Aarti Drugs Q3 Results Review - Negative Rate Variance Impacts API Sales: Dolat Capital

Dolat Capital Report

Q3 FY24 earnings were largely in line with our estimates. Lower API sales were impacted by negative rate variance and sluggish demand.

Revenue of Rs 6.1billion in Q3 declined by 8.7%/5.5% YoY/QoQ mainly on account of decline in Active Pharmaceutical Ingredient /intermediate sales. Ebitda margin at 11.6% (inline estimate) expanded by 93 basis points YoY mainly due to gross margin expansion on stabilizing input cost while contracted 34 bps QoQ on lower sales.

We downgrade our earning per share estimates by 21.3%/11.2%/10.4 for FY24E/FY25E/FY26, assuming lower-than-expected sales and Ebitda margin. Maintain 'Accumulate' with the revised target price of Rs 562 at 16 times FY26P/E.

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