Ajanta Pharma shares fall 5% after Q4 results; should you buy, sell or hold?

Shares of Ajanta Pharma dropped more than 5 per cent during the trading session Friday after the company reported a muted set of performance in the March 2025 quarter, which led to mixed reviews from the analysts, including downgrades and target price cuts. However, they see a decent upside in the stock in the long run.

Ajanta Pharma reported a 11 per cent year-on-year rise in its net profit at Rs 225 crore, while its revenue from operations rose 11 per cent YoY to Rs 1,170 crore in the March 2025 quarter. The drug maker reported a 7 per cent YoY rise in its Ebitda at Rs 278 crore, with Ebitda margins coming at 25 per cent for the quarter.

Ajanta Pharma’s 4QFY25 performance was a mixed bag, with revenues in line with NBIE estimates but margins missed the estimates. Revenues grew in double digits on the back of strong performance in India and Africa branded business and US generics business. The Africa institutional business is expected to remain lumpy, said Nirmal Bang Institutional Equities.

"We expect revenue, Ebitda and profit CAGR of 13 per cent, 14 per cent and 15 per cent over FY25–FY27E, supported by a healthy EBITDA margin of ~28% by FY27. The management has guided for an EBITDA margin of 28 per cent for FY26. We downgrade the stock to 'Hold' due to elevated valuations," it said with a target price of Rs 2,845.

Following the announcement of results, shares of Ajanta Pharma dropped more than 5.25 per cent to Rs 2,558 on Friday, with its total market capitalization slipping below Rs 33,000 crore. The stock had settled at Rs 2,700.85 in the previous trading session. The stock is down nearly 27 per cent from its 52-week high at Rs 3,485.75 hit in September 2024.

Ajanta Pharma is currently in an investment phase, expanding its presence across geographies and therapeutic areas. As a result, the company expects higher promotional and employee expenses, which will likely cap EBITDA margin improvements until post-FY27E, said Choice Broking, which has revised its FY26E/FY27E earnings estimates downward by 6.2 per cent/6.1 per cent, respectively.

"We maintain our 'buy' rating on the stock and cut our target price to Rs 3,180 by averaging our PE-based and DCF-based valuations. For the PE method, we apply a multiple of 30 times on FY27E EPS. Our DCF-based valuation suggests a slightly higher upside, but we believe the blended approach offers a more balanced view of near- and long-term value drivers," Choice added.

Ajanta Pharma exhibited largely in-line operational performance for the quarter. Superior performance in Domestic Formulation (DF)/US was partly offset by the weak institutional anti-malaria business. The high base of the previous year impacted YoY growth in the branded generics export segment, said Motilal Oswal Financial Services.

"Ajanta Pharma is  enhancing its growth levers through scaling up newer therapies/gaining market share in India, and increasing product launches—particularly in chronic therapies—in Africa/Asia markets, along with accelerating filings in the US generics market.  We maintain our estimates for FY26/FY27," it added with a 'buy' rating and a targe price of Rs 3,260.