MOSL: AJANTA PHARMA (Buy)-Superior sales growth and stable cost drive earnings
Ajanta Pharma: Superior sales growth and stable cost drive earnings
(AJP IN, Mkt Cap USD1.5b, CMP INR1136, TP INR1560, 37% Upside, Buy)
- Performance exceeds expectations: Sales rose 8% YoY to INR5.1b (est. of INR4.7b), led by a strong performance in Domestic formulation (off a low base) and Asia branded generics segments. Gross margin improved 330bp to 83.5%, led by a better product mix and favorable currency movement. EBITDA margin also improved 320bp YoY to 30.8% (est. of 27.2%). Lower other expenses (-218bp YoY as % of sales) were offset by higher employee cost (+206bp YoY as % of sales). Although EBITDA increased 21% YoY to INR1.6b (est. of INR1.3b), PAT grew at a lower rate of 8% YoY to INR1.1b (est. of INR899m) due to higher depreciation and tax rate.
- DF and Asia drive revenue growth: DF business (35% of sales) grew at 24% YoY, led by strong growth in Cardio (+28% YoY), Derma (+22% YoY) and Opthal (+21% YoY). New launches and increased traction in existing products led to 34% YoY growth in Asia branded generics. Overall growth was adversely impacted by declining institutional anti-malaria sales (-44% YoY) and moderate YoY growth in Africa branded generics.
- AJP targets to file 10-12 ANDAs in FY19: AJP filed one ANDA in 1QFY19, taking cumulative filings to 40. It received one final approval and two tentative approvals, taking cumulative approvals to 20. AJP maintained the guidance of 10-12 filings in FY19. R&D spend was INR410m (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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