MOSL: AJANTA PHARMA (Buy)-US/Asia drive earnings; Prospects improve for anti-malaria biz
AJANTA PHARMA: US/Asia drive earnings; Prospects improve for anti-malaria biz
(AJP IN, Mkt Cap USD1.5b, CMP INR1194, TP INR1435, 20% Upside, Buy)
On earnings growth revival trajectory
- After two years of earnings decline, Ajanta Pharma’s (AJP) earnings growth is back on track, led by superior execution in India/Asia/Africa branded generics segment (67% of sales) and healthy traction in new ANDA launches (20% of sales). Further, new orders from institutional agencies should also support sales as well as profitability.
- We raise our EPS estimates by 5%/6%/6% for FY20/FY21/FY22E to factor in better traction in the US/institutional anti-malaria segment. Re-iterate Buy.
Better-than-expected operating performance
- 3QFY20 revenues grew 34% YoY to INR6.5b (v/s est. INR5.8b), largely led by export growth of 47% YoY (INR4.5b) due to US generics sales growth of 141% YoY (INR1.6b).
- Emerging market sales grew +21% YoY (INR2.9b).
- Domestic sales grew 12% YoY to INR2b (~30% of sales).
- Gross Margin (GM) for the quarter contracted 580bp YoY to 74%. EBITDA margin expanded 480bp YoY to 28.6% (v/s est. 26.9%), due to reduced employee cost (down 470bp YoY) and lower other expenses (down 580bp YoY) as % of sales.
- EBITDA growth was robust at 61.3% YoY to INR1.9b (v/s est. INR1.6b).
- R&D expense for the quarter stood at INR350m (5% of sales).
- Tax rate during the quarter was 38.6% against 28% in 3QFY19 and 28% in 2QFY20. Accordingly, PAT came in at INR1.1b (in-line) and was up 48.3% YoY.
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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