Buy Ajanta Pharma; target of Rs 2,565: Motilal Oswal

Motilal Oswal's research report on Ajanta Pharma

Ajanta Pharma (AJP) delivered in-line sales in 4QFY24. However, EBITDA/PAT came in lower than our expectations, due to higher opex and higher tax outgo. AJP continued to outperform the industry in domestic formulation (DF) and Asia market. The performance is expected to improve in the Africa branded generics market going forward.

Outlook

We cut our estimates by 6%/7% for FY25/FY26, factoring in a) moderation in US growth prospects, b) higher logistics costs due to ongoing geopolitical tension, and c) a higher tax rate. We value AJP at 27x 12M forward earnings to arrive at a TP of INR 2,565. We expect a 17% earnings CAGR over FY24-26, backed by a 12%/15% sales CAGR in DF/Asia segment and a 150bp margin expansion. With new launches, MR addition and increased market share in existing products, AJP remains in good stead to outperform in the branded generics market (70% of FY24 sales). AJP continues to build the ANDA pipeline for the US market and implement efforts toward consistent compliance. Maintain BUY.