Motilal Oswal Recommends Buying This Pharma Stock For 29% Upside, In 1 Year

Brokerage firm Motilal Oswal recommended buying the stock of Ajanta Pharma (AJP) for a 29% return. The firm thinks that the company's Branded Generics segment in Asia and Africa remains on a robust footing on the back of launches and market share gains in existing products.

Target Price

The Current Market Price (CMP) of Ajanta Pharma is Rs. 1934. Motilal Oswal has estimated a Target Price for the stock at Rs. 2500. The stock is expected to offer a 29% upside, in 1 year.

Stock Outlook
Current Market Price (CMP)	Rs. 1934
Target Price	Rs. 2500
1 year return	29.00%

Company performance

AJP delivered 13% sales CAGR from Dec'18 to Dec'21, led by steady traction in existing therapies and ramp-up in newly added therapies and the Trade Generics segment. It delivered a sales growth of 23% YoY to Rs. 7.3b (30% of sales) in 9MFY22. The company is expected to drive 16% sales CAGR in the DF segment to Rs. 11b over FY22-24. AJP has garnered sales of Rs. 7b over the past 12M from Rs. 40m in FY16, which is largely led by launches and market share gains in existing products.

Comments by Motilal Oswal

Maintaining buy rating Motilal Oswal stated, "Compared to a moderate 5% YoY earnings growth expected in FY22, we expect AJP to deliver 16% earnings CAGR over FY22-24, led by superior performance in the Branded Generics segment across Domestic Formulation, Asia, and Africa. We remain positive on AJP on the back of a) its strong brand franchise in DF/Asia/Africa, b) robust prospects for the US Generics segment, and c) superior profitability and return ratios. We have cut our FY23/FY24 earnings estimate by 4%/6% to factor in a muted outlook for the institutional Anti-Malarial business and temporary slowdown in ANDA filings in the US market."

About the company

Ajanta Pharma has remained a focused player in the Branded Generics business in Asia and Africa with ~40 product registrations over the past 12 months. It already has a portfolio of ~200 products for these markets and its front-end presence with 450/400 MRs in Africa/Asia. AJP delivered 53%/2% YoY sales growth in Africa/Asia over 9MFY22 on the back of 20-22 product launches and market share gain in existing products. They serve a wide range of therapeutic segments like Anti-Biotic, Anti-Malarial, Anti-Diabetic, Cardiology, Gynecology, Orthopedics, Pediatric, Respiratory & General Health products.

Disclaimer

The above stock was picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.