Ajanta Pharmaceuticals - Q2FY21 Result Update - ICICI Securities

Q2 results were a beat on all fronts. Net revenues grew 7.8% YoY to Rs. 702 crore, mainly due to 11.6% growth in export formulations to Rs. 500 crore. Domestic growth stayed flattish at Rs. 202 crore amid slow recovery in dermatology and ophthalmology segments. EBITDA margins were at 38.3% vs. 27.6% in Q2FY20. Sharp improvement in margins was led by 420 bps YoY improvement in gross margins to 78.3% and lower travel & promotional spends amid Covid. Hence, EBITDA grew 54.4% YoY to Rs. 274.3 crore. PAT grew 45% YoY to Rs. 170.2 crore. Delta vis-à-vis EBITDA was mainly due to higher tax rate (31.7% vs. 28.0% in Q2FY20) and lower other income.

Valuation & Outlook

Despite a dent in domestic sales in Q2FY21 due to Covid-19, overall revenue growth remained strong on the back of strong growth across export geographies. Additionally, Ajanta posted a strong margin performance in the quarter, led by lower travel & promotional spends along with change in product mix. While the management expects subdued domestic growth in FY21 due to Covid-19, it expects high single digit growth for branded business in Asia, Africa (India, Asia, Africa- ~70% of sales) along with ~20% growth for US. On margins front, change in product mix (increased US revenues) notwithstanding, the management expects ~200-250 bps improvement in FY21, going ahead, with improving operating leverage and moderating capex. Overall, calculated focus, healthy margins, return profile and lighter balance sheet are some key differentiators for Ajanta. The company remains a play on global branded generics space. We arrive at our target price of Rs. 1960 based on 22x FY23E EPS of ~Rs. 89.0.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_AjantaPharma_Q2FY21.pdf

Shares of AJANTA PHARMA LTD. was last trading in BSE at Rs.1608 as compared to the previous close of Rs. 1609.35. The total number of shares traded during the day was 26785 in over 2287 trades.

The stock hit an intraday high of Rs. 1665.45 and intraday low of 1590. The net turnover during the day was Rs. 43663738.

Source : Equity Bulls

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