Aarti Drugs Limited - Technofunda | Globe Capital Market LTD.
Aarti Drugs Limited – Technofunda

Aarti Drugs Limited is the prime candidate to benefit from the government’s push for indigenous API manufacturing.

Overview and Recommendation


Aarti Drugs Limited is the prime candidate to benefit from the government’s push for indigenous API manufacturing. At the CMP of Rs 824, the stock is trading at ttm P/E multiple of 25.9x with ttm EPS of Rs 31.81.


Aarti Drugs Limited was established in the year 1984 and forms part of $900 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 and Specialty Chemicals. and also manufactures formulations through its whollyowned subsidiary- Pinnacle Life Science Private Limited. Products under APIs includes Ciprofloxacin Hydrochloride, Metronidazole, Metformin HCL, Ketoconazole, Ofloxacin, Diclofenac derivatives etc. whereas Specialty Chemicals includes Benzene Sulphonyl Chloride, Methyl Nicotinate etc.

Key Triggers:

Minimal impact on business due to Covid-19: Healthcare Industry being into essential services has not been adversely impacted due to the countrywide lockdown. There is likely to be no impact of Covid-19 on the capital and financial resources, profitability and liquidity position of the company. The smooth movement of cash flows will ensure ability to service debt and other financing arrangements. Due to essential nature of company’s business and pharmaceuticals being included in essential goods we don’t see any impact on demand of products.

Strong Q3FY21 earnings & API business opportunities push Aarti Drugs: In the December’2020 quarter, the Company recorded consolidated quarterly revenue from operations of Rs.530.25 Crores with year-on-year increase of 11.98%. API segment contributed approximately 87% and formulation around 13% of the total consolidated revenues. Consolidated EBITDA for the quarter ended December’2020 is Rs.107.76 Crores, up by 59.11% and consolidated profit after tax for the quarter ended December’2020 is Rs.68.03 Crores, up by 144.88% on a year-on-year basis. Consolidated EBITDA margin improved from last year to 20.25%. Debt/Equity ratio of the Company reduced further down to 0.39 as of December’2020 on a consolidated basis due to strong internal accruals. This puts the Company in a good position for raising long term debt in addition to strong internal accruals to finance upcoming projects.

Valuation & View:

Aarti Drugs Limited is the prime candidate to benefit from the government’s push for indigenous API manufacturing. At the CMP of Rs 824, the stock is trading at ttm P/E multiple of 25.9x with ttm EPS of Rs 31.81.

Key Risk:

Delay in the ramp-up of the recently-added capacity; more-than-expected competition in generic APIs.

Technical View:

AARTIDRUGS has witnessed a vertical rise from 105 to 1029 levels in a short time span of 6 months. Post that, it has been trading in a congestion zone (600-810 levels) since Oct 2020. On May 10, 2021, stocks has witnessed breakout from the above mentioned congestion zone with noticeable rise in volumes.

Considering the current chart patterns, we suggest traders to buy AARTIDRUGS as we are  expecting it to test 1000 levels in near term.


Considering both the factors fundamental & technical parameter, we recommend a ‘BUY’ in AARTIDRUGS at current level for the target price of Rs. 1000 with close below stop loss of Rs. 720.


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