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Arihant Capital
Ajanta
Pharma (Hold)
CMP: ₹1,370
Target: ₹1,500
Key Q3FY18 highlights: a) Ajanta Pharma delivered a better-than-expected 3QFY18 financial performance, with sales growing 10 per cent y-o-y to ₹587 crore; b) EBITDA margin showed a marginal improvement y-o-y to 33.6 per cent. Lower other income and a higher tax outgo led to lower PAT growth of 3.4 per cent y-o-y (v/s EBITDA growth of 11 per cent y-o-y) to ₹147 crore.
We believe that Ajanta Pharma’s long-term fundamentals continue to remain healthy driven by strong traction in the US business (post US FDA clearance to its Dahej unit) and above industry growth in domestic business. Its Sales, EBITDA and PAT witnessed 24 per cent, 37 per cent and 44 per cent CAGR, respectively through FY12-17 owing to strong growth in domestic formulation business (22 per cent CAGR) and healthy growth in exports (21 per cent CAGR). We have ‘hold’ rating on the stock with a target price of ₹1,500, valuing the stock at 25x FY19E EPS of ₹60.
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