Aarti Drugs Q3 PAT slides 37% YoY to Rs 37 cr

The pharmaceutical company's consolidated net profit tumbled 37.1% to Rs 36.69 crore in Q3 FY23 as against Rs 58.29 crore posted in Q3 FY22.

Net sales stood at Rs 663.96 crore in the quarter ended 31 December 2022, up 4.6% from Rs 634.80 crore reported in the corresponding quarter previous year.

Consolidated profit before tax dropped 36.9% to Rs 49.68 crore in Q3 FY23 as agasint Rs 78.69 crore recorded in Q3 FY22. Total expenses was at Rs 615.30 crore in Q3 FY23, rising 9.33% year on year (YoY)

EBITDA fell 26% YoY to Rs 71.7 crore in the quarter ended 31 December 2022. EBITDA Margin reduced by 443 basis points to 10.8% as compared with 15.2% reported in Q3 FY22.

The company's revenue from API business stood at Rs 557.3 crore (up 9% YoY), revenue from Formulation segment was at Rs 49.9 crore (down 9% YoY) and revenue from Specialty Chemicals, Intermediates & Others stood at Rs 57.1 crore (down 14% YoY) during the period under review.

On standalone basis, the company's net profit declined 34.3% to Rs 36.71 crore despite of 5.4% rise in revenue to Rs 625.53 crore in Q3 FY23 over Q3 FY22. The standalone business contributed around 92% to the consolidated revenue for the quarter.

Domestic revenue grew approximately by 8% while exports grew by around 2% YoY for Q3 FY23.

Adhish Patil, chief financial officer of Aarti Drugs, said, The company's overall API revenue for the quarter grew by 9% YoY. However, due to a correction in raw material prices, the company made some price adjustments in order to defend its market share. Owing to API price correction, the company undertook inventory loss of approximately Rs 6 crore as a prudent practice. All of this weighed on the gross margins by almost ~100 bps during the quarter.

The company has increased the inventory levels of imported key starting materials (KSMs) and other raw materials due to a sudden spike of Covid-19 cases and holidays related to a new year in China. API sales volume in exports were affected to some extent due to shortage of US Dollar in many countries. The finance cost also increased due to higher working capital requirements and rising interest rates.

The company has already received commitments from the customers for the brownfield expansion products as well as has received committed line of order for a campaign based product. As a result, the company is eyeing to double the revenue from Specialty Chemicals business within the next 12 months through the ongoing brownfield expansion.

The capex for 9M FY23 stood at Rs 115 crore and is expected to be in the range of Rs 200-250 crore for the entire FY23. The company's various capex initiatives are expected to be completed and fully scaled up over the period of next 2 years in a phased manner and are expected to bolster the topline and profitability growth.

Meanwhile, the company's board has declared the Interim Dividend of Re 1 for the financial year 2022-23. The record date for the same has been fixed on Wednesday, 8 February 2023.

Aarti Drugs is primarily involved in manufacturing and marketing of active pharmaceutical ingredients (API), pharma intermediates and specialty chemicals.

Shares of Aarti Drugs rose 1.10% to close at Rs 410.55 on Friday, 27 January 2023.

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