MOSL: AJANTA PHARMA (Buy)-Lower exports, higher operating costs impact earnings
Ajanta Pharma: Lower exports, higher operating costs impact earnings
(AJP IN, Mkt Cap USD1.3b, CMP INR1090, TP INR1390, 28% Upside, Buy)
- Revenues in line; higher operational cost hurts margin: Ajanta Pharma (AJP) reported its 3QFY19 revenue down 17% YoY to INR4.8b (in-line), largely due to lower exports, down 27% YoY to INR3b (64% of sales). The decline was offset to some extent by 9% YoY growth in domestic formulation (36% of sales) to INR1.7b. Gross margin (GM) contracted 144bp YoY to 79.8%, mainly due to increased raw material prices and change in product mix. EBITDA margin contracted at higher rate of 990bp YoY on higher employee cost/other expenses, up 700bp/145bp YoY (as % of sales). The increased operational cost is associated with newer facilities at Dahej and Guwahati. Absolute EBITDA declined 42% YoY to INR1.1b (our estimate: INR1.2b). Reduced margins, higher depreciation and tax rate led to PAT decline of 51% YoY to INR727m (our estimate: INR837m). For 9MFY19, sales/EBITDA/PAT declined 4%/14%/19% YoY to INR15.4b/INR4.4b/INR3b.
- On-track to file 10-12 ANDAs in FY19: For 9MFY19, AJP filed eight ANDAs and received 10 ANDA approvals (7-final and 3-tentative), taking the number of cumulative approvals to 24. AJP has already commercialized 21 ANDAs and has 17 ANDAs pending for approval. It has maintained its guidance of 10-12 filings for FY19.
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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