Reduce Ajanta Pharma Ltd For Target Rs.3,370 by Choice Institutional Equities
Limited Pipeline and H2 Moderation Temper Growth Outlook
While H1 revenue growth was strong, we project a more moderate H2 in FY27E. Growth in emerging markets and India should remain resilient, but the US is projected to moderate amid increased competition. Africa institutional sales are also projected to decline sharply due to ongoing uncertainty. Higher operating expenses with respect to continued addition of MRs and higher R&D expenses are likely to slow EBITDA margin expansion. We maintain our estimates but reduce our valuation multiple to 25x, reflecting a limited complex generics launch pipeline. Accordingly, we revise our TP to INR 3,370 and downgrade our rating to ‘REDUCE’. The revised valuation implies a PEG of 1.3x.
Strong Growth across Metrics
* Revenue grew 32.5% YoY / 10.3% QoQ to INR 17,942 Mn (vs. CIE estimate of INR 15,054 Mn).
* EBITDA grew 67.0% YoY / 29.3% QoQ to INR 5,476 Mn; margin expanded 630 bps YoY and 447 bps QoQ to 30.5% (vs. CIE estimate: 25.5%).
* PAT increased 49.2% YoY / 16.1% QoQ to INR 3,881 Mn.
Broad-based Growth Continues, but Margin Expansion to see a Slowdown
While H1 growth remained strong, the management expects a moderation in H2, primarily due to the US business. Overall revenue growth is guided at mid-tohigh teens, supported by the following regional drivers:
* India: We expect continued outperformance against IPM, supported by new launches and sustained growth in chronic therapies. Newer segments such as gynaecology and nephrology are also gaining traction.
* US: Growth is projected to moderate amid rising competition in recently launched products and continued investments in product development. We expect high-single-digit growth in FY27E.
* Asia and Africa branded markets: Africa continues to perform well, supported by favourable currency movements and expansion into newer markets. We project sustained double-digit growth. Asia is also projected to grow in the mid-teens, driven by launches and market share gains.
Despite these growth drivers, the management's H2 outlook remains moderate. Increased competition, continued R&D investment of ~5% of revenue and further MR expansion across emerging markets and India are forecast to limit margin expansion. We project EBITDA margin at ~27%.
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