31 July 2020
1QFY21 Results Update | Sector: Healthcare
Ajanta Pharma
Buy
Estimate change
TP change
Rating change
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CMP: INR1,512
TP: INR1,815 (+20%)
US/Asia businesses drive superior performance
Lower opex further supports profitability improvement
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
AJP IN
88
132 / 1.7
1578 / 840
-1/43/71
223
Ajanta Pharma (AJP) delivered superior 1QFY21 performance in the US/Asia.
This was supported by controlled costs, driving better operating leverage.
With capex in the final phase and strong product pipeline in key markets, we
believe AJP is well placed to garner healthy earnings over the next 2-3 years.
We have increased our EPS estimate for FY21/FY22E by 5.7%/3.4% to factor
in the benefit of lower opex and improving growth prospects in the branded
generic segment with the lockdown easing. We value AJP at 23x 12M
forward earnings to arrive at price target of INR1,815 (from INR1,700). We
remain positive on AJP’s ANDA pipeline in the US, consistency in compliance
and ability to outperform in the branded generics segment. Maintain
Buy.
1QFY21 revenues were up 9.2% YoY to INR6.7b (v/s est. INR6.4b), led by
growth in exports (19% YoY to INR4.8b), US generic sales (46% YoY to
INR1.5b; 22% of sales) and Asia sales (27.8% YoY to INR1.6b; 24% of sales).
Africa sales dipped 2% YoY to INR1.7b (25% of sales), led by 23% YoY decline
in Institutional sales to INR620m. Domestic formulation (DF) sales declined
10% YoY to INR1.78b (~26% of sales).
Gross Margin (GM) expanded 40bp YoY to 77.1%.
EBITDA margin expanded at higher rate of 590bp YoY with superior product
mix and controlled opex. As % of sales, other expense was down 650bp YoY,
which was marginally off-set by 100bp rise in employee cost.
EBITDA grew 32.6% YoY to INR2.2b (v/s est. INR1.5b).
R&D expenses stood at INR310m (5% of sales and down 190bp YoY).
PAT grew at a lower rate of 29% YoY to INR1.5b (v/s est. INR1b) due to
higher depreciation and tax rate for the quarter.
AJP has guided for flat FY21 revenue compared to FY20.
The company has received 5 ANDA approvals by the USFDA in 1QFY21. It has
guided to file ~10-12 ANDAs and intends to launch 6-7 ANDAs in FY21. It had
19 ANDAs pending approval as at end-1QFY21.
AJP has 3,000 MRs as on date in the domestic formulation (DF) segment.
The Ophthalmic block in Guwahati would be commercialized in 2QFY21.
It has guided for effective tax rate of 27-28% for FY21.
Over FY20-22E, we expect 18% earnings CAGR led by 19% sales CAGR in the
US and 7% sales CAGR in branded generics with 200bp margin expansion.
We have raised our EPS estimate by 5.7%/3.4% for FY21/FY22E to factor in
lower operating costs and better product mix. Our TP has been revised to
INR1,815 (from INR1,700 earlier), valuing AJP at 23x 12M forward earnings.
We remain positive on AJP on its new launches, rising share in key markets
of the US/India/Asia/Africa and improved operating leverage. Re-iterate
Buy.
Revenue growth and steady opex leads strong margin expansion
Financials & Valuations (INR b)
Y/E MARCH
2020 2021E 2022E
25.9 27.8 31.8
Sales
7.0
8.6
9.2
EBITDA
4.5
5.7
6.3
Adj. PAT
EBIT Margin (%)
23.3 26.6 25.1
Cons. Adj. EPS (INR) 51.1 64.0 71.7
15.1 25.2 12.0
EPS Gr. (%)
293.8 345.4 399.3
BV/Sh. (INR)
Ratios
Net D:E
-0.1
-0.1
-0.2
18.7 20.0 19.3
RoE (%)
19.0 20.3 19.4
RoCE (%)
Payout (%)
16.3 19.5 24.7
Valuations
29.5 23.6 21.0
P/E (x)
EV/EBITDA (x)
18.8 15.2 13.9
0.6
0.8
1.2
Div. Yield (%)
FCF Yield (%)
0.5
1.4
2.3
5.1
4.7
4.0
EV/Sales (x)
Highlights from management commentary
Shareholding pattern (%)
As On
Promoter
DII
FII
Others
Jun-20 Mar-20 Jun-19
70.5
70.5
70.5
11.8
11.4
10.4
8.2
8.9
9.5
9.5
9.2
9.6
Valuation and view
FII Includes depository receipts
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Tushar Manudhane - Research Analyst
(Tushar.Manudhane@MotilalOswal.com)
Research Analyst: Hitakshi Chandrani
(Hitakshi.Chandrani@motilaloswal.com);
Bharat Hegde
(Bharat.Hegde@motilaloswal.com)