Aarti Drugs Ltd. share price target

We expect revenue and PAT CAGR of 18.2% and 37.6% respectively over the period FY20-FY23E and recommend "Buy" with TP of INR 812.

We maintain our Buy rating on Aarti Drugs (ADL) and retain the TP to Rs910 based on 16x March'20 EPS of Rs56.8. ADL is the market leader in 9 out of 10 APIs manufactured by the company. That said, the company is likely to benefit from vertical integration which is likely to drive future growth. We expect margins to improve post the launch of new products and additional capacities of Ciprofloxacin and Metformin APIs in place. Key risks to our assumptions include...

We maintain our Buy rating on Aarti Drugs (ADL) and revise the TP to Rs960 (earlier TP Rs940) based on 16x March'20 EPS of Rs60.1. AIL's Q4FY18 results exceeded our expectations. The pharma major's revenue grew 3% YoY, margin improved 260bps to 17.1% and net profit grew 10% YoY. That said, the company is likely to benefit from vertical integration which is likely to drive future growth. We expect margins to improve post the launch of new products and additional capacities of Ciprofloxacin and Metformin APIs coming on stream. Key risks to our assumptions include slowdown in the domestic pharma market and regulatory...

Valuation and key risks: We see strong scope for re-rating and ADL using our conservative five-year AOCF/EV yield method to arrive at a TP of Rs940, implying an upside of 25% over CMP. We expect the company to report RoE of 23% and RoCE of 15% for FY20. ADL outscores many of its peers due to its efficacious presence in the domestic and emerging markets and its integration across the value chain. Key risks to our call include slowdown in the domestic market and regulatory risks for its...