Aarti Drugs targets 14% EBITDA margins by FY27 on plant ramp-up
The company expects margin recovery to 13.5-14% as its Sayakha methylamine plant scales. The salicylic acid unit remains offline for equipment upgrades.
What's new
- Management targets EBITDA margins of 13.5-14% for FY27.
- Sayakha methylamine plant utilization reached 60% early in Q1, up from 40% in Q4.
- Formulation revenue grew 41% to ₹91.3 crore, with a ₹1,000 crore target over five years.
Why this matters
Aarti Drugs is betting on higher utilization at its new facility to offset recent profitability headwinds. Net profit dropped 12% to ₹55.3 crore in Q4. The salicylic acid plant shutdown adds operational friction that remains a risk.
What we're watching
- The timeline for restarting the salicylic acid plant.
- Whether the formulation business sustains its 41% growth pace.
- Actual EBITDA margin delivery in the coming quarters.
The full read
Aarti Drugs faces a difficult period of operational transition. Profitability is squeezed. Net profit dipped 12% to ₹55.3 crore during the March quarter, which created immediate pressure on margins across the board. Looking ahead, management expects 13.5-14% EBITDA margins by FY27, a recovery path predicated entirely on the successful scale-up of the Sayakha methylamine plant. Utilization at that facility is already climbing from 40% in Q4 to 60% early in Q1. Meanwhile, the company is aggressively pushing its formulation segment, which hit ₹91.3 crore in quarterly revenue after a sharp 41% jump, with management aiming to grow this specific division to ₹1,000 crore within the next three to five years. However, the salicylic acid plant remains offline for critical equipment upgrades. The company's future hinges on that restart. It remains a work in progress.
Questions answered
- What is driving the management's margin expansion target?
- Management expects higher utilization of the new methylamine plant at Sayakha and an increase in exports to regulated markets to lift margins to 13.5-14% by FY27.
- What is the status of the salicylic acid plant?
- The plant is currently shut down as the company installs new equipment.
- How did the formulation business perform in Q4?
- Formulation revenue grew 41% to ₹91.3 crore during the March quarter, fueled by strong export demand.
- What utilization rate is the methylamine facility hitting?
- The plant reached 40% utilization in Q4 and is currently trending at 60% early in Q1, with a goal of 70% within the next year.
- What was the headline profit figure for the quarter?
- The company reported a consolidated net profit of ₹55.3 crore, representing a 12% decrease for the March quarter.