The turns are high but they will be lower on reported nos.They are saying they use some volume for captive consumption which doesn’t show up in revenues but improves margins.While making a comparison with other such companies,you’ll have to adjust for the volume they are using for captive consumption.
1 Like
From the concall summary, the management has said that they have got the benefit of Anti- dumping duty levied by Govt on Ofloxacin…
But to my knowledge, they had also made a complaint on Anti-dumping duty for Ciprofloxacin being made by them… On which the Govt had conducted an enquiry and concluded in favour of Aarti drug recently …
This benefit of Anti-dumping duty on Ciprofloxacin should come to Aarti drugs in Q2…
Can someone please confirm this…
Because I don’t find any comment on
anti dumping duty on Ciprofloxacin in which Aarti has leadership position…
Discl: invested …may be biased !
As per the concall - "Another product, ciprofloxacin (largest product contributing 22% to sales) has a provisional duty on it but no rates have been prescribed yet (to be done in a couple of months). India imports 300 MT per of this API and the company could benefit accordingly.
7 Likes
Robust financials along with fundamentals seem to be driving the stock price of Aarti drugs…
The Govt’s has recently put Anti-dumping duty on Ofloxacin produced by Aarti drug and the Govt considering Anti-dumping duty in Ciprofloxacin which would be favourable to Aarti drugs…
Another intersting part of Aarti’s business is that its exports are mainly to Asian countries apart from Domestic consumption. Now they are trying to enter USA and European market…also adding more API to their diabetic portfolio…all Capex through internal accruals…
Perhaps the only API maker in India with 60% promoter holding…there seems to be no promoter shares pledged…
It is likely that company may consider split share during the forthcoming AGM.
https://simplywall.st/stocks/in/pharmaceuticals-biotech/nse-aartidrugs/aarti-drugs-shares/news/are-robust-financials-driving-the-recent-rally-in-aarti-drugs-limiteds-nseaartidrugs-stock/
Discl: invested @ 460 level in March 2020…partially booked profit @1600 level…
May be biased in my views… Please do your own analysis before putting your hard earned money in any stock.
4 Likes
Always we should compare the valuation P/E with similar API makers…and see where it stands among its peers…
In fact , the balance sheet of Aarti drug is more cleaner than its peers with strong Promoter holding of 61%, very low debt, no promoter shares pledged…FCF… Capex through internal accruals… All are positive when compared with its peers…
It seems to be getting it’s true valuation it deserves from the market…
Discl: I am invested … may be biased…I may be wrong … Please apply due diligence before putting your money…I am not a SEBI registered stock advisor…
5 Likes
3:1 bonus share announced by Aarti Drugs.
I am new here and thanks to this forum that I was invested in this stock.
Stock hit UC on this(presumably) I have never understood this fascination with stock splits and bonuses.The EPS will also reduce in the same proportion post bonus.On a net basis,there is no value add here.
8 Likes
https://documentcloud.adobe.com/link/track?uri=urn:aaid:scds:US:be6a06a2-4500-4a9c-8a47-98bd7c8890a8
An interesting blog on Bonus shares
Please open the link below and scroll down to view …no need to log in…
Discl: invested…may be biased . … please make your own assessment before investment
1 Like
Anti dumping duty on Ciprofloxacin coming from China announced.Aarti drug will be the beneficiary
5 Likes
BSE/ NSE had written to Aarti Drug to explain the reason for unusual rise in price of the Stock. Here is the reply from The company.
Aarti Drugs board meeting scheduled on October 23 for Fund Raising
Aarti Drugs approved raising of 350 crores.
Aarti drugs declared their Q2 numbers - YOY numbers are very good - but not relevant. QOQ there is a 10% dip in NP
Aarti’s Q2 investor call was a very exhaustive one and it seemed there were many questions still. Some highlights:
-> 55/45 split between volume growth and realization growth in Q2. As guided earlier,prices have come down. But the guidance of better margins structurally continues. Moreover,December quarter will also see similar margins as Q2 given that prices are stable. March quarter should see both strong revenue growth and good profitability.
-> The fund raising resolution is just an enabling resolution. If valuations are attractive company might raise via QIP. Debt is an attractive option too. No fast tracking of capex plans.
-> New capex will be in the specialty chemicals,APIs and intermediates segments. Company intends to avail the benefits of the PLI scheme. Might float a 100% subsidiary for the new capex as well. Some part of capex will also be towards backward integration.
-> Company has already zeroed in on a technical partner for the chlorosulfonation foray.ADL will develop most of the technology in-house.
-> Given social distancing and overall lesser public activity,the spread of infective diseases has fallen sharply affecting the sales of antibiotics and anti-protozoal products. However,once public activity resumes or once there is a vaccine in the market,these segments will realize their full potential.
-> Company has a payment cycle of little more than 3 months. Thus,a lot of the sales of H1 have moved to receivables affecting cash flows. Mgt has guided for 2.5x kind of OCF in H2 vs. H1.
-> Asset turns on new capex will be north of 2.5x,maybe 3x as well. Some of this capacity will be used for captive consumption too. Peak sales on current capacities will be 2500cr.+,with debottlenecking could add 250-300cr. more. On new capex management expects 1600 cr. kind of additional sales.
-> Formulation business continues to do well and the third party manufacturer has been asked to increase capacities. Mgt expects this piece to generate 350cr. kind of revenues next year. Most growth here is led by pricing but volume growth is also coming now.
-> Company has the ability to immediately pass on any RM hardening. Majority of the contracts have this clause.
-> USFDA approval is pending and any movement on that could provide additional kicker to margins.
Since last quarter management’s tone has been far more upbeat than earlier. I feel cash flows remain a key monitorable for now. Overall,with the kind of capex plans the company has there is a very good chance that current margins(~19-20%) will sustain if not improve over 2-3 years. This is of course,assuming no shocks on the pricing front. If there is something I missed from the call,please feel free to add.
Disc.: Invested. Views are biased.
15 Likes
Aarti Drugs Q3 concall highlights -
Sales contributions - API- 87 pc, Formulations - 13 pc. Within APIs, domestic sales @ 67 pc, 33pc exports. Within formulations, Domestic sales @ 69 pc, 31 pc exports. API sales growth - 13 pc, Formulations sales growth - 5 pc.
API breakdown -
Antibiotics - 44 pc
Anti Protozoal - 13 pc
Anti Inflamatory - 14 pc
Anti Diabetic -14 pc
Anti Fungal - 10 pc
Rest - 7 pc
Anti Protozoal demand affected due lesser travel due Covid.
Consolidated EBITDA up 59 pc at 108 cr. PAT up 144 pc at 68 cr. EBITDA margins at 20.25 pc. Debt/Equity at 0.39 pc. Total Debt at 334 cr vs aprox annual profit of aprox 300 cr. Lower leverage provides financial headroom for expansions. Long term Debt avlb to the company at aprox 6.7 pc which is very competitive.
Carried out capacity expansion in Anti Inflamatory APIs. In process of comissioning new Anti Diabetic plant. Brownfield expansion of Anti biotics in progress.
Present levels of EBITDA likely to continue into Q4. Company not too sure if this can be sustained over a long time. Long term EBITDA call to be taken only after the entire globe is out of the Pandemic. Min EBITDA margins that company is aiming at is 18 pc.
Current brownfield expansions can take revenues upto 2500 cr. After extra brownfield and greenfield expansions, company aims to achieve a revenue tgt of 4500 cr in 5 Yrs ( minimum ). Company aims to hit 24-25 pc EBITDA margins five yrs down the line ie with 4500 cr sales.
H1 capex at 40 cr. H2 capex estimate at 40 cr. Greenfield expansion to start in next FY, taking total Capex to 600 cr. Current Net Block at aprox 650 cr. So…basically, the company intends to double its Net Block ( well almost ).
Capex money to be spent on 7 projects - Metformin, 02 intermeidates for captive consumption, sulphuric acid plant for captive consumption plus chlorosulhonation product, Skin treatment API, 02 PLI projects
Separate capex for Formulations over next 2-3 yrs - aprox 50 cr.
Present products face competition primarily from China. With apreciating Yuan, Aarti Drugs is becoming more competitive. These 20 -21 pc kind of EBITDA margins are likely to be sustained in the near future.
Disc : invested.
9 Likes
Aarti Speciality Chemicals Limited, a wholly-owned subsidiary of Aarti Drugs Limited receives an approval accorded under Production Linked Incentive (PLI) Scheme for Pharmaceutical Sector
7 Likes
Aarti dug board meeting on 19 March to consider buy back !
They had bonus issue only 6 month back…I think the promoters are investor / shareholder friendly !
1 Like
what is the implication of Promoters participating in the Buy-back , is it not a negative sign ? How should the normal retailer play his/her cards in this case …as my understanding was that Buyback is a sign that share is undervalued and has a good prospects in the eyes of the mgmt ( hence the buyback ) but when the promoters are themselves participating …it leads to some Qs being raised …? Comments from learned investors are welcome ?