Home >Markets >Mark To Market >Ajanta Pharma delivers a decent Q4, but growth may be priced in

Ajanta Pharma Ltd’s Q4 results came a step ahead of Street forecasts but business and logistics disruptions due to the nationwide lockdown may curb growth momentum in FY21.

In Q4, US business growth has been reassuring. US generic sales surged 88% year-on-year (y-oy) largely due to demand from covid-19 pre-stocking. Overall, exports rose about 43% y-o-y in the quarter.

The company plans to file about 10-12 abbreviated new drug applications (ANDAs) in the US in FY21.

Graphic: Santosh Sharma/Mint
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Graphic: Santosh Sharma/Mint

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Besides, with about 23 ANDAs pending approval, its launches in the US are expected to be steady. In FY20, Ajanta launched seven products in the US.

Another positive is that its emerging-market branded generics posted a 38% y-o-y growth. Some of its growth trends in Africa and Asia in branded generics have been similar, which is promising. Also, its spending on research and development of 7% of revenues is a positive.

In the domestic market, Ajanta Pharma has been able to grow faster than the overall sector in some segments such as ophthalmology and pain management. The company’s growth in the domestic market in Q4 was about 11.3% y-o-y, compared with the industry’s 11% increase.

All these have led to Ajanta Pharma’s revenue growing about 32% y-o-y in the March quarter, beating the Street estimates. Some of the product-mix changes and increases in costs, however, saw earnings before interest, taxes, depreciation and amortization margins at 24.4% in Q4, marginally lower against the year-ago period.

One worry in the coming quarters is whether such growth will continue this fiscal after the covid-19-induced lockdown pre-stocking. This has led analysts to curtail growth estimates for the coming year. “The covid-led disruption could be a dampener for earnings growth in FY21 and, accordingly, we have cut our EPS (earnings per share) estimate for FY21 by 6%," said analysts at Motilal Oswal Financial Services in a note.

In fact, analysts are pencilling in an earnings growth of just 11% in FY21. The stock has run up in the past few months on the sales momentum. In 2020, it has jumped as much as 53%.

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