Recently, on 5th Feb’21, we finally closed the coverage on the stock and booked complete profit in our Model Sheets as well.
Aarti Drugs has been a great wealth creator for us and our members. We first initiated coverage on the same in Feb’14 around 27-28 odd levels (adjusted for bonuses) and soon got a good exit opportunity with 200% + gain in less than 6 months. This time around, we got ~400% return from the stock in ~2.5 years.
Below, we have produced the update shared on 5th Feb’21 for your reference.
Aarti Drugs (NSE – AARTIDRUGS) – Sep’18 Alpha stock
CMP – 677.60 (BSE); 678.90 (NSE)
Rating – Negative and Coverage Closure; this is not an investment advice (refer rating interpretation)
Aarti Drugs Investment report was initiated in Sep’18 around 137-138 odd levels (adjusted for 3:1 bonus).
The company is having an extraordinary FY 21 on the back of significant uptick in prices for its products and as a result recording both higher sales and profitability. In the 9M FY 21, the company has recorded EBITDA margins of 21.5% against the average of 14-16% recorded in the past.
The major gains have been on the back of price inflation while the volume growth has been 10-12%.
The product prices did correct in the Sep’20 quarter and as a result EBITDA margins contracted from 24.60% in Q1 FY 21 to 20.14% in Q2 FY 21 and 19.95% in Q3 FY 21.
Going forward, in the medium term we believe there’s a risk of contraction in the end product prices and the same could negatively impact both the sales growth (on the higher base of FY 21), margins and thereby the growth in the profits of the company.
Further, the major growth will only start accruing from FY 23-24 when the company will commercialize the greenfield CAPEX of Rs 600 crore.
Thus, considering the above risks, we have a negative rating on the stock and also closing coverage on the same.
If you are struggling to find good Stock ideas for investment, you are reading just the right stuff and can access latest Stock Reports, Special situations and Model Sheet in Premium Memberships HERE
Disclosure: As on date, I don’t have any investment in the stock.
Ph.: +91-727-5050062, Mob: +91-9818866676
Email: [email protected]
Positive – Expected return of ~15% + on annualized basis in medium to long term for investment recommendations and in short term for Special situations
Neutral – Expected Absolute return in the range of +/- 15%
Negative – Expected Absolute return of over -15%
Coverage closure – No further update on the stock
% weightage – allocation in the subject stock with respect to equity investments
Short term – Less than 1 year
Medium term – Greater than 1 year and less than 3 years
Long term – Greater than 3 years
Research Analyst Details
Name: Ekansh Mittal Email Id: [email protected] Ph: +91 727 5050062
Analyst ownership of the stock: No
Details of Associates: Not Applicable
Analyst Certification: The Analyst certify (ies) that the views expressed herein accurately reflect his (their) personal view(s) about the subject security (ies) and issuer(s) and that no part of his (their) compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report.
Disclaimer: www.katalystwealth.com (here in referred to as Katalyst Wealth) is the domain owned by Ekansh Mittal. Mr. Ekansh Mittal is the sole proprietor of Mittal Consulting and offers independent equity research services to investors on subscription basis. SEBI (Research Analyst) Regulations 2014, Registration No. INH100001690
The views expressed are based solely on information available publicly and believed to be true. Investors are advised to independently evaluate the market conditions/risks involved before making any investment decision
A graph of daily closing prices of securities is available at www.bseindia.com (Choose a company from the list on the browser and select the “three years” period in the price chart
This report is for the personal information of the authorized recipient and does not construe to be any investment, legal or taxation advice to you. Ekansh Mittal/Mittal Consulting/Katalyst Wealth is not soliciting any action based upon it. This report is not for public distribution and has been furnished to you solely for your information and should not be reproduced or redistributed to any other person in any form. This document is provided for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. Ekansh Mittal or any of its affiliates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Neither Ekansh Mittal, nor its employees, agents nor representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information. Ekansh Mittal/Mittal Consulting or any of its affiliates or employees do not provide, at any time, any express or implied warranty of any kind, regarding any matter pertaining to this report, including without limitation the implied warranties of merchantability, fitness for a particular purpose, and non-infringement.
The recipients of this report should rely on their own investigations. Ekansh Mittal/Mittal Consulting and/or its affiliates and/or employees may have interests/ positions, financial or otherwise in the securities mentioned in this report. Mittal Consulting has incorporated adequate disclosures in this document. This should, however, not be treated as endorsement of the views expressed in the report.
We submit that no material disciplinary action has been taken on Ekansh Mittal by any regulatory authority impacting Equity Research Analysis.
Disclosure (SEBI RA Regulations)
Whether the research analyst or research entity or his associate or his relative has any financial interest in the subject company/companies and the nature of such financial interest – No
Whether the research analyst or research entity or his associates or his relatives have actual/beneficial ownership of 1% or more securities of the subject company (at the end of the month immediately preceding the date of publication of the research report or date of the public appearance) – No
Whether the research analyst or research entity or his associate or his relative has any other material conflict of interest at the time of publication of the research report or at the time of public appearance – No
Whether it or its associates have received any compensation from the subject company in the past twelve months – No
Whether it or its associates have managed or co-managed public offering of securities for the subject company in the past 12 months – No
Whether it or its associates have received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past 12 months – No
Whether it or its associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past 12 months – No
Whether the subject company is or was a client during twelve months preceding the date of distribution of the research report and the types of services provided – No
Whether the research analyst has served as an officer, director or employee of the subject company – No
Whether the research analyst or research entity has been engaged in market making activity for the subject company – No