Quant Mutual Fund Enters Aarti Pharmalabs, Stock a China+1 Strategy Play

Quat Mutual Fund Makes a Major Investment in Aarti Pharmalabs

On Wednesday, Quat Mutual Fund, one of the oldest and pioneering mutual funds in India, made headlines with its substantial purchase of 10,51,000 shares of Aarti Pharmalabs. This significant move puts the spotlight on Aarti Pharmalabs, prompting a deeper look into the company.

Aarti Pharmalabs – A Brief History

Aarti Pharmalabs Limited (APL), originally known as Aarti Organics, was established in 1984 as a wholly owned subsidiary of Aarti Industries Limited. In October 2022, APL demerged into a separately listed entity, effective from July 2021. APL is part of the Aarti Group, a diversified chemical conglomerate with a turnover of Rs 134 billion in FY23. The company has garnered international recognition for its production of generic Active Pharmaceutical Ingredients (API), intermediates, and Xanthine derivatives. Additionally, APL offers Contract Development and Manufacturing Organization (CDMO) and Contract Manufacturing Organization (CMO) services.

Expertise and Global Reach

Over the years, Aarti Pharmalabs has developed robust and cost-effective processes for rapid scale-up and commercial production. It has become a preferred partner for the beverages, nutraceuticals, and pharmaceutical industries globally.

Quarterly Revenue Breakdown of Q4FY24

Xanthine Derivatives & Allied Products

In Q4FY24, 44% of Aarti Pharmalabs’ revenue came from Xanthine Derivatives and Allied Products. Xanthine derivatives are compounds structurally related to xanthine, a purine base found in various human tissues and fluids. These derivatives, including caffeine, theobromine, and theophylline, have significant pharmacological effects and are primarily used for their bronchodilator properties. APL is the largest Indian manufacturer of these derivatives, which find applications in beverages, nutraceuticals, and pharmaceuticals.

API & Intermediates and CDMO/CMO Services

37.6% of Aarti Pharmalabs’ revenue in Q4FY24 was derived from APIs and intermediates, while the remaining 18.4% came from CDMO/CMO services.

Q4FY24 Financial Performance

Aarti Pharmalabs reported a 4.3% year-on-year increase in operational revenue for Q4FY24. The company’s EBITDA saw a remarkable 47% year-on-year jump, and profit after tax surged by 52.2% year-on-year. Additionally, PAT margins improved by 407 basis points to 12.91%.

Stock Market Performance and Future Prospects

On Wednesday, Aarti Pharmalabs’ stock hit a fresh 52-week high. With Quat Mutual Fund’s prominent purchase appearing in the bulk deal, the stock is expected to see further action on Thursday.

Strategic Position in the Global Market

Aarti Pharmalabs holds a significant presence in the global Xanthine derivatives industry, commanding a 15-20% market share. As a non-Chinese dependent and integrated manufacturer of Xanthine derivatives, APL is well-positioned to benefit from trends like the “China+1” strategy, enhancing its strategic advantage in the global market.

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Disclaimer: This post has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.