Aarti Pharmalabs Ltd has emerged as an interesting pharma stock to watch as analysts of HDFC Securities turn optimistic with the stock pick of the week, despite near-term pressure on earnings.
The company, which has a significant presence in APIs, Xanthine derivatives, and a rapidly growing CDMO sector, is about to reach an important stage of capacity development and margin recovery.
Although price erosion and higher expenses have affected previous quarters, management anticipates a significant rebound in the second half, bolstered by the activation of new facilities, a surge in CDMO commercial projects, and steady demand from regulated markets.
Aarti Pharmalabs is being positioned as a possible turnaround and growth bet over the next two to three quarters, supported by HDFC Securities’ “Buy on dips” recommendation.
Aarti Pharmalabs Target Price
Buy in Rs 733-751 band and add on dips in Rs 645-653 band, Target Price: Rs 868, Time Period: 2-3 quarters, Base Case Fair Value: Rs 814
“Aarti Pharmalabs is well placed with its leadership position in niche products, and new product launches. We are positive on the stock on the back of strong growth trajectory in key products and expected launch of new products and commissioning of new facilities, which would drive growth in the next 2-3 years. Company has guided for strong double digit revenue growth along with steady margin improvement in the medium term,” said the research analysts of HDFC Securities.
“For H1FY26, the company reported weak numbers across parameters largely due to price erosion in API business. However, the management said that H2FY26 is expected to be significantly better than H1FY26. CDMO business to continue its strong growth trajectory in the medium to long term,” they added.
“We expect strong growth over FY26-28E led by new capacity addition, better business mix and significant growth in CDMO business, albeit on a low base. We estimate Revenue, EBITDA, and PAT CAGR of 7%, 10% and 10.5% respectively over FY25- 28E. We feel investors can buy the stock in the band of Rs 733-751 and add more on declines to Rs 645-653 band (18x Sep-2027E EPS) for base case target of Rs 814 (22.5x Sep-2027E EPS) and bull case target of Rs 868 (24x Sep-2027E EPS) over the next 2-3 quarters,” the research analysts further recommended.
Aarti Pharmalabs Share Price Analysis
Aarti Pharmalabs Ltd.’s technical profile, according to Trendlyne data, exhibits a mixed-to-cautious bias in the short term. The stock is trading below both its 50-day and 200-day simple moving averages, suggesting possible resistance at higher levels and a recent loss in trend momentum.
The Money Flow Index (MFI) has exhibited signs of being elevated, indicating recent buying interest, but the RSI (Relative Strength Index) is still in the mid-range, showing neither overbought nor oversold situations. These signs, when paired with high volatility and mid-range oscillator readings, suggest that the stock is now consolidating and lacks a distinct directional conviction.
About Aarti Pharmalabs
Aarti Pharmalabs Limited (APL) is a well-known worldwide producer of CDMO/CMO services, xanthine derivatives, and generic Active Pharmaceutical Ingredients (APIs). With a 15-20% global market share, APL is one of the largest manufacturers of xanthine derivatives in India, including caffeine, which has the largest capacity in the country.
By Q4FY26, the corporation is still on track to increase its capacity to 9000 MTPA. The corporation aims to raise its worldwide market share to around 20-25% after increasing capacity. Over the next three years, it is anticipated to attain capacity utilization of about 80%, with 50% of sales going to beverages and regulated customers.