Target: ₹2,378

CMP: ₹1704.65

Ajanta’s Q4-FY22 sales grew 15 per cent to ₹870 crore. Its India and Africa branded divisions and Asia reported stellar growth. More price erosion and keener competition, however, led to muted US business. On higher price erosion (about 18 per cent) and fewer-than-expected launches (on lower filings), its US sales declined 3 per cent to ₹170 crore. It plans to file 10-12 products in FY23. We anticipate a 14-per cent CAGR over FY22-24 supported by the launches.

Its gross margin slid 531 bps to 72.5 per cent y-o-y due to higher raw material prices and a one-time impact (1.5 per cent of sales due to flu-related products written back and 1.5 per cent more due to price erosion in the US). Adjusting for this, the gross margin contracted 280 bps y-o-y to 75 per cent .

Higher other expenses squeezed the EBITDA margin 1,053 bps to 23.7 per cent. PAT fell 5.1 per cent to ₹150 crore. With launches, continuing momentum in India, other branded markets and a pick-up in the US, Ajanta would deliver 12 per cent revenue/PAT growth each over FY22-24.

Risks: Currency fluctuations, ramping-up delays, pricing risk in India.