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Reliance Securities
Ajanta Pharma (Buy)
CMP: ₹1,020
Target: ₹1,360
Ajanta Pharma is a holding company. The company is a specialty pharmaceutical company engaged in developing, producing and marketing a range of branded and generic formulations.
We believe that Ajanta Pharma’s long-term fundamentals continue to remain healthy driven by strong traction in India business and healthy growth in Asia and the US led by new launches.
We envisage Ajanta Pharma’s domestic formulations business to clock 14.9 per cent CAGR over FY18-20E led by improved sales force productivity and new launches (15-20/ a year).
We expect strong recovery in sales and earnings in FY20E with sales and PAT growth of 14.3 per cent y-o-y and 40 per cent y-o-y, respectively.
Return ratios are also expected to remain healthy (RoCE & RoE seen at 22 per cent & 18 per cent) in FY20E.
We maintain our ‘buy’ recommendation on the stock with a target price of ₹1,360, valuing at 24x FY20E EPS of ₹56.7.
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