Target: ₹3,145
CMP: ₹2,774
We recently met the management of to gain deeper insights into the company’s business prospects.
After posting a strong 23 per cent earnings CAGR over FY23-25, Ajanta Pharma has entered a consolidation phase in FY26 due to incremental investments in MRs for both base and newer therapies. We, thus, expect earnings growth to moderate to 11 per cent y-o-y in FY26.
That said, the benefits of initiatives undertaken in FY26 should begin to accrue meaningfully in FY27, driving 20 per cent y-o-y earnings growth. We have not yet factored in any semaglutide-related upside in FY28 earnings. Given the considerable scope of demand expansion and Ajanta Pharma’s robust franchise, the sales traction can be decent despite generics-led price erosion in Semaglutide across markets post-patent expiry.
We estimate Ajanta Pharma’s potential sales from this opportunity in Asia and Africa at $25-30 million on an annualised basis in H2-FY28. Assuming a gross margin of 70 per cent and limited additional operating costs, the EBITDA margin of this product should be healthy at 50-55 per cent, driving additional EBITDA for Ajanta Pharma.
We value Ajanta Pharma at 30x 12M forward earnings to arrive at our target price of ₹3,145. Reiterate BUY.