Accumulate Ajanta Pharma; target of Rs 1771: Dolat Capital Market
Dolat Capital Market recommended accumulate rating on Ajanta Pharma with a target price of Rs 1771 in its research report dated November 05, 2020.
November 07, 2020 / 06:51 PM IST
Dolat Capital Market's research report on Ajanta Pharma
Ajanta Pharma reported stellar Q2 beating our estimates on the operating performance. Top-line grew 8% YoY, in-line with our estimate, driven by US and branded Africa business. Other geographies including India were muted. However, lower opex aided margins at 38.3% (up 490 bps QoQ and 1,070 bps YoY), way higher than our estimates. While the same is expected to taper as activities resume in subsequent quarters, management re-iterated its guidance of EBITDA margins at 29-30% for FY21E. Higher EBITDA, better working capital management and end of the capex cycle contributed to Rs2.4bn FCF in 1HFY21 (Rs2bn in FY20). Ajanta announced buyback of Rs1.35bn (~Rs4.5bn cash on books). Ajanta has invested Rs16bn in facilities over the last 4-years, majority of which has completed, indicating better free cash generation going ahead. We reckon that peak capacity utilization at Guwahati and Pithampur plants over the next 2 years could potentially add Rs12bn to revenues. We estimate sales/PAT CAGR of 14%/15% over FY21–23E, along with a margin sustenance at 28-29%.
We maintain our estimates and introduce FY23 in this note. At the CMP, Ajanta is trading at 22x and 19x its FY22E and FY23E EPS, respectively. Maintain ACCUMULATE. Volatility in the emerging markets remains a key risk.
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