Ajanta Pharma - Robust performance continues.... - IndiaNivesh

Ajanta Pharma reported robust revenue growth of ~36% y-o-y (7% sequentially) to Rs 1.84 billion in Q2 FY13 above our estimates (INSPL est= Rs 1.64 billion) on account of robust performance across the markets. Domestic business grew 27% y-o-y & Exports grew 41% y-o-y in Q2 FY13 on the back of partial benefit from favorable currency movement.

Operating performance was inline with estimates:

Company's EBITDA increased 74% y-o y (16.3% sequentially) to Rs 405 million inline with our estimates (INSPL est= Rs 401 million) primarily due to improvement in operating leverage. EBITDA margins increased ~490 bps y-o-y (180 bps q-o-q) mainly due to decline in other expenditure partially offset by increase in material cost.

Adj net profit grew 85% y-o-y in Q2 FY13:

During the quarter company reported other operating income of Rs 31 million compared to Rs 2 million in Q2FY12. Despite substantial increase in effective tax rate (30% in Q2FY13 compared to 5% in Q2FY12) due to outgo of EOU benefits, Ajanta's net profit grew 85% y-o-y (12% q-o-q) to Rs 219 million(INSPL est=207 million).

Company reported adj EPS of Rs 9.27 in Q2FY13 compared to Rs 5.02 in Q2FY12.

Valuations

Since June 2011, we had recommended buy rating on the stock at prevailing adj market price of Rs 145 level. Our recommendation was based on the continuity in robust performance and expansion in P/E multiple to Industry level. In line with our expectations, company's performance has been consistently robust in domestic as well as in exports business. Valuations have expended from forward PE 5x in the starting of FY12 to forward P/E of 9x at current level.

At CMP of Rs 415, the stock trades at PE 8.7x of FY13E & 7x of FY14E earnings estimates. On the back of continuously robust performance and expansion in margins partially benefiting from INR depreciation, we expect valuation to expand further. By rolling P/E multiple to FY14E earnings estimates, we revise our target price upwards to Rs 540 & maintain BUY on the stock. (Valuing at 9x of FY14E earnings estimates) (Earlier target price was Rs 458.)

Source : Equity Bulls

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