API & Intermediates Fuel 58% Growth in Q2FY24 for Aarti Pharmalabs

Aarti Pharmalabs Q2FY24 result updates

API & Intermediates Fuel 58% Growth in Q2FY24 for Aarti Pharmalabs

Company Name: Aarti Pharmalabs Ltd | NSE Code: AARTIPHARM | BSE Code: 543748 | 52 Week high/low: 514/235 | CMP: INR 488 | Mcap: INR 4,418 Cr | PE: 23.3

Company Overview:

Aarti Pharmalabs Ltd is a subsidiary of Aarti Industries Ltd, involved in the manufacturing and distribution of pharmaceuticals and chemicals. The company operates in three business verticals: API & Intermediaries, CDMO & CMO Services, and Xanthine derivatives & allied. It is the largest Indian manufacturer of Xanthine Derivatives, widely used in beverages, cosmetics, and pharmaceuticals. The company boasts 150+ products, including 52+ patented files, and operates six manufacturing units in Gujarat and Maharashtra.

Topline dipped due to price reductions in certain products

In the recent quarter, the standalone revenue of the company declined by 11.96% YoY (-0.56% QoQ) to 356 Cr. This dip was attributed to the decrease in prices of certain products. However, the decline in selling prices was offset by an increase in volume and a decrease in raw material costs, resulting in an overall margin improvement across earnings levels.

Q2 EBITDA dips YoY, yet margins expand by 85 bps

The company witnessed an 8.18% YoY decrease in EBITDA, amounting to 74 Cr compared to the previous quarter’s 71 Cr. Surprisingly, the EBITDA margin expanded by 85 bps, reaching 20.72%. This margin growth, despite a drop in EBITDA, was fueled by increased volume and reduced raw material costs. On a QoQ basis, EBITDA increased by 3.19%, driven by lower raw material costs and operating expenditures.

APIs and Intermediates drive impressive 58% growth in Q2

Among the three business verticals, API & Intermediate emerged as the primary growth driver, contributing 58% to the revenue in Q2FY24. The remaining 42% was attributed to other verticals, such as CDMO & CMO Services and Xanthine derivatives & allied. The company foresees a robust growth trajectory in the CDMO / CMO pipeline, maintaining its significance in overall revenue.

Promising Future Outlook: Anticipated Growth Opportunities Ahead

The company is actively progressing on greenfield projects in Atali, Gujarat, expecting completion in H2 of FY 24-25. This project, with a total Capex plan of 350-500 Cr in phase 1, is set to increase capacity and introduce 40+ value-added products annually. Anticipating operating leverage in FY26, the company projects an EBITDA growth of 10-15% in FY24.

Valuation and Key Ratios

As of now, the stock trades at a multiple of 23.3x EPS (TTM) of Rs 20.9, with a market price of 488. The industry PE stands at 33.6x, while the company values the stock at 2.66 times its book value of Rs 183 per share. The EV/EBITDA multiple is at 13.47x, compared to the industry median of 18.62x. The trailing twelve months ROE and ROCE are 13.2% and 16.1%, respectively, with a robust interest coverage ratio of 14.2x, indicating strong solvency.

Q2FY24 Result Update: Standalone

➡️Standalone revenue witnessed an 11.96% YoY decline (-0.56% QoQ) to 356 Cr in Q2FY24 due to a drop in product prices.

➡️Gross profit decreased by 6.41% YoY (-1.48% QoQ) to 165 Cr, with gross margin expanding 275 bps YoY due to lower raw material costs.

➡️EBITDA decreased by 8.18% YoY but grew 3.19% QoQ to 74 Cr, driven by margin expansion. EBITDA margin expanded 85 bps YoY and 75 bps QoQ to 20.72% due to operating leverage.

➡️Operating profit (EBIT) decreased by 12.67% YoY (+2.50% QoQ) to 57 Cr, with EBIT margin expanding by 13 bps YoY and 48 bps QoQ to 16.14%.

➡️PAT decreased by 9.21% YoY (-1.44% QoQ) to 41 Cr, while the PAT margin expanded by 35 bps YoY to 11.73%.

➡️Earnings per share (EPS) for the quarter stood at 4.61 Rs, compared to 4.68 Rs in the previous quarter.


Aarti Pharmalabs Ltd, despite facing a decline in standalone revenue attributed to product price drops, showcased resilience with strategic measures. The focus on API & Intermediate business, upcoming greenfield projects, and favorable margins position the company for future growth. The financial indicators, along with ongoing expansion plans, suggest a promising trajectory, making Aarti Pharmalabs a noteworthy player in the pharmaceutical and chemical industry.

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