Ajanta Pharma shares up 13% today on buyback plan, Q4 results. Stock still a buy?

Ajanta Pharma Ltd saw its shares rallying 13 per cent in Friday's trade following its March quarter (Q4) results and the announcement of Rs 351 crore share buyback, including tax, at Rs 2,770 apiece. This buyback price was at 24 per cent premium to Ajanta Pharma's previous closing price of Rs 2,233.10. A few analysts said the drug maker beat consensus estimates on both revenue and margins but their target prices suggest limited upside ahead.

On Friday, Ajanta Pharma stock jumped 13.38 per cent to hit a high of Rs 2,531.95 on BSE. A few target prices on the stock are in the range of Rs 2,560-2,613, suggesting limited upside ahead.

"We remain positive about Ajanta Pharma’s prospects given its branded play and strong focus on the domestic market, combined with drug shortages and reduced pricing pressure in the US. We have maintained BUY on Ajanta Pharma with a revised target price (TP) of Rs 2,613, valuing it at 25 times on FY26E earnings," said Nirmal Bang.

Ajanta Pharma has guided for a flattish Ebitda guidance of 28 per cent for FY25, citing the Red Sea issue and increased expenses. Analysts said growth will primarily be driven by expansion in the branded business and new launches. A stabilisation of raw material prices and the easing of pricing pressure in the US are expected to improve Ebitda.

"ROE and ROCE are forecasted to reach healthy levels of 23.2 per cent and 24.2 per cent, respectively, by FY25E. With major capex completed, we project FCF generation of approximately Rs 1,000 crore over FY25E-FY26E," it said.

Motilal Oswal values Ajanta Pharma at 27 times 12-month forward earnings to arrive at a target price of Rs 2,565. This brokerage sees 17 per cent earnings CAGR over FY24-26, backed by a 12 per cent/15 per cent sales

CAGR in DF/Asia segment and a 150 bps margin expansion.

"With new launches, MR addition and increased market share in existing products, AJP remains in good stead to outperform in the branded generics market (70 per cent of FY24 sales). AJP continues to build the ANDA pipeline for the US market and implement efforts toward consistent compliance," Ajanta Pharma said.

Nuvama said Ajanta Pharma's branded generics business remains on a strong footing with mid-teens growth in FY25E due to sales force expansion and new launches. The US generics business, it said, is likely to grow in mid-single digit due to benign erosion and six new launches.

"Ajanta Pharma's 28 per cent Ebitda margin guidance looks conservative considering improving geography mix, lower input costs and we believe there is 50–100bp room to expand margins. We build revenue/EBITDA/PAT CAGR of 12 per cent/15 per cent/18 per cent over FY24–26E. We raise target to Rs 2,560 (earlier Rs 2,505)," it said.