Aarti Drugs targets 14% EBITDA margins as new plant ramps up
Management expects utilization at the Sayakha methylamine facility to hit 70% within a year, even as the salicylic acid plant remains offline.
What's new
- Aarti Drugs targets 13.5-14% EBITDA margins for FY27.
- Sayakha methylamine plant utilization hit 40% in Q4 and is trending at 60% in early Q1.
- Formulation revenue grew 41% to ₹91.3 crore, with a long-term goal of ₹1,000 crore.
Why this matters
The company is betting on operational gains from its new methylamine facility to offset recent profit declines. Whether they hit these margin targets depends on the successful ramp-up of the Sayakha plant and the return of the salicylic acid unit to service.
What we're watching
- The timeline for restarting the salicylic acid plant.
- Progress toward the 70% utilization target at the Sayakha facility.
- Whether the formulation business can maintain its 41% growth pace.
The full read
Aarti Drugs is looking past a 12% drop in Q4 net profit, which fell to ₹55.3 crore, by focusing on a margin recovery plan for FY27. Management is guiding for EBITDA margins of 13.5-14%, pinned on the ramp-up of its Sayakha methylamine plant. That facility is already showing progress, moving from 40% utilization in Q4 to 60% in early Q1, with a goal of 70% within a year.
Growth is coming from the formulation business.
Revenue in that segment jumped 41% to ₹91.3 crore this quarter, and the company has set a long-term target to scale this division to ₹1,000 crore over the next three to five years. The main hurdle remains the salicylic acid plant, which is currently offline for equipment upgrades. The next test is whether the Sayakha ramp-up can sustain its momentum to hit those margin targets.
Questions answered
- What is the current status of the salicylic acid plant?
- The plant is currently shut down. Management is waiting to install new equipment before resuming operations.
- How is the Sayakha methylamine plant performing?
- Utilization reached 40% in Q4 and has climbed to 60% in early Q1. The company aims to reach 70% utilization within the next year.
- What is the outlook for the formulation business?
- Formulation revenue reached ₹91.3 crore in Q4, a 41% increase. The company plans to scale this segment to ₹1,000 crore over the next three to five years.
- How did the company perform in the March quarter?
- Consolidated net profit dropped 12% to ₹55.3 crore.