Aarti Drugs Hits Upper Circuit Again; Has Climbed Over 600% In A Year

Aarti Drugs has delivered stellar returns for its investors especially since the outbreak of COVID-19. The mid-cap pharma stock rose from Rs 114.15 on 7 October 2019 to Rs 850.30 on 5 October 2020, when it hit an upper circuit of 5 percent. The stock has recovered from its fall in September and has been on the radar of investors looking for money makers.

Brokerage recommendation

Axis Securities recently picked Aarti Drugs among its recommendations and placed a price target of Rs 844 on the stock. The brokerage feels that the earnings momentum is expected to continue in active pharma ingredients (API) sector over the next 2-3 years and the company is well-placed to benefit from this opportunity considering its strong product portfolio when compared to its peers.

"Further, in Q1FY21 most of API players have reflected an improvement in gross margins by 400-500 bps based on increased in realisations of the products. It is expected that these margins will stabilize with the ease in global supply chain disruptions," it said.

Aarti Drugs offers APIs in a range of therapeutic categories, such as anti-inflammatory, cardioprotection, antifungals, antibiotics, antidiabetic, sedative and vitamins.

Rewards for investors

There was also some significant insider buying in the stock in the last few months, which is a good sign. In August, the company had cleared the proposal to issue three bonus shares to investors for every one fully paid share.

Strong financials

Aarti Drugs' strong financials have also helped in the meteoric rise in its share price. For the June-ended quarter, the company reported a 280.62 percent rise in net profit to Rs 85.45 crore. The management had said that it was confident of clocking profit after tax growth of 15-20 percent over the medium term on the back of ongoing capital expenditure.