Aarti Pharma Q2 FY27 Earnings Call — Analysis (NSE: AARTIPHARM)
Aarti Pharmalabs posted record Q2FY27 revenue of ₹613 Cr (+47% YoY) and EBITDA of ₹136 Cr (+84% YoY), driven by steroid API debottlenecking and CDMO expansion.
Result quality: stable — Steady quarter. Management sentiment: optimistic.
The take
Q2FY27 Revenue ₹613 Cr ( +47% YoY ) . Guidance raised — FY27 api segment fy27 revenue level > ₹780 Cr . But walked back — API volume and guidance recovery . New story: Xanthine global dominance via capacity .
Results
Revenue rose 47% YoY to ₹613 Cr, EBITDA grew 84% YoY to ₹136 Cr with margins expanding 450 bps to 22.2%, and PAT jumped 175% YoY to ₹66 Cr.
Financial highlights
| Metric | Value | Change | Basis |
|---|---|---|---|
| Revenue | ₹613 Cr | +47% | yoy · Q2FY27 · vs ₹417 Cr in Q2FY26 |
| EBITDA | ₹136 Cr | +84% | yoy · Q2FY27 · vs ₹74 Cr in Q2FY26 |
| EBITDA Margin | 22.2% | +450bps | yoy · Q2FY27 · vs 17.7% in Q2FY26 |
| PAT | ₹66 Cr | +175% | yoy · Q2FY27 · vs ₹24 Cr in Q2FY26 (2.75x) |
| Xanthine Derivatives Share | 50% | none · Q2FY27 · of Q2FY27 revenue | |
| API & Intermediates Share | 30% | none · Q2FY27 · of Q2FY27 revenue | |
| CDMO/CMO Share | 13% | none · Q2FY27 · of Q2FY27 revenue |
Guidance
Management reaffirmed 40% to 50% revenue growth for the CDMO segment in FY27 and targeted ₹350 Cr to ₹400 Cr in total FY27 capex.
What management committed to
- Atali Block 2 dedicated CDMO block will be commercialized in H2 FY28. — H2 FY28
- API and Intermediate segment FY27 revenue will exceed the FY25 level of approximately INR 780 Cr. — > INR 780 Cr, FY27
- Peptide and oligonucleotide lab will be fully operational with equipment by the end of FY27. — FY27
- Xanthine production capacity nameplate will reach 9,600 metric tonnes. — 9,600 tonnes, FY29
Key themes
CDMO scale-up and capacity commercialisation
How the narrative shifted
- Xanthine global dominance via capacity: Aarti is executing its Xanthine scale-up plan with expanded capacity reaching full production by FY27 end, targeting 9,600 MT nameplate and 90% utilization over two years, while maintaining bullish revenue guidance.
- CDMO commercial ramp-up: CDMO growth trajectory remains strong with 59 active projects, Atali Block 2 groundbreaking completed, and the INR 1,000 Cr target reaffirmed with a detailed pipeline churn explanation.
- API volume and guidance recovery: Contradicted old guidance that FY27 would not surpass FY25 levels; new narrative emphasizes volume-led growth rather than process-cost recovery.
- Macro: Xanthine raw material volatility: Geopolitical turmoil continues to keep Xanthine input costs elevated and volatile, but the company is passing on cost increases, making the impact a pass-through mechanism rather than a margin squeeze.
- Capex cycle and pre-op absorption: The heavy capex cycle is culminating with Q3 capitalization of Atali Phase 1B and full Xanthine capitalization by FY27 end; margin impact guided at ~1pp while working capital structurally increases.
- China competitive dynamics shift: No explicit discussion of involution policy; China Plus One cited only in context of CDMO project inflow.
- Peptide and oligonucleotide new capability: Management is investing in a new peptide and oligonucleotide R&D lab (operational by FY27 end) and hiring teams, targeting customer business to begin in FY28.
- CDMO asset turnover guidance: Management provides explicit asset turnover guidance of 1.2x to 1.4x for new dedicated CDMO blocks, signaling high capital efficiency and revenue potential from the new capacity.
Operational commentary
- Atali Phase 1 is complete with Phase 1B trial batches underway and capitalization scheduled for Q3FY27.
- Groundbreaking completed for Atali Block 2 dedicated block, with commercialisation targeted for H2FY28.
- Xanthine capacity expansion to achieve full 9,600 MT nameplate capacity by end-FY27, targeting 7,500-8,000 MT volume in FY28.
- Steroid block debottlenecking completed and contributing to sales; debottlenecking of anti-cancer block 3 at Tarapur underway.
- Operational peptide and oligonucleotide R&D lab setup scheduled by end-FY27 to initiate commercial pitching in FY28.
Analyst Q&A
Q. What is driving the sharp increase in working capital, inventories, and receivables relative to operating cash flows?
Working capital cycle remains steady at 150-167 days; inventory build-up is intentional to support H2-heavy CDMO deliveries and higher overall sales turnover.
Q. Given strong H1 outperformance, is there scope to upgrade the multi-year EBITDA and revenue growth guidance of 15-18%?
Management maintained its 3-year structural guidance framework and declined to give a specific upgraded point forecast for FY27/FY28.
Q. How will the CDMO pipeline deliver the ₹1,000 Cr target given that development molecules have stayed flat at ~20?
The pipeline experiences regular churn as unsuccessful trials exit; 10-12 key commercial molecules (20% of the 59 total projects) will drive ₹700-800 Cr of the target revenue.
Research and educational content only. Not investment advice.