New Product Launches And Liquid Plant Will Expand Presence

Key Takeaways

• Ajanta Pharma's expansion in Asia and Africa through new product launches and chronic therapies supports long-term revenue growth.
  
• Strategic pipeline and entry into new therapeutic areas enhance growth, while new manufacturing capabilities improve margins and cost control.
  
• Heavy reliance on unpredictable agencies and increased expenses may pressure margins, with limited U.S. growth and moderated Africa market affecting future revenue stability.

Catalysts

A specialty pharmaceutical formulation company, together with its subsidiaries, develops, manufactures, and markets speciality pharmaceutical finished dosages.

• Ajanta Pharma's strategy to expand its Branded Generic business in Asia, particularly with the launch of 25 new products in chronic therapies, is expected to drive sustained revenue growth in FY 2026 and beyond.
  
• The company's significant growth in the Africa business, driven by expanding its chronic therapies portfolio and launching 13 new products, lays a foundation for scalable long-term revenue improvements.
  
• In the U.S. market, Ajanta's strategic product pipeline and recent launches promise stronger growth, which may enhance earnings as the company leverages its superior execution and robust product availability.
  
• Ajanta's entry into new therapeutic areas like gynecology and nephrology in India, coupled with the acquisition of brands in the Pain Management segment, is expected to enhance revenue streams and offer potential margin improvements through higher-value offerings.
  
• The development of a new liquid plant to manufacture formulations for emerging markets positions Ajanta to control product quality and cost better, thus improving margins and supporting future revenue increases.

Ajanta Pharma Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Ajanta Pharma's revenue will grow by 12.3% annually over the next 3 years.
• Analysts assume that profit margins will increase from 19.8% today to 22.7% in 3 years time.
• Analysts expect earnings to reach ₹14.5 billion (and earnings per share of ₹115.54) by about May 2028, up from ₹9.0 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as ₹10.9 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 36.3x on those 2028 earnings, down from 37.6x today. This future PE is greater than the current PE for the IN Pharmaceuticals industry at 29.8x.
• Analysts expect the number of shares outstanding to decline by 1.17% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 12.53%, as per the Simply Wall St company report.

Ajanta Pharma Future Earnings Per Share Growth

Risks

• The Africa Institution business experienced a significant degrowth of 41% during FY 2025 due to its heavy reliance on unpredictable procurement agencies, which could continue impacting revenue negatively if not stabilized.
  
• The U.S. Generic business showed limited growth of 9% despite five new product launches, with ongoing tariff uncertainties that could affect future revenue and gross margins.
  
• A sharp increase in personnel costs by 21% over the previous year due to policy changes and expansions in the domestic market could pressure net margins if not offset by proportional revenue growth.
  
• The company anticipates a moderation in growth in the Africa pharma market for FY 2026, including the impact of a high base effect from FY 2025, which could affect revenue projections.
  
• Other expenses are expected to remain elevated due to continued investment in the Branded Generic business, which could impact EBITDA margins if revenue growth does not keep pace.

Valuation

• The analysts have a consensus price target of ₹3085.0 for Ajanta Pharma based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹3667.0, and the most bearish reporting a price target of just ₹2288.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₹64.2 billion, earnings will come to ₹14.5 billion, and it would be trading on a PE ratio of 36.3x, assuming you use a discount rate of 12.5%.
  
• Given the current share price of ₹2706.1, the analyst price target of ₹3085.0 is 12.3% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.