Aarti Drugs (524348) Q2 24/25 earnings summary

Executive summary

• Q2 FY25 revenue declined 7% year-over-year to ₹599.8 crore due to lower realizations and subdued API demand, but grew 8% sequentially from Q1 FY25; H1 FY25 revenue was ₹1,156.3 crore, down 11% year-over-year.

• EBITDA for Q2 FY25 was ₹68.5 crore (margin 11.5%), and PAT was ₹35 crore (margin 5.8%), both down year-over-year; H1 FY25 EBITDA was ₹135 crore (margin 11.7%), and PAT was ₹68 crore (margin 5.9%).

• API segment contributed 81% of Q2 FY25 revenue, with Formulation at 11%, Specialty Chemicals at 5%, and Intermediates & Others at 3%.

• The company completed a buyback of 665,000 shares at ₹900 per share in September 2024, reducing share capital to ₹91.27 crore.

• The first sustainability report was published, highlighting efforts to reduce carbon footprint.

Financial highlights

• Q2 FY25 EBITDA margin was 11.5%, down 50 bps year-over-year; H1 FY25 EBITDA margin was 11.7%, down 70 bps year-over-year.

• EPS for Q2 FY25 was ₹3.83, down 11% year-over-year; H1 FY25 EPS was ₹7.48, down 21% year-over-year.

• Gross margin improved to 34.9% in H1 FY25 from 32.9% in H1 FY24.

• Net operating cash flow for H1 FY25 was ₹168 crore, down from ₹219 crore in H1 FY24.

• Net debt to equity ratio improved to 0.46 as of Sep 2024.

Outlook and guidance

• Management expects pricing to improve as prices have stabilized and volumes grew 10% sequentially; operating leverage anticipated to improve in H2 FY25 with new projects.

• Capex of ₹600 crore (FY22–FY26) focused on brownfield expansion, backward integration, and capacity enhancement, with majority funded through internal accruals.

• Long-term revenue guidance revised to ₹3,500–4,000 crore by FY27, down from earlier ₹4,200–4,500 crore, due to lower API prices.

• EBITDA margin target is 14.5–15.5% in the long term, with near-term margins expected to improve from Q4 FY25 as new projects come online.

• Production ramp-up of Salicylic Acid expected to reach 300+ tonnes/month by October 2024 and 1,800 tonnes through FY25 & FY26.