|Healthcare||Pharmaceuticals & Drugs||₹463.70||04-Nov-2022|
India ranks 3rd in the world for production of pharmaceuticals by volume and 14th by value and is the largest producer of generic medicines globally, contributing 20% share in global supply by volume, leading and is a leading manufacturer of vaccines and accounts for 60% of total vaccines. India’s domestic pharmaceutical market stood at USD 42 Bn. and is likely to reach USD 120-130 Bn. by 2030 with an expected growth of 11-12%. In the FY2022, India reported an export of USD 24.6 Billion and received FDI worth USD 1.41B. The cost of manufacturing is almost 33% lower than western markets. The further growth of the pharma industry can be linked with the decline of China’s API(Active Pharmaceutical Ingredients) market and promotion of Indian API manufacturing by governnment in the form of PLIs (Production Linked Incentives).
About the Company
Aarti Drugs, incorporated in 1984, is a part of Aarti Industries Ltd. and is engaged into manufacturing and selling Active Pharmaceutical Ingredients (API’s), Pharma Intermediates, Specialty Chemicals as well as Formulations. It is exporting its API’s and Speciality chemicals to over 100 countries across the globe.
Overview of the business
- The company is one of the leading producres of Metformin in the world, main first-line medication for the treatment of type 2 diabetes.
- It is one the largest producers of some vital drugs such as Tinidazole, Nimesulide Ketoconazole, Metronidazole Benzoate in the world.
- The company has 12 manufacturing units out of which 10 are dedicated to API manufacturing and in total has a monthly capacity of 4,407 MT.
- The esteemed clients of the company include Sun Pharma, Lupin, Mankind, Pfizer and many more and 37% of the revenue for the company comes from exports.
|52 Week H/L (₹)||608.00/378.00|
|Market Cap (Crores)||4,307|
|Face Value (₹)||10.00|
|Book Value (TTM ending 2022-09)||119.86|
|EPS (TTM ending 2022-09)||20.21|
RATIO ANALYSIS AMONG PEERS
|RATIOS||AARTI DRUGS LTD.||SUN PHARMACEUTICALS INDUSTRIES LTD.*||HIKAL LTD.*|
|Price-to-Earning Ratio (TTM)||22.99||60.92||41.62|
|Price-to-book value (TTM)||3.88||4.77||3.98|
Above stated ratios are based on the available recent quarterly results of the companies as on the date of report.
Sun Pharmaceuticals ltd is taken because, it is the pharma industry leader in terms of Market Cap.
Hikal ltd. is taken for comparison as it is of the similar size in terms of market cap
- In the Q2 of FY23, company reported a consolidated sales or ₹625.00 cr as compared to ₹551.00 Cr in the previous quarter with a growth of 12%
- The operating profit margins of the company have compromised to 11% in the recent quarter as compared to the 14% OPM in the corresponding quarter in previous year due to increased material costs, which is a similar case in other companies of the industry as well.
- The company earned a PAT of ₹37.00 Cr and the EPS of ₹3.95 was available for the shareholders.
- The stock price was consolidated in a range of 108-180 for 5 years till 2020, then after the breakout from the range, it went upto the high of 1026.95 in just 6 months, a rise of more then 400%.
- After falling from the high, it was consolidated in the range of 804-630, after breaking down the range, it made a new low of 378.00.
- The range of 500-520 is strong resistance zone, a good upside can be witnessed if it breaks the range of 520.
- Aarti Drugs Ltd. is a fundamentally strong company with a ROE of 21.03%, ROCE of 20.75% and EPS of ₹20.21, which is better than most of the companies in the industry.
- The changes in the lifestyle have lead to a growth in the number of diabetic patients all over the globe, and the company can benefit from this condition as it is one of the leading producers of Metformin in the world, first line medication of Type-2 Diabetes.
- There are high chances of growth in global API market, the company can tap the opportunity by increasing its exports and also the Indian govt. has plans to support the Indian Pharma industry.
- The promoters holding which was 61.62% in Q3 of FY20 has declined to 59.77% in the Q2 of FY23.
- The recovery and collection the company is on the weaker side, as the increase in the debtor days have resulting in negative cash flow from operations and the company has been taking short term borrwings to incur its operating as well as investing expenses