Anand Rathi is bullish on Aarti Drugs has recommended buy rating on the stock with a target price of Rs 745 in its research report dated November 21, 2018.
Anand Rathi's research report on Aarti Drugs
Fuelled by product launches, expanded capacity and market-share gains in its products, Aarti?s revenue and PAT would clock 14% and 21% CAGRs over FY18-21. Also, supported by price rises and volume growth, its API business would improve. We maintain our Buy recommendation, with a higher price target of `745. API business momentum to continue. The company?s APIs cover the therapeutic categories of anti-inflammatories, cardio-protectants, antifungals, antibiotics, antidiabeties, sedatives and vitamins. To diversify, the company continues to focus on different therapies; at present, antibiotics brings ~35% to its API segment revenue. It has recently completed the expansion of capacity for one of its key antifungal molecules. We believe that, with the expanded capacities in place, higher prices and volume growth would boost value growth, and expect a ~16% API revenue CAGR over FY18-21.
We reduce our FY19e and FY20e EBITDA respectively 8.2% and 4.3%, due to lower-than-expected gross margins because of the raw-material-supply disruptions. We roll forward our estimates to FY21 and retain our Buy recommendation on the stock, with a revised price target of `745 (earlier `720), based on 12x FY21e EPS.
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