Aarti Drugs: A High-Conviction Play on India's API and Formulation Growth Story

Over the past few months, I’ve been closely tracking Aarti Drugs Ltd, a key player in India’s pharmaceutical and specialty chemicals space. This wasn’t just another trade — it was a conviction-driven decision backed by strong fundamentals, technical indicators, and management commentary.


▶ Why I Entered Aarti Drugs

Fundamental Value with Upcoming Growth Triggers:Aarti Drugs has undergone a phase of strategic expansion in APIs, formulations, and specialty chemicals. The management's FY26 revenue guidance of ₹3,000 Cr, coupled with expected EBITDA margins of 15–16%, signals a margin-accretive growth trajectory.

USFDA Approval & Global Expansion:The lifting of the import alert on the Tarapur facility in Feb 2025 is a major development. It not only unlocks exports to the US again but is also expected to improve visibility in the European market. This paves the way for better pricing, higher volumes, and wider reach.

New Product Pipeline:APIs like Metformin, Salicylic Acid, and Fluconazole, along with advanced formulations in oncology and DPP-4 inhibitors, strengthen the long-term outlook.

Capex Backed by Strategy, Not Just Scale:The company is investing in backward-integrated greenfield projects at Tarapur and Saykha, with a revenue potential of ₹250-300 Cr/year from these expansions.

 

▶ Technical Breakout & My Trades

From a technical standpoint, the stock showed a breakout setup around the ₹400 levels with strong support near ₹360-380. I executed multiple trades as part of my strategy, with both short- and medium-term holding durations. The overall result was a profitable trade outcome with net positive returns, especially on the later legs of the position.

Despite some early drawdowns, my conviction in the company’s evolving fundamentals allowed me to average wisely and ride the upside momentum as the stock approached the ₹470+ levels. 

"It wasn’t just a technical play. It was a blend of conviction, research, and patience."

 

▶ What Lies Ahead?

Even after booking profits, I continue to track Aarti Drugs closely. Here’s why I still believe the stock holds long-term value:

  • Formulation business (Pinnacle Life Sciences) is expected to grow at 20–25% YoY with improved margins.
  • Specialty chemicals are projected to scale from ₹130 Cr to ₹250 Cr+ in 2 years.
  • US exports are likely to rise significantly after regulatory clearance.
  • Renewable initiatives like the solar SPV investment will start delivering meaningful cost savings from FY26 onwards.

▶ Risks to Watch

  • Inventory levels (91–99 days) are on the higher side and could impact working capital.
  • Execution delays in greenfield projects might defer some revenue ramp-up. 
  • Raw material volatility and global pricing pressures remain near-term hurdles.


▶ Final Thoughts

Aarti Drugs is transforming from a traditional API player to a diversified pharma & specialty chemical company with a strong global footprint. While I’ve partially exited my positions, I see merit in keeping the stock on my radar for potential re-entry if valuations become attractive again.


Disclaimer: This blog reflects personal views based on analysis and trading experience. Please do your own research or consult a financial advisor before investing.

Comments

  1. SjJuly 17, 2025 at 4:19 AM

    Superb analysis

    ReplyDelete
  2. Freture TechnoJuly 31, 2025 at 2:28 AM

    Aarti Drugs stands out as a high-conviction investment driven by strong demand in APIs and formulations. Its diversified product portfolio, backward integration, and export potential position it well to benefit from India’s growing pharmaceutical sector and global supply chain shifts.
    PTFE Lined Valve

    ReplyDelete

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