Buy Ajanta Pharma; target of Rs 4250: Prabhudas Lilladher

Key Investment Pillars

• Ajanta Pharma's Q2FY27 EBITDA grew strongly by 47% YoY, driven by higher revenues across branded generic markets, with a beat aided by premium products becoming a larger share of revenue.
• The company's play on high growth branded generics (BGx) market, spread across India, Asia, and Africa, contributed 70% to total revenue in FY26, with strong annual free cash flow of INR8–10bn supporting sustained investments and potential inorganic opportunities.
• Alternative shipping routes helped restore deliveries in Q2 in Asia markets, and the recent in-licensing agreement with Biocon for marketing semaglutide in 26 countries across RoW markets is a good fit given its strong existing franchise across these markets.
• Management expects India growth to remain strong, supported by new launches, market-share gains, and field-force productivity, with a guided high double-digit growth in FY27E for Branded Africa.

Thesis Validation Checklist

To validate the investment thesis, investors should watch for: the continuation of strong revenue growth across markets, particularly in the branded generics segment; the ability of the company to maintain its margin expansion; the success of new product launches and the in-licensing agreement with Biocon; and the company's ability to navigate potential risks such as increasing competition in the US generics market and geopolitical tensions in the Middle East.