Hold Ajanta Pharmaceuticals; target of Rs 1190: ICICI Direct

ICICI Direct recommended hold rating on Ajanta Pharmaceuticals with a target price of Rs 1190 in its research report dated May 03, 2018.

May 15, 2018 / 05:48 PM IST
 
 
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ICICI Direct's research report on Ajanta Pharmaceuticals


Revenues grew 9% YoY to Rs 530 crore (I-direct estimate: Rs 488 crore) mainly due to 110% YoY growth in African branded formulation to Rs 109 crore (I-direct estimate: Rs 83 crore). Domestic sales grew 6% YoY to Rs 148 crore, in line with I-direct estimate of Rs 151 crore EBITDA margins contracted 743 bps YoY to 26.3% (I-direct estimate: 33.0%), lowest in the past three years, mainly due to higher costs related to commissioning of new plants. EBITDA declined 13% YoY to Rs 140 crore (I-direct estimate: Rs 161 crore) Net profit declined 17% YoY to Rs 95 crore (I-direct estimate: Rs 116 crore) mainly due to a below expected operational performance.


Outlook


Q4 margins were impacted mainly due to commissioning of new plants, which is likely to impact the company’s FY19 margins. Apart from this, the sharp reduction in the African tender business opportunity is likely to impact near term growth significantly. We expect the contribution from this business to go down from ~17% of revenues to ~5-6%, going ahead. On the positive side, branded business in domestic, Africa and Asia are improving and are expected to grow in double digits. US growth is expected to remain strong despite an adverse scenario. However, front loading of cost and shrinking of the African tender opportunity is likely to impact near term sentiments. We reduce our FY19E and FY20E earnings estimates by 27% and 21%, respectively. Accordingly, we reduce our target price to Rs 1190 based on 20x FY20E EPS of Rs 59.6.


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first published: May 15, 2018 05:48 pm

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