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Yes Securities Report
Ajanta Pharma Ltd.'s management alluded to higher other expenses and marginal rise in research and development spending in H2 though margin performance year-to-date results in 1% raise in margin guidance.
Growth outlook remains unchanged for domestic business even as cardiac growth recovers post National List of Essential Medicine impact on MetXL.
Branded exports might be tad weaker as Asia business remained under pressure; albeit company expects to H2 recovery with low teens growth.
U.S. surprised on the upside and with similar sales expectations, this warrants an increase in our FY24 U.S. growth to 8-9% versus flat earlier (on back of strong flu season in Q3 last year which may not be repeated).
Broadly, we reckon there is not much change to growth expectation while we push up margin by ~100 basis points in FY24 resulting in +7% change to FY24 earnings per share with no major change to FY25 numbers.
We raise target price-to-earning to 28 times (from 26 times earlier) which is a slight premium to historic mean of 26 times as margin outlook appears particularly steady and also to narrow some of the valuation gap with other domestic plays like JB Chemicals and Pharmaceuticals Ltd. (at 30 times FY25 PE).
Believe stock returns might be linked to Ebitda/profit after tax growth with little likelihood of PE rerating.
Our revised target price is Rs 2,020 (earlier Rs 1,850) and retain Ajanta Pharma as a preferred pick with potential of steady returns.
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