Motilal Oswal is bullish on Ajanta Pharma has recommended buy rating on the stock with a target price of Rs 1390 in its research report dated January 30, 2019.
Motilal Oswal's research report on Ajanta Pharma
Ajanta Pharma (AJP) reported its 3QFY19 revenue down 17% YoY to INR4.8b (in-line), largely due to lower exports, down 27% YoY to INR3b (64% of sales). The decline was offset to some extent by 9% YoY growth in domestic formulation (36% of sales) to INR1.7b. Gross margin (GM) contracted 144bp YoY to 79.8%, mainly due to increased raw material prices and change in product mix. EBITDA margin contracted at higher rate of 990bp YoY on higher employee cost/other expenses, up 700bp/145bp YoY (as % of sales). The increased operational cost is associated with newer facilities at Dahej and Guwahati. Absolute EBITDA declined 42% YoY to INR1.1b (our estimate: INR1.2b). Reduced margins, higher depreciation and tax rate led to PAT decline of 51% YoY to INR727m (our estimate: INR837m). For 9MFY19, sales/EBITDA/PAT declined 4%/14%/19% YoY to INR15.4b/INR4.4b/INR3b.
Outlook
We cut our FY19/20/21 EPS estimates by 4%/8%/8% to INR44/INR52/INR60 to factor in a muted 3Q and increased operational costs associated with newer facilities. We roll to 24x (unchanged) 12M forward earnings to arrive at a TP of INR1,390 (prior: INR1,482). We remain positive on AJP, given its healthy growth in Branded Generics and in the US. Buy.
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