Aarti Drugs - Rs.154.00

Aarti Drugs Ltd (ADL), has emerged as a fully integrated research-driven company developing processes for active pharma ingredients (API) and intermediates and is a leading manufacturer of bulk drugs in some popular therapeutic groups and speciality chemicals. It has a strong presence in the anti-diarrhoea, anti-inflammatory therapeutic groups with products such as Tinidazole, Metronidazole, Nimesulide, Rofecoxib and is the largest producer of Benzene based basic and intermediate chemicals in India. It also manufactures vitamins, anti-asthama, anti-HIV, anti-arthritis, anti-fungal, antibiotics, ACE inhibitors, anti-osteoporosis, anti-diabetic, anti-cholinergic, sedatives and anti-depressant drugs. ADL commands a leadership position with over 70 per cent market share for more than 15 principal products including secnidazole, ornidazole, metronidazole etc. It is the sole supplier of Tinidazole to Pfizer Inc worldwide and commands 85 per cent market share in the world. Its customer list include companies like Ranbaxy, Dr Reddy’s Labs, Nicholas Piramal, Zydus Cadila, Cipla, GSK Pharma, Pfizer, Merck, J B Chemicals etc. It also exports to more than 80 countires and international giants like Abbott, Aventis Pharma,Bayer, Clariant, Glaxo SmithKline, Pfizer, Merck, Wyeth, Searle to name a few.

Its manufacturing facilities at Tarapur, Sarigam and Turbhe with state-of-the-art R & D Center at Turbhe, is recognized by the Department of Science and Industrial Research, Government of India. Its manufacturing facilities have been audited and approved by MNCs such as Pfizer, Rhone Poluenc, Merck and several other overseas buyers. It has identified few products for USDMF filing and intends to file at least 6 to 8 drug master file (DMF) during the current year. With already 30 molecules in its basket, ADL is planning to commercialize another 10 molecules the in current year to cash in on the opportunity presented by the patent expiry of many blockbuster molecules in the near future.

Fundamentally as well as financially, the company is strong with huge potential for growth. For FY05, it reported a turnover of Rs.242 cr. with 11% growth and NP of Rs.14 cr., an increase of 16% compared to last year. It maintained its dividend of 30% and reserves stood at Rs.65 cr. leading to a book value of Rs.65. For FY06, the company is expected to clock a turnover of Rs.315 cr. and NP of Rs.24 cr. This works to an EPS of Rs.21 on its current equity of Rs.11.70 cr. and EPS of Rs.16 on its fully diluted equity of Rs.15 cr. Investors are strongly recommended to buy at current levels with a price target of Rs.225 (50% appreciation) in 12~15 months. Long-term investors can expect much higher returns if held for 24~36 months.