Buy Ajanta Pharma; target of Rs 1580: ICICI Securities

ICICI Securities research report on Ajanta Pharma

Ajanta Pharma’s Q1FY24 result surprised positively on margin front. Softening of raw material and freight costs have started showing improvement in gross (+482bps YoY) and EBITDA (+325bps) margins. Traction in India branded business continues to be robust, with 14% growth vs market growth rate of 9%, while momentum in export branded business is expected to gain in quarters ahead. Management has maintained its double-digit revenue growth and margin guidance for FY24. Normalisation of raw material and overhead costs, coupled with operating leverage, may lead to 440bps jump in EBITDA margin over FY23-25E.

Outlook

We raise our FY24E/25E earnings estimates by 7%/6%, respectively; maintain our BUY call on Ajanta with target price raised to INR 1,870 (INR 1,580 earlier), valuing the company at 23x FY25E earnings.