 4% of sales. Resultant PAT at INR 3.88bn up 49% YoY. EPS at INR 30.7/share
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SEBI Registration number is INH000000933
