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Anand Rathi
Aarti Ind (Buy)
Target: ₹1,200
CMP: ₹1,024.45
Muted demand from user industries and lock-down hit lower utilisation, mainly in its specialty chemicals division, hurts Aarti’s Q1 performance. We are upbeat on its long-term performance as it is working on new chemicals, expected to start from FY23 and due to new product launches. Further, its plans to capitalise nearly ₹2,400 crore capex in the next 18-24 months on different projects offer long-term revenue assurance.
Aarti Industries spoke of approximately 20 per cent annual growth in its pharma business driven by expansions (APIs, intermediates).
These would help deeper penetration in some key therapies (anti-hypertensives, cardio-vascular, oncology, corticosteroids). Besides, product launches in the US and more business with global innovators would help.
Added revenue of ₹1,000 crore over three years in its chemicals business would come from product launches, capacity expansion, debottlenecking and shifting of demand from China. Margins would improve with the rising share of high-margin products, greater efficiencies, higher utilisation and growing supplies to the regulated market in the pharma category.
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