Motilal Oswal’s Initiating Coverage report on Aarti Drugs

Given the robust revenue visibility that the company enjoys from its dependence on the domestic and global pharmaceutical industry, aggressive expansion plans in high value segments, a 23% CAGR in profits over FY15-17E along with consistently expanding return ratios and dividend payout of 30%; we believe company is available at attractive valuations at 14.3x FY17E.

We value the business at 18.0x FY17E EPS which is a 20% discount to the mean multiple of 22.6x commanded by midcap formulation companies and recommend a BUY rating on the stock with a target price of INR 850/share.

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