Target: ₹2,500
CMP: ₹1,980.25
Compared to a moderate 5% YoY earnings growth expected in FY22, we expect Ajanta Pharma AJP to deliver 16 per cent earnings CAGR over FY22-24, led by superior performance in the Branded Generics segment across Domestic Formulation, Asia, and Africa.
Demand revival in core therapies, inflation-linked price hike benefit for the National List of Essential Medicines (NLEM) portfolio, and enhanced marketing efforts in the Cardiology segment are expected to drive superior performance in the DF segment going forward.
The Branded Generics segment in Asia and Africa remains on a robust footing on the back of launches and market share gains in existing products.
We have cut our FY23/FY24 earnings estimate by 4 per cent/6 per cent to factor in a muted outlook for the institutional Anti-Malarial business and temporary slowdown in ANDA filings in the US market.
We continue to value Ajanta Pharma at 25x 12M forward earnings to arrive at our Target Price of ₹2,500. We remain positive on the company on the back of: a) its strong brand franchise in DF/Asia/Africa; robust prospects for the US Generics segment; and ) superior profitability and return ratios
Lower than expected price hikes in the DF segment, prolonged delays in ANDA approvals, , and lesser than expected traction in Asia/Africa are the key risks to our call.