Buy Ajanta Pharmaceuticals; target of Rs 1960: ICICI Direct
ICICI Direct is bullish on Ajanta Pharmaceuticals has recommended buy rating on the stock with a target price of Rs 1960 in its research report dated November 04, 2020.
November 07, 2020 / 12:54 PM IST
ICICI Direct's research report on Ajanta Pharmaceuticals
Q2 results were a beat on all fronts. Net revenues grew 7.8% YoY to Rs 702 crore, mainly due to 11.6% growth in export formulations to Rs 500 crore. Domestic growth stayed flattish at Rs 202 crore amid slow recovery in dermatology and ophthalmology segments. EBITDA margins were at 38.3% vs. 27.6% in Q2FY20. Sharp improvement in margins was led by 420 bps YoY improvement in gross margins to 78.3% and lower travel & promotional spends amid Covid. Hence, EBITDA grew 54.4% YoY to Rs 274.3 crore. PAT grew 45% YoY to Rs 170.2 crore. Delta vis-à-vis EBITDA was mainly due to higher tax rate (31.7% vs. 28.0% in Q2FY20) and lower other income.
The company remains a play on global branded generics space. We arrive at our target price of Rs 1960 based on 22x FY23E EPS of ~Rs 89.0.
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