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Apr 10, 2013, 12.35 PM IST | Source: Moneycontrol.com

Buy Aarti Drugs; target of Rs 210: Sunidhi Securities

Sunidhi Securities is bullish on Aarti Drugs and has recommended buy rating on the stock with a target of Rs 210 in its April 09, 2013 research report.

Sunidhi Securities is bullish on Aarti Drugs and has recommended buy rating on the stock with a target of Rs 210 in its April 09, 2013 research report.
 
“Incorporated in 1984, Aarti Drugs (ADL), a part of the Rs3, 000 crore Aarti Group of Industries is engaged in manufacture and sale of bulk drugs and its intermediates. It manufactures vitamins, anti-arthritis, anti-fungal, antibiotics, ACE inhibitors, besides its range in anti-diabetic, anti-cholinergic, sedatives and anti-depressant drugs. Its product profile includes active pharmaceutical ingredients, steroids, pharma intermediate and speciality chemicals. Active pharmaceutical ingredients (API) include Cardioprotectant, AntiBPH and Traquilizar.”
 
“API products include Aceclofenac, Diclofenac Sodium, Clopidogrel Bisulphate, Metronidazole, Ornidazole and Tinidazole. Steroids include Glucocorticoid Steroids, which consists of Hydrocortisone Sodium Succinate Sterile, Hydrocortisone Acetate and Hydrocortisone Hemisuccinate. Speciality chemicals includes Benzene Sulphonamide, Benzene Sulphonic Acid, Benzene Sulphonic Acid Methyl Ester and Benzene Sulphonyl Chloride. With nearly three decades of manufacturing experience and strength of nine manufacturing locations, ADL has today transformed into multi-tonne, multilocation GMP complaint with the state-of the art facilities. Strategically located at Tarapur (Maharashtra) and Sarigam (Gujarat), the units are currently capable of making over 50 bulk actives, several key intermediates/speciality chemicals.”
 
“During Q3FY13, net profit rose 127.4 percent to Rs10.9 crore on 28 percent higher sales of Rs198.5 crore. OPM and NPM stood at 15.0 percent and 5.5 percent against 11.4 percent and 3.1 percent respectively in Q3FY12. During 9MFY13, net profit rose 119 percent to Rs31.4 crore on 35.1 percent higher sales of Rs604.7 crore. OPM and NPM stood at 14.1 percent and 5.2 percent against 10.7 percent and 3.2 percent respectively in 9MFY12. During FY12, sales rose 32.8 percent to Rs659.3 crore. Net profit fell 4.2 percent to Rs22.5 crore mainly on account of higher interest and depreciation costs. OPM and NPM stood at 12.0 percent and 3.4 percent against 13.1 percent and 4.5 percent respectively in the previous year.”
 
“ADL continues to enjoy economies of scale due to its large production capacities in Anti Diarrhea, Anti Inflammatory, Anti Fungal and Anti Biotic segment. Bigger market share will automatically help it to remain competitive in market due to lower overheads and better bargaining power. ADL is constantly gearing up to cater the demand with a diversified product basket of Anti-diabetic, Anti-inflammatory, Anti-hypertensive and Cardio vascular therapeutic drugs. ADL increased market share of its existing molecules in the Antibiotic and Anti-fungal segment in the year 2011-12. To cope up with the demand ADL has already expanded its existing products’ capacities. There is also a shift in demand from, drugs treating hygiene related diseases to drugs treating lifestyle related diseases in the urban sector. With growing exports of finished dosage formulations to regulated countries, even API facilities must have cGMP certifications. ADL facilities meet highstandards and are approved to supply API to many such ready-formulations exported to regulated markets. With regard to the affected manufacturing units in Tarapur, ADL clarified that these plants contribute about 13 percent of the total sales of the company on an annualised basis and assets of the affected plant are adequately insured.”
 
“ADL has taken efforts to procure the affected intermediate from outside and the supplies would be restored within a month approximately. Timeframe to rebuild the affected intermediate plant is being worked out. ADL said in a statement. At the current market price of Rs159, the share is trading at a P/E of 4.5x on FY13E and 3.4x on FY14E. We recommend BUY with a target price of Rs210 in the medium term,” says Sunidhi Securities research report.

Public holding more than 90% in Indian cos

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