Dolat Capital Market has given Buy recommendation for Ajanta Pharma with a target price of Rs. 2208 in its research report issued on Feb 03, 2021

Dolat Capital Market’s research report on Ajanta Pharma

Ajanta Pharma reported stellar Q3 beating our estimates on the operating performance. Top-line grew 16% YoY, driven by strong recovery in India as well branded exports segment. US was in line at US$22mn (flat QoQ, YoY). Despite higher expenses in marketing and promotional post normalization, EBITDA margins was higher at 32.3% (up 370 bps YoY but lower by 600bps QoQ), vs our estimate of 30%. For 9MFY21, company has reported EBITDA margins of 34.7% vs its earlier guidance of 29-30% for FY21E. Higher EBITDA, better working capital management and end of the capex cycle contributed to Rs2.4bn FCF in 1HFY21 (Rs2bn in FY20). Ajanta has invested Rs16bn in facilities over the last 4-years (all through internal accruals), majority of which has completed, indicating better free cash generation going ahead. We reckon that peak capacity utilization at Guwahati and Pithampur plants over the next 2 years could potentially add Rs12bn to revenues. We estimate sales/PAT CAGR of 13%/10% over FY21–23E, along with a margin sustenance at 29-30%. Factoring the strong 9M performance, we increase our FY21/22 estimates by 16%/9% for FY21/22E respectively.


At the CMP, Ajanta is trading at 22x and 19x its FY22E and FY23E EPS, respectively. Post the recent correction, we upgrade our rating to BUY. Volatility in the emerging markets remains a key risk.