Ajanta Pharma - Healthy Work-In-Progress On Reducing Cost Pressure To Boost Outlook: Motilal Oswal
Domestic formulation- New launches/better MR productivity to drive industry outperformance.
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Motilal Oswal Report
We met with the management of Ajanta Pharma Ltd. recently to understand its business outlook in further details.
Ajanta Pharma has enhanced its efforts to improve profitability over the next two-three years.
Superior execution in the branded generics segment across domestic formulation, Asia and Africa would result in industry outperformance. This will be further supported by relief on the cost front, which would pave the way for at least 200 basis points margin expansion over FY23-25E.
However, the U.S. generics growth prospects might moderate due to slowdown in the pace of approvals over the near term.
We expect 15% earnings compound annual growth rate over FY23-25 versus 4% YoY earnings decline in FY23.
Ajanta Pharma had multiple headwinds such as higher raw material costs and operating deleverage over the past 12-15 months, leading to historically lower margins in nine months-FY23. However, with efforts in place to overcome these hurdles, there is scope of better margins from FY24 onwards.
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