Aarti Drugs (524348) Q1 24/25 earnings summary

Executive summary

• Q1 FY25 revenue declined 15.9%-16% year-over-year to INR 555-557 crore, with EBITDA down 22% and PAT down 30.6%-31% due to lower realizations and subdued API demand.

• API segment contributed 80% of Q1 FY25 revenue, with a focus on expanding specialty chemicals and formulations.

• Gross margin improved by 280 bps year-over-year to 35.4% in Q1 FY25, despite lower absolute profits.

• Dermatology product operations commenced but faced scale-up issues, impacting PBT by INR 6 crore in the quarter.

• Audited standalone and consolidated financial results for the quarter ended June 30, 2024, were approved by the Board on July 26, 2024.

Financial highlights

• Q1 FY25 EBITDA was INR 66 crore, with an EBITDA margin of 11.9%; PAT stood at INR 33 crore, and EPS was INR 3.62, down 30.1% year-over-year.

• Gross margin for standalone business improved to 34.1%-35.4%.

• Formulation segment revenue reached INR 70.4-70.5 crore, up 4.2% quarter-on-quarter but down 21.6% year-over-year.

• Standalone and consolidated net profit for Q1 FY25 was INR 26.91-33.27 crore, down from INR 39.54-47.97 crore in Q1 FY24.

• PAT margin for Q1 FY25 stood at 6.0%, a decrease of 130 bps year-over-year.

Outlook and guidance

• Margin improvement anticipated in FY25, targeting 13%-14% EBITDA margin in H2, driven by export growth, backward integration, and new specialty chemicals facility at Sayakha.

• Full-year API business expected to post some growth, with high single-digit volume growth for the year.

• Specialty chemicals segment projected to achieve 50% year-on-year growth in H2 FY25.

• Long-term revenue target of INR 4,000-4,500 crore by FY27, assuming current prices and volume growth.

• Oncology formulation sales expected to begin in FY26, with majority of sales from FY27.