Ajanta Pharma zooms 8% to fresh 52-week high on strong Q3 results

Despite normalisation in fixed costs (at pre-Covid levels), the company's Ebitda margin came 372 bps higher YoY at 32 per cent, driven by improvement in gross margin

Shares of Ajanta Pharma rallied 8 per cent to a fresh 52-week high of Rs 1,879.45 on the BSE on Wednesday after reporting a 64 per cent rise in its consolidated net profit to Rs 177 crore for the quarter ended December 2021, mainly on account of robust sales. 

Consolidated revenue from operations of the company stood at Rs 749 crore for the quarter under consideration. It was Rs 651 crore for the same period a year ago, the company said in a BSE filing.

Besides, despite normalisation in fixed costs (at pre-Covid levels), Ebitda margin came 372 basis points (bps) higher on year-on-year at 32 per cent, driven by improvement in gross margin (up 344 bps YoY).

At 10:10 AM, the stock was trading 6 per cent up at Rs 1850.75 as compared to 0.56 per cent gain in the benchmark S&P BSE Sensex. A total of 5.22 lakh shares have changed hands on the NSE and BSE combined, so far.

HDFC Institutional Equities maintained 'BUY' rating on the stock, with a revised target price of Rs 2,250 per share.

"We believe Ajanta is poised to re-rate as: its high exposure to branded business (around 70 per cent of revenue) offers good growth visibility with superior margins; rising scale in the US ($80mn, doubled in 2 years) will lead to meaningful improvement in profitability; with conclusion of major capex cycle (Rs 1,600 crore+ in the past six years, internally funded) and plant opex reflecting in P&L, operating leverage benefits are expected to drive strong earnings growth of 15 per cent CAGR, core-ROCE expansion of around 465bps to 29 per cent and FCF generation of around Rs 1,400 crore over FY21-FY23.," it said.

Analysts at Anand Rathi were also positive on the company. "India sales were up 12.8 per cent to Rs 220 crore while emerging markets (Africa, rest of Asia) grew 25.3 per cent to Rs 360 crore. A better product mix in branded generics (68 per cent of sales) pushed its gross margin up 344 bps to 77.5 per cent. The Ebitda margin expanded 372bps to 32.3 per cent despite a rise in marketing and promotional expenses and more expenditure on R&D," the brokerage said.

"Launches in India (20-22 a year), 10-12 filings in the US and continued momentum in the Rest of Asia and Africa may drive 14.4%/24.4%/25.7% growth in revenue/EBITDA/PAT over FY20-23. We upgrade FY21e/22e/23e earnings 8%/8.3%/8.7%. We continue to be positive on the company and retain our Buy rating, with a higher target of Rs2,152 from earlier Rs1,980," it said.