Ajanta Pharma Q1 Results Review - Branded Generics Drive Earnings: Motilal Oswal

Motilal Oswal Report

Ajanta Pharma Ltd. delivered better-than-expected Q1 FY25 performance, led by a superior show in the branded Africa segment, lower raw material costs, and controlled other expenses. The decline in institutional antimalaria business and moderate growth in the U.S. generics affected the overall performance to some extent.

We raise our earnings by 8%/5% for FY25/FY26E factoring in:

1. a robust execution in the branded generics segments of Asia, Africa, and India;

2. a subdued outlook in the anti-malaria business; and

3. improved operating leverage.

We value Ajanta Pharma at 30 times 12 months forward earnings to arrive at our target price of Rs 2,935.

After the margin dip/earnings decline in FY23, Ajanta Pharma has consistently improved its profitability in FY24/Q1 FY25. The strong brand franchise in established markets of India, Asia, and Africa enables the company to outperform the industry. It is also in the process of building a healthy abbreviated new drug application pipeline for the U.S. generics market. Accordingly, we expect a 19% earnings CAGR over FY24-26. Reiterate Buy.

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