Ajanta Pharma Reports 66% Rise In Its Net

Ajanta Pharma, whose share prices have more than doubled this year, has reported decent quarterly numbers for Q1FY14. The revenues of the company for the quarter were up by 25% to Rs 215 crore while the net profit was up by 66% to Rs 66 crore. With this, the company has maintained its fantastic growth story in the overall business of the company.

During the quarter, the company has generated Rs 119 crore from exports against Rs 86 crore a year earlier. This implies growth of 24% on a YoY basis. The company has also reported 14% growth in domestic sales to Rs 96 crore. For FY13, the share of exports remained at 64% of the total revenues.

The quarter has seen EBITDA margins at 23.72% against 20.85% in Q1FY13. The rise in the EBITDA margins is due to slower growth in material costs which grew by about 15% to Rs 50 crore during the quarter.

The company told us that it expects to grow by 20-21% during this fiscal and the margin levels would also remain intact at 24-25% for the year. The company has filed 14 ANDAs and has received 1 approval so far. It now has 2 US FDA approved products of which 1 is launched in the US markets. It is hopeful of receiving some US FDA approvals this year but is not very bullish on the US revenues.

For Q1FY14, the company has paid taxes amounting to Rs 15 crore at a tax rate of 32%. The tax rate has remained higher during the quarter and has impacted its profits.

Certainly, Ajanta Pharma is showing fantastic growth and it is likely to continue for the rest of the year, going ahead. The stock, after the result, has shown volatility and traded down by 3% at closing today. At the CMP of Rs 993, it trades at a TTM price to earnings multiple of 20x. The stock, however, has been commanding premium valuation over its peers due to the huge earnings visibility. We would thus recommend a ‘buy’ on this stock which has the potential of giving good returns in the future.