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  • 29 Jul 2022
  • ICICIdirect Research

Q1 REVENUES A BEAT, MARGINS MUTED

AJANTPHARM - 2864 Change: -121.40 (-4.07 %)

News: Ajanta's revenues grew 27% YoY to Rs 951 crore driven by domestic business growth of 22% YoY to Rs 279 crore and Emerging markets (branded), which grew 40% YoY to Rs 409 crore. US sales grew 6.5% YoY to Rs 179 crore while Africa tender business sales also increased by 43% YoY to Rs 77 crore. EBITDA margins declined 612 bps YoY to 23.3% due to lower gross margins (down 654 bps YoY to 70.5%) and higher other expenses. EBITDA largely flat YoY at Rs 222 crores while PAT was flat YoY at Rs 175 crores.

Views: Ajanta’s domestic business was driven by growth of 10% in Cardiology, 21% in Ophthalmology, 20% in Dermatology and 23% in Pain Management. Traction in Africa branded business and Asia markets was on back of low base last year. US business witnessed slower price erosion this quarter and management expects muted growth of 5% in FY23. EBITDA margins declined due to, 1) write-off of inventory (contributing ~2% decline), 2) US price erosion (contributing ~1% decline) and raw material price inflation ( contributing ~1% decline). However, margins are likely to recover by ~300 bps sequentially, with guidance to end FY23 with 26-27% margins. Ajanta is likely to maintain mid-teen domestic growth momentum leveraging on the new launches and price hike. Company is well placed to leverage its branded position in emerging markets as well through market share gain and new launches. Overall, calculated focus, steady gross margins and lighter balance sheet are some key differentiators for Ajanta.

Impact: Positive.