Shares of Ajanta Pharma cracked nearly 7 per cent on Friday after the company posted a 20 per cent decline in consolidated net profit for the second quarter (Q2) that ended September 30.
The pharma company’s Q2 profit came at Rs 156.6 crore this year compared to a profit of Rs 195.94 posted in the year-ago period. The sharp plunge was mainly on account of higher expenses and lower sales in the US generics market.
Total expenses stood higher at Rs 775.45 crore, as against Rs 653.92 crore in the same period last year.
After the Q2 results, the scrip hit an intraday low of Rs 1,250. It finally settled 6.86 per cent lower at Rs 1,255.75 today. A total of 23,000 shares changed hands amounting to a turnover of Rs 2.95 crore.
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Considering the closing figure, the stock traded a little over 18 per cent higher from its May low and nearly 20 per cent lower from its January high.
Brokerage view
Motilal Oswal Research said, “Ajanta Pharma delivered a miss on operational performance in Q2 FY23, led by higher employee and freight costs. Adverse currency movement in Africa Branded Generics and price erosion in US Generics affected profitability in the September quarter. Branded Generics in India (Domestic Formulation) and Asia witnessed robust industry outperformance in Q2.”
The pharma giant expects its Asia business to grow over 20 per cent on a YoY basis in FY23, the brokerage stated. Motilal maintained a ‘Buy’ rating on Ajanta Pharma with a target price of Rs 1,560.
In the second quarter, India sales came at Rs 314 crore against Rs 248 crore in the corresponding period last year, registering a growth of 27 per cent.
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Nuvama Research said, “The pharma company has witnessed a steep margin pressure over the last few quarters, but its branded business revenues have remained impressive. While high input and freight costs are taking a toll on margins, a 26 per cent EBITDA (Earnings before interest, taxes, depreciation, and amortization) margin guidance for H2 (second half) provides respite.”
The brokerage also maintained a ‘Buy’ rating on the stock with a target price of Rs 1,620.
Technical view
On the technical front, Tirthankar Das, Technical & Derivative Analyst, Retail, Ashika Stock Broking Ltd, said that the new elevated base for the stock is presently at Rs 1,090. “It would be wiser for a trader to show patience and accumulate at lower levels of Rs 1,100-1,125,” he added.