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Aarti Drugs Ltd

Stock Rating

Industry Rank:
4
Relative Strength Rating:
97
Outstanding
Acceleration in Earning Rating
64
Positive
Technical Rating
96
Outstanding
Pharmaceuticals & Drugs - API
CMP: Rs 1270.55
Up
No change
Down

Company details

Market cap:
3,165.00
52-week high/low:
Rs. 1394.00 / 421.00
NSE volume: (No of shares)
40,805.00
BSE code:
524348
NSE code:
AARTIDRUGS

Shareholding

(in %)
31-Mar
Promoter
61.44
Public
38.56
Others
0
Total
100

Indexed Stock Performance

Aarti Drugs Ltd Sensex
Aarti Drugs Ltd
One Year Performance

Price performance

Return (%)
1m
3m
12m
36m
Absolute
32.96
160.63
141.78
142.40
Sensex
4.84
22.77
-12.02
12.92

+91 22 6639 3000

research@stockaxis.com

Aarti Drugs Ltd

The company is a major beneficiary from the government’s push for indigenous API manufacturing

 

 

Aarti Drugs Ltd. was established in the year 1984 and forms part of $1000 Million Aarti Group of Industries with robust R&D Division at Tarapur, Maharashtra Industrial Development Corporation (MIDC) in close vicinity to manufacturing locations. The Company is engaged in the manufacturing of Active Pharmaceutical Ingredients (APIs), Pharma Intermediates, Specialty Chemicals and also produces Formulations with its wholly-owned subsidiary – Pinnacle Life Science Private Limited. Products under APIs includes Ciprofloxacin Hydrochloride, Metronidazole, Metformin HCL, Ketoconazole, Ofloxacin etc. whereas Specialty Chemicals includes Benzene Sulphonyl Chloride, Methyl Nicotinate etc. Over the years, the Company has been able to carve a niche for itself and is looking forward to expand the volumes. The Company aims at becoming the first choice of this expanding market through better products, ensuring quality and timely delivery.

 

Investment Thesis

Established position in the active pharmaceutical ingredients (APIs) business: The company is among the leading manufacturers of APIs in India with 12 manufacturing facilities of which nine manufacturing facilities are located at Tarapur, Maharashtra, two manufacturing facilities at Sarigam, Gujarat and one formulation plant at himachal pradesh. The company has a strong product portfolio of about 130 products of which top 10 products contribute 76.4% of sales in FY20. The company is having presence across 11 therapeutic segments with strong presence in antibiotic, antidiarrheal and anti inflammatory segments.

Diversified business revenue along with long term relationship with customers: The company has long term relationship with clients and has a set of diversified client base, including most of the major pharmaceuticals players in India, European and Gulf countries. The company exports its products to more than 90 countries worldwide and thus there is a comfortable geographic diversification of revenues. The same is evident from top 10 export customers contributing to only 19.6% of company’s export sales as on FY20.

Newer capacities established since last two years will help grow top-line: The company is leveraging new capacities to capitalise new markets and has good amount of land parcels in industrial zones in Maharashtra and Gujarat which can take care of green field projects in next 3 to 4 years. The Company has already scaled up its anti-diabetic and anti-inflammatory capacity which will provide impetus to revenue growth going forward. Further CAPEX is planned for introducing new products in anti-diabetic category and speciality category

Covid-19 impact: Due to Covid-19 pandemic, there will be no significant impact on the business as the company is not facing any in/out-bound supply issues.

Key Risks

The pharmaceutical industry is highly regulated in many other countries and requires various approvals, licenses, registrations and permissions for business activities.

 

Financial Highlights

(Rs Crores)

ParticularsMar-17Mar-18Mar-19Mar-20Mar-21EMar-22E
Net Sales1195.171243.631560.941806.092076.982355.34
Raw Materials Consumed744.43737.721013.531178.961342.811520.16
Gross Profit450.74505.91547.41627.13734.17835.18
Employee Cost47.9552.1454.5569.3677.9892.67
Other Expenses212.31251.89281.94295.95353.18403.20
EBITDA190.49201.87210.92261.82303.01339.31
Margins%15.90%16.20%13.50%14.50%14.60%14.40%
Depreciation38.4640.0642.5648.7552.4058.10
EBIT152.03161.81168.36213.07250.61281.21
Other Income4.001.056.185.952.703.10
Interest40.0238.3643.5133.7327.9122.36
Profit Before Tax116.01124.50131.02185.29225.40261.95
Provision for Tax34.2142.2041.2743.8956.3565.49
Tax Rate%29.00%34.00%31.00%24.00%25.00%25.00%
PAT81.8082.3189.75141.40169.05196.46
EPS34.2934.9038.0660.6972.5584.32
Source: Stockaxis Research, Company Data

Valuation

We expect the company to be major beneficiary from the government’s push for indigenous API manufacturing as its key products feature in the list of drugs allowed for indigenous API manufacturing. Further we expect the company's earnings to grow going forward supported by recent additions in capacity for diabetes and specialty chemicals and also commencement of contract manufacturing of few products which are in shortage. The stock is currently trading at 15.1x FY22E EPS.