Shares of Ajanta Pharma surged almost 9 per cent to hit their fresh 52-week high of ₹1,682.05 in morning trade on BSE on Friday (July 28), a day after the company released its June quarter scorecard. The stock opened at ₹1625.10 against the previous close of ₹1546.20 and soon jumped 8.8 per cent to the level of ₹1,682.05.
The stock has gained about 31 per cent in the last one year against a 22 per cent gain in the BSE Healthcare index and a 16 per cent gain in the equity benchmark Sensex in the same period.
Ajanta Pharma Q1 Results: Ajanta Pharma reported revenue from operations at ₹1,021 crore and EBITDA at ₹271 crore for Q1FY24. Profit after tax (PAT) came at ₹208 crore against ₹175 crore.
Brokerages upbeat after Q1 show
Brokerage firms expressed their positive views on the stock after the June quarter number and see a significant upside in the stock price from hereon.
Brokerage firm Motilal Oswal Financial Services maintained a ‘buy’ call on the stock with a target price of ₹1,800, citing earnings outlook and attractive valuation.
“Ajanta Pharma posted in-line sales with better-than-expected profitability in Q1FY24. The company benefited from the lower raw material and freight cost in Q1FY24 and expects the same to sustain over the near-to-medium term,” Motilal pointed out.
“We raise our earnings estimates for FY24 and FY25 by 7.5 per cent each factoring in (a) the lower intensity of price erosion in the US generics segment, (b) superior execution in branded generics segment and (c) lower operational cost. We value Ajanta Pharma at 22 times 12-month forward earnings to arrive at our target price of ₹1,800,” said the brokerage firm.
The brokerage firm expects a 23 per cent earnings CAGR over FY23-25, led by a 15 per cent sales CAGR in Domestic Formulation (DF)/Asia and a 13 per cent sales CAGR in the US segment, supported by 370bp margin expansion.
Brokerage firm ICICI Direct also has a buy call on the stock with a target price of ₹1,950.
The brokerage firm pointed out the increased capital allocation towards the branded generics segment which is 72 per cent of the revenues.
For this, the company has gone for more numbers of product launches (including higher First to Market molecules) in various geographies, with differentiated delivery systems or combinations and doubling of the international workforce (up 50%), ICICI Direct observed.
The brokerage firm believes Ajanta Pharma’s margins may improve amid operational leverage, expected softening of raw material cost and incremental focus on branded business.
“Calculated focus, healthy margins, return profile and lighter balance sheet are some key differentiators for Ajanta,” ICICI said.
“Revenue, EBITDA and PAT are expected to grow at a CAGR of 11 per cent, 23 per cent and 25 per cent, respectively, for FY23-25. Return ratios are expected to reach 25 per cent levels and ROIC (return on invested capital) may be even higher,” the brokerage firm said.
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Updated: 28 Jul 2023, 10:07 AM IST