Motilal Oswal's research report on Ajanta Pharma
AJP delivered a miss on operational performance in 2QFY23, led by higher employee and freight costs. Adverse currency movement in Africa Branded Generics and price erosion in US Generics affected profitability in 2QFY23. Branded Generics in India (Domestic Formulation) and Asia witnessed robust industry outperformance in 2QFY23. We have cut our FY23/FY24 estimate by 6%/5% to factor in: a) a lack of launches in US Generics, b) moderation in its growth prospects in the Africa business due to currency headwinds, and c) elevated raw material and logistics cost. We continue to value AJP at 22x 12M forward earnings to arrive at our TP of INR1,560. While there are near-term headwinds on the OPEX front, AJP remains wellplaced to deliver better-than-industry sales growth in the Branded Generics segment of Domestic Formulation, Asia, and Africa. After the successful compliance at Dahej, ANDA approvals are also expected to gather pace. We maintain our Buy rating.
Outlook
We continue to value AJP at 22x 12M forward earnings to arrive at our TP of INR1,560. We remain positive on AJP on the back of a steady outperformance in DF, Africa, Asia, and certain niche launches in the US market. We maintain our Buy rating.
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