Thread by @mmali09

#Specialsituation #Spinoff #Demerger #AARTIPHARM🧵

- Business overview
- Financials
- Valuations
- 1 year Concall highlights (Q1 FY22 to Q1FY23)

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1/14

2/ Co. overview

3/ Segments:

APIs & Intermediates for innovators & generic firms for a variety of applications like anti-cancer, anti-asthmatic, antihypertensive, oncology medicines.

Xanthine derivatives are used for beverages, as well as nutraceutical and other pharma applications.

4/ Existing & upcoming units

CAPEX - Rs. 350 - 500 Cr.
Adding 50+ new products in APIs & Intermediates

5/ % Export revenue:

US - 27%
EU - 27%
ROW - 27%
China - 12%
Japan - 7%

*FY22 figures

6/ Revenue & EBIT FY18 - FY23E (conservative est.)

- Revenue growing at 27% CAGR
- EBIT margins have fallen in recent times (industry wide)

*there is a difference of 100 Cr. sales in pre-demerger presentations. You'll see that in 7/

7/ Declared post-demerger

Financials & Valuations at CMP 313
P/E - 14.9x
EV/EBITDA - 9.6x

Q4 FY23 sales is taken conservatively at 400cr.

Aarti Dugs, an inferior business (we'll see how its different below) gets:
P/E - 23x
EV/EBITDA - 14.5x

aartipharmalabs.com/investors/apl-…

8/ Concall Notes - Q1 & Q2 FY22

9/ Concall Notes - Q3 & Q4 FY22

10/ Last concall notes - Q1 FY23

11/ How is Aarti Drugs inferior/different ?

Q3 FY22 concall

12/

Mgt. seems to have been walking the talk with exception of some delay in capex going live and "closely" achieving the EBIT% guidance. Commentary is encouraging and growth has been at blistering pace - 27% CAGR FY18-23.

13/

Positives:
- Sales growth pace haven't slowed
- Higher scale/value prod + regulated mrkt mix
- Tarapur - 200-250Cr. potential in 3yrs
- 50+ new products launch
- Additional 350-500Cr capex over 3yrs
- Dombivli plant doesn't contribute much where there is USFDA issue

14/

Close track:
- EBIT % falling (industry wide), have always guided for 18-20%
- Capex/New unit ramp up
- Incremental sales & high value prod. %
- USFDA issue resolved ?
- CDMO opp. ?

Disc: Small position

Not a Buy/sell recommendation

#Aartipharm just gave guidance for the next few yrs. Slowdown compared to last yr but this will likely translate into 19-20% PAT growth.

#Aartipharm Q1FY24 Highlights

- EBITDA margin guidance 20% + or - 2
- Expect to achieve 10-15% EBITDA growth guidance for FY24
- See ValuePickr for AGM notes

Insight from presentation, they have resolved USFDA issue at Dombivili API/Intermediates plant, now USFDA approved.

Xanthine:
- To make RM inhouse - Q2FY24, will be independent of China in Xanthine Chemistry
- Capacity increased by 1K TPA to 5K TPA
- Increasing volumes to offset value decline
- Largest domestic co.
- Cost of production is similar to China
- Competing with China & one EU player

CMO/CDMO:
- Operate from Phase 2 onwards
- Focus on scale up & commercialisation
- Expect this higher margins segment to grow to a reasonable size in coming years with potential to become 10% of FY24 sales

Technically: Moving strong