The brokerage expects 17 percent earnings CAGR over FY20-22 for Ajanta Pharma.
Shares of Ajanta Pharma gained 3 percent on May 21 as Motilal Oswal has retained its bullish view on the stock after strong earnings by the company in Q4FY20.
The stock closed at Rs 1,490.80, up Rs 48.60, or 3.37 percent amid high volumes on the BSE.
Ajanta Pharma ended FY20 on a healthy note with 15 percent earnings growth (against 12 percent compounded earnings decline over FY17-19), led by sales revival in Asia, Africa and new introductions in the US market. Revenue during the year grew by 26 percent and operating profit 22 percent over the previous year.
Motilal Oswal remained positive on Ajanta Pharma due to strong ANDA pipeline for the US market, new launches in the branded generics segment of Asia/Africa/India and better operating leverage.
The brokerage expects 17 percent earnings CAGR over FY20-22.
"The COVID led disruption could be a dampener for earnings growth in FY21, and accordingly, we have cut our EPS estimate for FY21 by 6 percent; our EPS estimate for FY22E remains unchanged. Rolling our price target to 22x 12M forward earnings, we arrive at a price target of Rs 1,700 (from Rs 1,635 earlier), said Motilal Oswal while reiterating buy on the stock.
Ajanta Pharma has reported a 45 percent year-on-year growth in March quarter profit at Rs 129.2 crore on revenue of Rs 682 crore that increased sharply by 32.4 percent YoY driven by exports. During the quarter, Ajanta Pharma had forex gain of Rs 40 crore in other income.
Within exports, US generic sales were up 88 percent and emerging markets sales grew 38 percent YoY. Domestic formulation sales increased by 11 percent.
Ajanta Pharma incurred capex of Rs 250 crore for FY20 and has guided for capex of Rs 200 crore for FY21 (Rs 75 crore for Guwahati Ophthalmology block and Rs 130 crore for maintenance).
The company's major capex program would conclude in FY21 and only maintenance capex would be required FY22 onwards, indicating better free cash flow situation for Ajanta Pharma, said Motilal Oswal.
Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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