 "pharma, medicine, drugs")
Shares of Ajanta Pharma surged 2 per cent to hit a 52-week high of Rs 1,534.85 in Thursday’s intra-day trade. In the past three weeks, the stock of pharmaceutical company has rallied 17 per cent on upbeat branded generic business outlook. In comparison, the S&P BSE Sensex was down 0.10 per cent at 63,459, as of 10:01 am.
Ajanta Pharma is a specialty pharmaceuticals formulation company with a well-diversified branded generics business spread across India, the rest of Asia, and Africa. The company has a strong chronic-focused product portfolio led by a first-to-market strategy and front-end presence that helps it to outgrow market. The company is committed to investing in innovative products to fill identified gaps and putting major capital allocation into this business.
Ajanta’s business also consists of two more verticals: US generics and institutional business in Africa. These two verticals are facing headwinds and the company said that they remain cautiously opportunistic for them.
"After disruptions of the past three years, the outlook for global spending on medicines has become clearer as uncertainties gave way to more predictable challenges. Policymakers across developed and emerging economies are shifting from crisis to rebuilding modes with a focus on longer-term sustainability issues," Ajanta Pharma said in their annual report.
The price erosion in the US made the situation worse and this brought the company’s profit margins to the lowest level in the last decade. The management is confident to scale up margins again in the coming years on the back of enhanced contribution from Branded Generics business and normalisation of freight costs.
Analysts at ICICI Securities maintain a 'buy' rating on Ajanta Pharma due to their compelling play on branded generics (~72 per cent exposure) with strong execution track record and financials. The stock, however, was trading above brokerage firm’s 12-month target price of Rs 1,520 per share.
"Margins are likely to improve amid operational leverage, expected softening of raw material cost and incremental focus on branded business," the brokerage firm added.
