Buy Ajanta Pharma; target of Rs 2205: Dolat Capital Market

Dolat Capital Market's research report on Ajanta Pharma

Ajanta Pharma reported an-inline 4Q and FY21. Top-line grew 11% YoY, driven by strong recovery in India (23% YoY). US was in line at US$23mn (8% QoQ, 21% YoY). This was partially offset by dismal performance in branded exports owing to supply disruption. Company exhibited strong cost control measures (also aided by lower R&D) leading to EBITDA margins at 34.3% (up 200 bps QoQ), vs our estimate of 30%. For FY21, company has reported EBITDA margins of 34.6% and profit growth of 40% YoY at Rs6.5bn. Higher EBITDA, better working capital management and end of the capex cycle contributed to Rs3bn FCF in FY21 (Rs2bn in FY20).

Outlook

At the CMP, Ajanta is trading at 20x its FY23E EPS. Volatility in the emerging markets remains a key risk.