Anand Rathi 's research report on Aarti Drugs
Driven by strong domestic demand for API and traction in formulations, Aarti’s Q2 sales shot up 21.1% to Rs5.8bn. Higher realisation and lower overheads led to its EBITDA margin expanding 583bps to 20%. Absolute EBITDA grew 70% to Rs1.2bn. The better operating performance and lower tax rate boosted adj. PAT 133% to Rs752m. On such a strong Q2, we raise our FY21e/22e/23e EPS 13.9%/13.9%/7.1%. Revenue/PAT would clock 18.9%/37.6% CAGRs over FY20-23.
Outlook
After a strong Q1 FY21 the stock has run up 58% (adjusting for the split) and now trades at 22.3x/18.6x/14.4x FY21e/FY22e/FY23e earnings. We retain our Buy rating and raise our target to Rs813 based on 18x FY23e earnings.
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