Anand Rathi has given Buy recommendation for Aarti Drugs with a target price of Rs. 844 in its research report issued on Jul 28, 2021
Anand Rathi’s research report on Aarti Drugs
Raw-material price rises and a higher share of domestic sales dented Aarti’s gross margin 966bps to 31.7%. Certain maintenance costs pulled down the EBITDA margin more, to 1,085bps. Revenue grew 6.5% to Rs5.8bn on 6.7% growth in formulations, and 38.5% in specialty chemicals. API sales were up 3.9% to Rs4.5bn. Via better utilisation of capacities and addition of products, Aarti is on track for 18% revenue growth in the next 4-5 years. We cut our FY22e/FY23e EPS 18.6%/11.1% to factor in the temporary rise in raw-material prices.
We retain our Buy rating and lower our target to Rs844 (earlier Rs949) on 20x FY23e earnings.