Bonus issue fails to lift Ajanta Pharma; stock hits 52-week low on weak Q4

Bonus issue fails to lift Ajanta Pharma; stock hits 52-week low on weak Q4

Shares of Ajanta Pharma hit a 52-week low of Rs 1,593, down 4 per cent on the BSE in Wednesday’s intra-day trade due to weak operational performance for the quarter ended March 2022 (Q4FY22). The board of directors has approved a bonus issue in the proportion of 1:2 equity share of Rs 2 each.

The stock was quoting lower for the sixth straight trading day, falling 12 per cent during this period. At 11:58 am; it was trading 2.5 per cent lower at Rs 1,616, as compared to a 0.61 per cent decline in the S&P BSE Sensex.

Ajanta Pharma is a specialty pharmaceutical formulation company having branded generic business in India and emerging markets, generic business in US and institution business in Africa.

In Q4FY22, Ajanta's earnings before interest, taxes, depreciation, and amortization (ebitda) declined 20 per cent year on year (YoY) to Rs 207 crore. Ebitda margins declined 1,053 bps YoY to 23.7 per cent due to lower gross margins (down 531 bps) and higher other expenses.

The company’s revenue grew 15 per cent YoY to Rs 870 crore driven by domestic business growth of 12 per cent YoY at Rs 245 crore and emerging markets (branded) which grew 46 per cent YoY to Rs 399 crore.

US sales de-grew 3 per cent YoY to Rs 168 crore, while Africa tender business was down 37 per cent YoY to Rs 50 crore.

Ajanta’s domestic business was driven by growth of 11 per cent in cardiology, 25 per cent in ophthalmology, 17 per cent in dermatology and 28 per cent in pain management. US business witnessed continued pricing erosion (~18 per cent) amid increase in competition, ICICI Securities said in a note.

Ajanta is likely to maintain domestic growth momentum leveraging on the already launched products (16 new launches in FY22, 4 being First to Market) and leverage its branded position in emerging markets through market share gain and new launches. On the margins front, material cost was higher due to inflationary API prices and US price erosion, the brokerage said.

Motilal Oswal Financial Services has cut FY23/FY24 estimated EPS by 6 per cent/7 per cent, respectively, to factor in increased raw material/supply chain costs, higher price erosion in the US generics and muted institutional anti-malaria sales.

“We believe the company will sustain outperformance in the branded generics segment of DF/Africa/Asia aided by new launches, market share gains in existing products and price hikes to some extent. While the near-term outlook would be subdued, the higher pace of filings/approvals would improve the growth prospects in the US generics segment,” the brokerage said in a results update.