MOSL: AJANTA PHARMA (Buy)-Africa/institutional anti-malaria drag performance…but branded/US generics to bring earnings back on track
Ajanta Pharma: Africa/institutional anti-malaria drag performance…but branded/US generics to bring earnings back on track
(AJP IN, Mkt Cap USD1.2b, CMP INR989, TP INR1225, 24% Upside, Buy)
- Revenue hurt by weakness in Africa biz: Revenue declined 3% YoY to INR5.1b (in-line) in 4QFY19, largely on account of the weakness in (a) institutional anti-malaria (-26% YoY; 9% of sales) and (b) Africa branded generic (-31% YoY; 15% of sales) businesses. However, the impact was partly mitigated by the ramp-up in US sales (+79% YoY; 15% of sales) and steady growth in the India business (+8% YoY; 30% of sales)/Asia (+9% YoY; 28% of sales).
- Margins contract on account of higher RM cost: Gross margin shrank 280bp YoY to 79.5%. EBITDA margin, too, contracted 164bp YoY to 24.7% (our estimate: 23.7%) due to higher employee cost (20.8% as percentage of sales v/s 19.8% in the year-ago period) and RM cost. Other expenses, however, declined to 34% of sales (36.2% in 4QFY18), providing some comfort to the margins. Adj. PAT declined 6% YoY to INR889m (our estimate: INR806m). For FY19, sales/EBITDA/PAT declined 4%/14%/17% YoY to INR20.5b/INR5.6b/INR3.8b.
- Other key highlights: In FY19, AJP filed 13 and received 12 ANDA approvals (including two tentative approvals). The company has commercialized 25 ANDAs till date. Further, 21 ANDAs are pending for approval. AJP has guided to file 10-12 ANDAs in FY20. R&D spend stood at INR400m (8% of sales).
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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