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Recommendations India

Ajanta Pharma Q4FY14 results update

May 8, 2014, Thursday, 12:29 GMT | 07:29 EST | 16:59 IST | 19:29 SGT
Contributed by Nirmal Bang


Ajanta Pharma (APL) posted stellar results beating street expectations on all fronts. Sales have come at Rs 311 cr, a growth of 24.7% yoy. EBITDA margins at 36.1% are highest in the history of the company (33.0% in Q3FY14 and 27.7% in Q4FY13) on back of lower raw material cost on account of change in suppliers. Hence, partial improvement is expected to continue in future too. For FY15E, we expect company to report 30-31% EBITDA margins. Led by higher sales and better margins, Net Profit grew by 158.7% to Rs 70.1 cr


Key Highlights

- Domestic markets grew by 33% yoy, much hogher than industry average and its peers led by all around healthy growth like in Cardio (48% yoy), Derma (26%) and Opthal (47%) segments. Exports posted decent growth of 16% yoy. For FY14, sales grew by 32.3% whereas domestic market posted growth of 31.8% and exports segment 29.4%

- Key highlight of the quarter was improvement in the EBITDA margins at 36.1%, which are highest in the highest of the company. Lower raw material cost and employee cost benefitted the margins. For the full year EBITDA margins jumped to 31.2% as compared to 25% in FY13. We expect margins to remain at similar levels for coming years

- PAT for the quarter grew by 92% yoy, on the back of higher sales and better margins. For full year PAT grew by 118%.

- For full year the company launched 24 products in domestic markets, 10 in Africa, 20 in Asia and two in Latam during the year.

- The company has filed one ANDAs during the quarter taking the total number to 23 (combined market share is $3.5 bn) out of which 21 are awaiting approval. APL expects 2-3 approvals during FY15. It is on track of its strategy of filing 5-6 ANDAs per year.


Valuation & Recommendation

The management is confident of achieving 22% growth (on higher base) with 30-31% EBITDA in FY15. The company has sound balance sheet with zero net debt Debt and return rations more than 30%. We are introducing FY16E numbers and rolling forward our target multiple to FY16E. The stock has re-rated substantially in last three years and given the growth momentum and improving profitability, we believe that it can sustain at these valuations. Considering the continuous outperformance, healthy outlook investors can hold shares for price target of Rs 1320 (13x of FY16E EPS)