The share price of Aarti Drugs, which manufactures active pharma ingredients, pharma intermediates and speciality chemicals, traded 5 percent higher on May 2 after the company reported a 7 percent increase in revenue at Rs 743 crore as against Rs 697 crore reported a year back. The company’s revenue stood at Rs 665 crore in Q3FY23.
Net profit increased marginally by 2 percent to Rs 56 crore compared to Rs 55 core reported in the March 2022 quarter. In Q3, the company’s net profit slumped 37 percent YoY to Rs 37 crore.
Earnings before interest, taxes, depreciation and amortisation (EBITDA) came in 6 percent higher at Rs 94 core compared to Rs 89 crore reported in March 2022. Margin contracted from 12.8 percent in Q4FY22 to 12.7 percent in Q4FY23. Margin stood 10.8 percent in Q3FY23.
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“The company’s performance improved considerably on a sequential basis due to ease in the input costs, and efficient working capital management. On a sequential basis, the EBITDA margins improved by ~190 bps due to operating leverage driven by improved capacity utilisation. The margins are expected to keep on improving on a sequential basis going forward with the upcoming foray into dermatology and backward integration in the second half of FY24 and stable input costs,” said Adhish Patil, Chief Financial Officer at Aarti Drugs Limited.
He further expects a mean reversion in the EBITDA margins by the end of FY24 and expect it to remain in the range of 14-16 percent.
For FY23, the revenue grew by 9 percent, while the improvement in margins due to a healthy product mix was offset by inflationary pressure on input costs and subdued volume offtake due to high API costs, Patil said. “However, there is a good pickup in the volume offtake from January 2023 onwards which is expected to remain higher for the next few quarters.”
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Market capitalisation of the company has increased over 28 percent over the last one month. At 12.04pm, the scrip was trading 4.59 percent higher on the National Stock Exchange with the benchmark Nifty pharma trading 0.22 percent down at 12,585.80 points.
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