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Hold Ajanta Pharmaceuticals; target of Rs 1100: ICICI Direct

Ajanta Pharma’s Q3FY19 results were below I-direct estimates on all fronts mainly due to lower-than-exacted export formulation sales Revenues declined 17.4% YoY to Rs 485.1 crore (I-direct estimate: Rs 522.6 crore) due to 26.7% YoY decline in export formulations to Rs 304 crore (I-direct estimate: Rs 344.5 crore). Domestic revenues grew 8.7% YoY to Rs 174 crore EBITDA margins declined to 22.1% from 33.6% in Q3FY18 (I-direct estimates: 25.4%) due to lower gross margins and higher expenditure pertaining to new plants commissioned. EBITDA declined 45.7% YoY to Rs 107.3 crore (I-direct estimate: Rs 132.7 crore) Net profit declined 54.6% YoY to Rs 66.9 crore (I-direct estimate: Rs 95.8 crore) mainly due to a weaker operational performance.

Outlook

We roll over our estimates to FY21 and accordingly arrive at our new target price of Rs 1100 based on 18x FY21E EPS of ~Rs 61.