Ajanta Pharma reported strong growth in India and Africa for Q1FY27, even as supply chain issues impacted its Asian markets. While the company raised its growth outlook, ICICI Securities maintained a 'Hold' rating citing valuation concerns at the current price.
Ajanta Pharma posted a positive start to the 2027 fiscal year, with its recent financial performance outperforming expectations. The company saw significant growth in its core Indian business, which rose by 24.4% compared to the same period last year. Its Africa branded business also performed well, recording a 29.4% increase. These regions have become primary drivers for the company’s revenue, helping to balance out difficulties elsewhere.
Challenges in Asia Market
While domestic and African operations showed strength, the company’s performance in Asian markets faced pressure, with revenue contracting by 16.1% year-on-year. This decline is largely linked to ongoing supply chain disruptions caused by geopolitical tensions in West Asia. These logistics issues have made it difficult to move products efficiently in the region. Management and market analysts expect this segment to recover in the coming quarters as supply chains stabilize and logistical hurdles are addressed.
Future Growth Guidance
Following the first-quarter results, the company provided updated growth projections for the full fiscal year 2027. Management now anticipates mid-teen growth for the Indian market and high-teen expansion for the Asian segment. The Africa branded business is expected to see double-digit growth, while the United States market is projected to grow in the mid-to-high single digits. The company continues to target an EBITDA margin—a key measure of operating profit—in the range of 26% to 28%.
Valuation and Brokerage View
ICICI Securities has updated its outlook on the stock, setting a price target of ₹3,260. Despite the strong quarterly performance, the brokerage has maintained a 'Hold' rating. This decision is based on valuation concerns, as the current share price already accounts for much of the company's growth potential. The brokerage also made a small upward adjustment of about 1% to its earnings per share estimate for FY28 to account for the sustained momentum in the Indian market. The target price uses a valuation multiple of 28 times the expected earnings for the 2028 financial year.
Investors may continue to track the resolution of supply chain disruptions in West Asia and whether the company can maintain its targeted profit margins throughout the year. The sustainability of growth in the Indian and African segments will also remain a key monitorable in the coming quarters.