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  • 11 May 2022
  • ICICIdirect Research

BRANDED SALES STRONG AMID WEAK MARGINS

AJANTPHARM - 3142 Change: -56.80 (-1.78 %)

News: Ajanta's revenues grew 15% YoY to Rs 870 crore driven by domestic business growth of 12% YoY to Rs 245 crore and Emerging markets (branded) which grew 46% YoY to Rs 399 crore. US sales de-grew 3% YoY to Rs 168 crore while Africa tender business was down 37% YoY to Rs 50 crore. EBITDA margins declined 1053 bps YoY to 23.7% due to lower gross margins (down 531 bps) and higher other expenses. Sharp margins decline was also due to, 1) write-off one product sent to US nearing expiry (contributing ~1.5% decline) and 2) US price erosion (contributing ~1.5% decline). EBITDA contracted 20% YoY to Rs 207 crores while PAT de-grew 5% YoY to Rs 151 crores. Delta vis-à-vis EBITDA was mainly due to increase in other income and lower tax expense. Board of directors has approved the bonus issue of equity shares in the proportion of 1:2 equity Share of Rs 2/- each.

Views: Ajanta’s domestic business was driven growth of 11% in cardiology, 25% in ophthalmology, 17% in dermatology and 28% in pain management while traction in Africa branded business was supplemented by growth in Asia markets on back of strengthening of brands in these markets. US business witnessed continued pricing erosion (~18%) amid increase in competition. Ajanta is likely to maintain domestic growth momentum leveraging on the already launched products (16 new launches in FY22, 4 being First to Market) and leverage its branded position in emerging markets through market share gain and new launches. On the margins front, material cost was higher due to inflationary API prices and US price erosion. Management expects to maintain ~ 28% EBITDA margins FY23. Overall, calculated focus, steady gross margins and lighter balance sheet are some key differentiators for Ajanta.

Impact: Neutral