Aarti Drugs Q2 Results Review - Sluggish Export Demand Impacts API Sales: Dolat Capital

Dolat Capital Report

Aarti Drugs Ltd.'s Q2 FY24 earnings were below our estimates due to lower than expected active pharma ingredient sales impacted by negative rate variance and sluggish demand.

Revenue of Rs 6.4 billion in Q2 declined by 6.7%/3.0% YoY/QoQ mainly on account of decline in active pharma ingredient/intermediate sales. Ebitda margin at 11.9% (below estimate) expanded by 110 basis points YoY mainly due to gross margin expansion on stabilising input cost while contracted 80 bps QoQ on lower sales.

We downgrade our earnings per share estimates of Aarti Drugs by 13.8%/14.2% for FY24E/FY25E, assuming lower-than-expected sales and Ebitda margin.

Rolling over to FY26, maintain 'Accumulate' with the revised target price of Rs 610 at 16 times FY26 price/earnings.

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