Hold Ajanta Pharmaceuticals; target of Rs 1060: ICICI Direct

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ICICI Direct's research report on Ajanta Pharmaceuticals

Revenues declined 2.9% YoY to Rs 515.2 crore (I-direct estimate: Rs 463.4 crore). The 7.4% YoY growth in domestic market to Rs 159 crore (I-direct estimate: Rs 154 crore) and 81% YoY growth in US business to Rs 76 crore (I-direct estimate: Rs 74 crore) was largely offset by 29.7% YoY decline in African business to Rs 121 crore (I-direct estimate: Rs 91.3 crore). EBITDA margins declined 164 bps YoY to 24.7% (I-direct estimate: 22.0%) due to lower gross margins. EBITDA declined 8.9% YoY to Rs 127.1 crore (I-direct estimate: Rs 101.9 crore). Net profit declined 5.9% YoY to Rs 88.9 crore (I-direct estimate: Rs 68.2 crore) mainly in sync with the operational performance.

Outlook

Overall, we expect some slowdown in sales but improvement in profitability on the back of better operating leverage and tax benefits. We arrive at our target price of Rs 1060 based on 18x FY21E EPS of ~Rs 58.9.

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