Nuvama Reaffirms 'Buy' on Ajanta Pharma, Raises Target to ₹3,250 on Strong Q2 Results and Growth Outlook

Analysts at Nuvama Institutional Equities, including Shrikant Akolkar, Aashita Jain, Gaurav Lakhotia, and Tanay Parab, have sustained a favourable outlook on Ajanta Pharma Limited after reviewing its financial performance for the second quarter of fiscal year 2025-26. They have reiterated their 'Buy' recommendation for the company's stock and elevated the target price to ₹3,250 per share, an increase from the prior target of ₹3,210, suggesting a potential upside of 28.2% from its last closing price.

The company reported a strong Q2 FY26 performance, with Profit After Tax (PAT) growing by 20% year-on-year to ₹260 crore, up from ₹216 crore in the same period last year. Revenue from operations increased by a healthy 14% to ₹1,354 crore from ₹1,187 crore. Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) saw a 5% year-on-year increase, reaching ₹328 crore.

Key growth drivers identified by Nuvama include a satisfactory performance in the Indian market, with 12% year-on-year growth in its India business. The Emerging Markets (EM) branded business is also a significant focus, supported by strong execution and new product launches, with the Africa branded business growth forecast upgraded to double digits for FY26E. The US business showed exceptional growth, surging by 48% year-on-year, with further high-teens growth anticipated in FY27E, benefiting from a low base and new launches. The expansion of the medical representative force and entry into new therapeutic areas are bolstering India's growth.

Analysts project a revenue/EBITDA/PAT Compound Annual Growth Rate (CAGR) of 14%/17%/18% over FY25-FY27E. They also anticipate Return on Capital Employed (RoCE) and Return on Invested Capital (RoIC) to surpass 30% by FY27E, indicating improved capital efficiency.

Impact: This news is highly positive for Ajanta Pharma Limited's stock, suggesting potential upward movement based on strong fundamentals and analyst confidence. For the broader Indian stock market, it highlights resilience and growth potential within the pharmaceutical sector, particularly in specialty and branded markets. The positive outlook on emerging markets and the US business from an Indian company is a favourable signal for the sector. Rating: 7/10

Difficult Terms:

* **Profit After Tax (PAT)**: The profit a company has left after deducting all expenses, including taxes. * **EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation)**: A measure of a company's operating performance before accounting for financing and accounting decisions. * **CAGR (Compound Annual Growth Rate)**: The mean annual growth rate of an investment over a specified period longer than one year. * **RoCE (Return on Capital Employed)**: A profitability ratio that measures how efficiently a company is using its capital to generate profits. * **RoIC (Return on Invested Capital)**: A profitability ratio that measures how well a company generates profits from its invested capital. * **MR (Medical Representative)**: A person employed by a pharmaceutical company to promote and sell its medicines to doctors and pharmacists. * **EM (Emerging Markets)**: Countries with developing economies that are transitioning from developing to developed status.