Ajanta Pharma newly rated 'Buy' at PL Capital; 26% upside seen; check TP

The brokerage analysis suggested that branded generics contributed to 74 per cent of Ajanta Pharma's revenue in FY25 and its branded generics business operates with a healthy OPM of 30 per cent

PL Capital has initiated coverage on Ajanta Pharma stock with a ‘Buy’ rating and a target price of ₹3,200, which implies 25.8 per cent upside from Tuesday’s close at ₹2,542.7 per share. The brokerage believes increased focus on branded formulations, penetration into newer therapies, and scale-up in the United States (US) generics will drive revenue.

 

On Tuesday, Ajanta Pharma's share price closed 0.13 per cent higher at ₹2,542.7 per share. In comparison, the BSE Sensex was down 0.07 per cent at 82,102.1.  READ STOCK MARKET UPDATES TODAY LIVE

Why is PL Capital upbeat on Ajanta Pharma?

Branded generics power growth with 30% margin

The brokerage analysis suggested that branded generics contributed to 74 per cent of Ajanta Pharma’s revenue in FY25, and its branded generics business operates with a healthy Operating Profit Margin (OPM) of 30 per cent. Analysts expect this momentum to sustain on the back of new launches, geographic expansion, new therapeutic additions, and volume growth. They have factored 13 per cent of CAGR revenue over FY25-28E for the branded generics business.

 

Strong domestic footing:

New therapeutic additions, market share gain, and new launches are anticipated to boost the domestic business, which is forecasted to register 13 per cent revenue CAGR over FY25-28E.

 

In FY25, domestic formulations accounted for 32 per cent of the company’s total turnover. Over the last 3 years, Ajanta Pharma has outperformed the Indian Pharmaceutical Market (IPM) by 200-300 basis points (bps). Besides, the company is focused on four high-growth specialty therapies: cardiac, ophthal, derma and pain management, with chronic therapies accounting for 65 per cent of the portfolio, providing sticky revenue streams.

 

During FY25, the company entered two new therapies – nephrology and gynecology – and acquired three brands in pain management. 

First-mover advantage in Asia/Africa:

Ajanta Pharma has a presence in 30 countries across Asia and Africa with 2,040 medical representatives (MRs) and has been a pioneer in introducing field force in some of these markets, according to the brokerage. Further, the company has been strengthening its branded generics business through increased investments in both products and people, thus driving growth along with further therapeutic diversification.

 

PL Capital has factored in 13 per cent/11 per cent revenue CAGR over FY25-28E from the branded generics business across Asia/Africa. Over FY’22-25, Ajanta Pharma’s branded generics business in Asia and Africa contributed 42 per cent to total revenue in FY25 and clocked 11.5 per cent CAGR. 

Strong margin profile and cash generation:

Ajanta Pharma has consistently maintained an OPM of 26–27 per cent over the past few years, the brokerage noted. Analysts expect margins to improve moderately in FY26E as the full impact of operating expenditure from new therapeutic additions is reflected. Over FY25–28E, they project a 320 bps margin expansion, driven by the company’s focus on the branded generics business.   

Additionally, the company generates a strong free cash flow (FCF) of ₹700–1,000 crore annually, most of which is distributed to shareholders via dividends and buybacks, though the company remains open to exploring merger and acquisition (M&A) opportunities in branded generics markets. With rising utilisation and asset turnover, we expect FCF to rise to ₹2,500 crore, alongside return on capital employed (RoCE) expansion of 800 bps to 38 per cent over FY25–28E.