Reduce Ajanta Pharma Ltd for Target Rs. 2,760 by Choice Institutional Equities
Growth to Moderate on High Base; Margin to Stay Range-bound
We maintain a neutral outlook, as the company continues to invest in field force expansion, brand-building and market expansion. While these initiatives support topline momentum, we expect growth to moderate, given the high base in FY26, particularly in the US. EBITDA margin is likely to remain range-bound at ~27% over FY27–29E, with meaningful upside contingent on recovery in West Asia and ramp-up of new launches. We marginally revise FY27/28E estimate downwards by 1.7%/1.6%. While the structural growth story remains intact, we believe most positives are reflected in current valuation. We continue to value the stock at 25x average on FY28E EPS, arriving at an unchanged TP of INR 2,760 and maintain our REDUCE rating
Strong Revenue Growth but Margin Declines
* Revenue grew 21.5% YoY / 3.4% QoQ to INR 14,216 Mn (vs. CIE estimate: INR 13,246 Mn).
* EBITDA grew 12.2% YoY but declined 12.8% QoQ to INR 3,334 Mn; margin contracted 194 bps YoY / 435 bps QoQ to 23.5% (vs. CIE estimate: 26.2%).
* PAT increased 18.4% YoY but declined 2.6% QoQ to INR 2,667 Mn
Growth Moderates Post Strong FY26; India and Africa Remain Key Drivers
AJP reported strong YoY revenue growth, driven by robust performance in North America, followed by Africa Branded Generics. We expect low-teens growth in FY27E, led by:
* India: Continued structural outperformance vs IPM, supported by new launches, field force expansion and a strong chronic portfolio.
* US: FY26 saw exceptional growth driven by market share gains and faster ramp-up of key launches; FY27E growth likely to moderate due to a high base, with most launches back-ended in H2.
* Asia & Africa Branded: Africa is expected to sustain momentum through new launches, market share gains and improving chronic mix; Asia growth may moderate due to ongoing Middle East disruption.
Margin to Stay Steady at ~27% amid Growth Investments
While revenue growth remained strong, EBITDA margin contracted ~200 bps YoY, impacted by the West Asia crisis. We expect these headwinds to persist through H1FY27E, with margin likely to be at ~27%, in line with management guidance, factoring in increased field force and freight cost. Any meaningful upside will depend on scale-up of new launches and recovery in Asia.
For Detailed Report With Disclaimer Visit. https://choicebroking.in/disclaimer
SEBI Registration no.: INZ 000160131
