Ajanta Pharma

Stock Opportunities Not-so-Hidden Gems
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FY23Q4 concall

  • Q4FY23: Sales grew at 1%, Gross margin 72%, EBITDA margins ~ 17%, PAT margins ~ 14%
  • FY23: Sales grew at 12%, Gross margin 72%, EBITDA margins ~ 21%, PAT margins ~ 16%
  • Logistics costs contributed 2% to margin dip and have now normalized
  • FY24 growth: Branded will see mid-teens growth, US will see mid-single digit growth, Africa institution will be flattish
  • FY23 forex: 47 cr. net gain (adjusted for unrealized losses) vs 73 cr. net gain in FY22
  • Margins have bottomed out. Expect 2% margin revival in freight cost + 2% in gross margin in FY24 which should bring EBITDA margin to 25%
  • CAPEX of 160 cr. in FY23. FY24 maintenance capex + corporate office will be 200 cr.
  • Improvement in working capital resulted in 99% cashflow conversion
  • For 12 months, employee cost increased due to expansion in field force by 50% internationally. 27 cr. sales incentives (for FY23) were earlier reflected in SG&A and are now categorized in employee costs
  • Hope to recoup margins in years ahead
  • R&D stood at 6% of sales for FY23, absolute R&D will be same in FY24

US:

  • 19% in FY23 (17% in Q4) (1 new launch in FY23; 40 launched products)
  • Mid-single digit growth for FY24
  • Expect to launch 5 products in FY24 (including gChantix)
  • gVimovo will be launched in Q1FY24
  • gChantix: target action date is Q2FY24, will launch in Q3FY24 if get approval
  • Filed 1 ANDA in Q4 (5 in FY23) and plans to file 6-8 ANDAs during FY24
  • High single digit price erosion
  • Want to keep US contribution at similar levels (20-22% of sales)
  • Flu product was $10mn in Q3, that is not present this quarter. Base revenue run rate has increased from 180 cr. to 200 cr.

Domestic:

  • 20% in FY23 (17% for Q4), launched 23 new products (6 is first launch in India). New brand launches will be lower than in last couple of years
  • FY23 growth breakup: 8% volume, 6% price, 3% new product launch
  • Trade generics: 42 cr. (vs 30 cr. in Q3FY22); 151 cr. in FY23 (vs 117 cr. in FY22). Expect low double digit growth (more chronic focused vs largely acute for the industry)
  • FY24: expect low double digit growth (vs 8-9% industry growth).
  • IPM rank 27 (gained 2 ranks in FY23), 4 brands are in top 500 of IPM
  • In MetXL, NLEM reduction was 18% and they have been able to gain back 11.3% from WPI based inflation price increase
  • MRs: 2800

Emerging market (branded generics)

  • Africa branded de-grew by (-26)% this quarter due to pension strikes in France. Shipments first happen to France and then go to Franco Africa. (-5%) de-growth in FY23 due to INR depreciation. 8 new products launched. Hoping for mid to high teens growth in FY24
  • Asia branded grew by 18% in FY23 (de-growth of -9% in Q4). Launched 38 products
  • Asia + Africa MR: 1300

Africa institution

  • De-growth of (-8%) in FY23 (and -1% for Q4)

Disclosure: Invested (position size here, sold few shares through participation in buyback in last-30 days)

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