Ajanta Pharma Positioned For Steady Growth; Jefferies Initiates Coverage With 'Buy'

Jefferies has initiated coverage on Ajanta Pharma Ltd. with a 'Buy' rating and a target price of Rs 2,850. The broking highlights Ajanta’s strong positioning in high-entry-barrier branded generic markets like India, Asia, and Africa, which together contribute around 70% of its revenue.

The company’s focused approach, tailored strategies, and strong execution have led to consistent double-digit growth and robust free cash flow, the brokerage said in its note.

Ajanta's India business accounts for 31% of total revenue and has delivered a 13.7% revenue CAGR over financial years 2020-25E. Its strategy centres on lifestyle-related therapies such as cardiology, ophthalmology, dermatology, and pain management, with a strong track record of launching differentiated products ahead of peers.

The company’s recent foray into nephrology and gynaecology is expected to further boost growth. Jefferies forecasts a 13% revenue CAGR in India over financial years 2025-27E, about 3-4% ahead of the industry average.

In Asia and Africa, which contribute 45% of revenue, Ajanta’s success is attributed to an on-ground presence and a tailored product portfolio. With around 1,800 medical representatives across 30 countries, Ajanta has consistently outperformed the market. Jefferies estimates a 15-17% revenue CAGR in these regions over financial years 2025-27E, supported by a strong product pipeline.

Overall, Jefferies expects Ajanta to report a 13% revenue CAGR, 17% Ebitda CAGR, and 19% profit CAGR over financial years 2025-27E. Margins are projected to expand by 200 basis points to 29.5%, driven by the rising contribution from branded generics. The impact of potential global tariffs is expected to be limited, as the US market—where margins are lower—accounts for just 22% of Ajanta’s revenue.

The target price is based on 28x March 2027 estimated EPS, in line with peers that also have high branded generic exposure. Ajanta stands out for its higher organic growth, superior operating margins, and strong return ratios, the brokerage said in its note.

Key risks to the investment thesis include potential price controls in branded generic markets and regulatory issues, particularly with the US FDA.