Aarti Pharmalabs Stock Outlook Improves as HDFC Securities Recommends Buy on Dips

Aarti Pharmalabs Ltd is drawing attention among pharma investors as HDFC Securities turns constructive on the stock, despite recent earnings pressure. Analysts view the company as a potential turnaround candidate over the next two to three quarters, supported by expanding capacity, recovering margins, and growing contributions from its Contract Development and Manufacturing Organisation (CDMO) business.

The brokerage has tagged Aarti Pharmalabs as its stock pick of the week and recommended a staggered entry strategy. Analysts advise buying on corrections, as they expect stronger performance in the second half of FY26, driven by new facilities coming onstream and improving product mix in both regulated markets and specialty segments.

HDFC Securities has suggested investors accumulate Aarti Pharmalabs in a phased manner. The recommended buy zone is Rs 733-751, with additional buying on declines towards Rs 645-653. The analysts have set a base case fair value at Rs 814 and a higher target price of Rs 868, both over a 2-3 quarter time frame.

Parameter	Details
Buy band	Rs 733-751
Add on dips	Rs 645-653
Time horizon	2-3 quarters
Base case target	Rs 814 (22.5x Sep-2027E EPS)
Bull case target	Rs 868 (24x Sep-2027E EPS)
Add valuation reference	18x Sep-2027E EPS for buy range

"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.

Analysts expect earnings to recover meaningfully as capacity additions align with higher utilisation. The brokerage projects FY25-28E Revenue, EBITDA and PAT compound annual growth of 7%, 10% and 10.5%, respectively. Management commentary indicates that new CDMO contracts and scale-up in key molecules could support a more favourable business mix.

"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 earnings trend and CDMO business outlook

The company has faced near-term pressure, mainly from price erosion in its Active Pharmaceutical Ingredient (API) portfolio and rising costs. "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.

Management expects the second half of FY26 to benefit from higher volumes and better operating leverage. Additional commercialisation of CDMO projects and stabilisation of new plants are expected to aid both revenue and margin recovery. Demand from regulated markets is seen as steady, supporting core APIs and xanthine derivatives.

Aarti Pharmalabs share price technical view

On the technical side, Trendlyne data signals a cautious stance for Aarti Pharmalabs in the near term. The stock is trading below its 50-day and 200-day simple moving averages, which often indicates overhead resistance and a loss of upside momentum after recent sessions.

The Money Flow Index suggests buying interest has emerged, as readings appear relatively elevated. However, the Relative Strength Index remains in a neutral band, pointing to neither overbought nor oversold conditions. Combined with high volatility and mid-range oscillator levels, these indicators suggest an ongoing consolidation phase without a clear directional trend.

Aarti Pharmalabs business profile and capacity plans

Aarti Pharmalabs Limited (APL) operates as a global supplier of generic APIs, xanthine derivatives, and CDMO or CMO services. The company holds an estimated 15-20% worldwide share in xanthine derivatives. Within this portfolio, caffeine remains a key product, for which APL is reported to have the largest manufacturing capacity in India.

The company is working towards a planned capacity expansion to 9000 metric tonnes per annum by Q4FY26. Management intends to use this additional capacity to lift its worldwide xanthine market share towards 20-25%. Over the next three years, APL aims for around 80% utilisation, with about half of its sales expected from beverages and regulated customers.

Aarti Pharmalabs is therefore positioned as a stock where operational recovery, capacity expansion, and CDMO scaling could converge over the next few years. HDFC Securities’ "Buy on dips" stance reflects confidence in this medium-term trajectory, while short-term risks remain linked to pricing pressure in APIs and near-term share price volatility.

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