MOSL: AJANTA PHARMA (Buy)-Africa pressure offset by growth in Asia, US
Ajanta Pharma: Africa pressure offset by growth in Asia, US
(AJP IN, Mkt Cap USD1.3b, CMP INR1057, TP INR1482, 40% Upside, Buy)
- Better-than-expected performance: Sales were flat YoY at INR5.1b (our estimate: INR5b), supported by Asia (+30% YoY to INR1.3b; 26% of sales) and US (INR800m v/s INR260m in 2QFY18) sales. Growth, however, was restricted by a 38% YoY decline in Africa sales (26% of sales) and YoY flat sales in domestic formulations (DF) business (33% of sales). Gross margin improved 260bp YoY to 82.4%, led by a better product mix and favorable currency. However, EBITDA margin contracted 350bp YoY to 30.5% (our estimate: 27%) on account of higher employee cost (+200bp YoY as % of sales) and other expenses (+300bp YoY). Consequently, PAT declined 4.8% YoY to INR1.2b (our estimate: INR1b). For 1HFY19, sales/EBITDA/PAT grew 4%/3%/2% YoY to INR10.5b/INR3.2b/INR2.3b.
- Targeting to file 10-12 ANDAs in FY19: AJP filed two ANDAs in 1HFY19, taking cumulative filings to 41. It received five final approvals, taking cumulative ANDAs pending for approvals to 12. AJP maintained the guidance of 10-12 filings in FY19. R&D spend was INR500m (9% of sales).
- Other key highlights: AJP garnered institutional anti-malaria sales of ~INR940m in 1HFY19; it has maintained its guidance of INR1.3-1.4b for FY19. Although the EBITDA margin stood at 30.6% in 1HFY19, AJP maintained its guidance of 27-28% for FY19. Forex gain was at ~INR140m for the quarter.
Ajanta Pharma Limited. Ajanta Pharma Limited is a holding company. The Company is a specialty pharmaceutical company engaged in developing, producing and marketing a range of branded and generic formulations. Its business includes branded generics in emerging markets of Asia and Africa, generics in the developed markets of the United States and Institutional sales. The branded generics business is spread in India and over 30 emerging countries across Africa, Commonwealth of Independent States (CIS), the Middle East and South East Asia. The Company serves a range of therapeutic segments, such as anti-biotic, anti-malarial, anti-diabetic, cardiology, gynecology, orthopedics, pediatric, respiratory and general health products. Ajanta has six formulations manufacturing facilities located in India and 1 in Mauritius. In addition, the Company also has an API manufacturing facility located at Waluj, India. The Company's subsidiaries include Ajanta Pharma (Mauritius) Ltd., and Ajanta Pharma USA Inc.
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