Aarti Drugs Shares Rise 5% on Solid March Quarter Earnings

Shares of Aarti Drugs rose 5% on May 2 after a 7% rise in revenue.

Shares of Aarti Drugs, which makes active pharmaceutical ingredients, drug intermediates and speciality chemicals, rose 5% on May 2 after a 7% rise in revenue to Rs 743 crore, compared with Rs 697 crore reported a year ago. The company posted a revenue of Rs 665 crore in Q3FY23.

Net profit increased 2% to Rs 56 crore, compared to a core profit of Rs 55 crore reported in the March 2022 quarter. In the third quarter, the company’s net profit fell 37% year-on-year to Rs 37 crore.

EBITDA was 6% higher at Rs 94 crore than the Rs 89 crore reported in March FY22. Margins contracted from 12.8% in Q4FY22 to 12.7% in Q4FY23. The margin for Q3FY23 was 10.8%.

“The company’s performance improved sequentially due to lower input costs and efficient working capital management. On a sequential basis, the EBITDA margin improved by approximately 190 basis points due to operating leverage driven by higher capacity utilisation. With the imminent foray into dermatology and backward integration in the second half of FY24 and stable input costs, margins are expected to continue to improve on a sequential basis,” said Adhish Patil, Chief Financial Officer, Aarti Drugs Limited.

He further expects EBITDA margins to be mean reverting by the end of FY24 and will likely remain in the 14-16% range.

In FY23, revenue increased by 9%. At the same time, margin improvements from a healthy product mix were offset by lower volumes due to inflationary pressure on input costs and higher API costs, Patil said. “However, there will be a nice pickup in volumes from January 2023 and are expected to remain elevated over the next few quarters.”

The company’s market capitalisation has increased by more than 28% over the last month. Shares were trading 4.59% higher at 12:04 pm on the National Stock Exchange, with benchmark Nifty Pharmaceuticals trading 0.22% lower at 12,585.80.

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