Next leg of Aarti's growth will ride on long-term contracts worth Rs110bn, which has been delayed and will start from Q1FY22E. We tweak our FY21 estimates to factor delay in commissioning of long term contract and make other changes. AIL's near term growth trajectory will face...

Aarti Industries Ltd reported ~19% YoY and ~25% QoQ increase in topline to `11,726mn on account of 24% YoY and 32% QoQ increase in specialty chemicals segment and ~21% YoY and 14% QoQ increase in pharmaceuticals. EBITDA for the quarter stood at `2543mn showcasing growth of ~0.5% YoY and 39% QoQ. However, EBITDA margins dropped to 21.7% in Q2FY21 compared to...

Aarti Industry's specialty chemicals volume growth was driven by sales push in non-regular market for its discretionary products. Pharma segment continues to grow its volume with demand being intact resulting in better operating leverage for the company. Overall revenue increased on account of increasing volume and greater traction from customer, based on scale-up of value-added products. Specialty chemical segment EBIT margin contracted 676 bps YoY / (up 172 bps QoQ) to 17.1% due to one-time effort to push higher volume at lower margin, while that of Pharma segment expanded 700 bps / 219 bps QoQ to 25.5%, resulting in overall EBIT margin contraction by 445 bps YoY (up 163 bps QoQ)....

JK Cement: During 2QFY21, JK Cement's (JKCE's) consol revenue/EBITDA/APAT soared 24/69/170% YoY to Rs 16.34/4.31/2.21bn respectively. Both grey and white/putty businesses reported solid volume growth and margin expansions on good demand and continued cost controls. A robust 2Q along with working capital release cooled off leverage. We continue to like JKCE for its continued healthy traction across both the businesses. We maintain BUY rating on the stock with a revised TP of Rs 2,110/share (10x consolidated Sep'22E EBITDA). Gujarat State Petronet: Our BUY recommendation on Gujarat State Petronet with a TP of INR 270 is premised on the following: (1) robust transmission volume (+13% CAGR over FY21-23E to 51mmscmd) as benign spot LNG prices should continue to drive volume growth from industrial customers and encourage RIL to continue using LNG. This should translate into growth in standalone EBITDA and APAT by 20% and 22% CAGR to INR 42bn and INR 20bn in FY23E; (2) compelling valuation at 5.8x FY22E EPS, considering the high return ratios (RoE of 24/25% in FY21/22E) and steady cash flows (combined FCF of INR 25bn over FY21-22E). Alkyl Amines: Our BUY recommendation on AACL with a target price of INR 4,025 is premised on (1) robust demand from pharmaceutical and agrochemical customers that form ~70% of AACL's revenue mix, (2) rising domestic market share in Methyl Amines, (3) impending capacity expansion for (high-margin) Acetonitrile, and (4) production-linked incentive scheme that provides the right tailwinds for long-term volume growth. 2Q EBITDA/APAT was 28/27% above estimates, owing to a 6% rise in revenue and...

for margin improvement. However, we believe current valuations already discount most of the remained flattish to Rs2.54bn in Q2FY21 (vs our estimate of Rs2.24bn in Q2FY21). Lower positives of the better product mix, growth at export front and margin improvement and hence other income has led PBT to report a de-growth of 3.1% YoY to Rs1.77bn in Q2FY21. PAT offer limited upside from here. We assign accumulate rating with target price of Rs. 474...

EBITDA margins declined by 190bps YoY due to weak product mix and higher cost. Consequently, PAT was down by 5% YoY. Revival in discretionary portfolio, ~40% of specialty chemicals...

Aarti Industries' (ARTO) 2QFY21 revenue performance (up ~19% YoY) was ~13% ahead of consensus estimates, but operating margin was significantly below expectations on account of sharp decline in Specialty Chemicals margin (down ~675bps YoY). Pharma segment did exceptionally well both on revenue (up ~22% YoY) and margin front (~700bps YoY expansion). The management believes that the current margin trend in the Pharma segment is sustainable as its salience in the regulated markets has increased and with further capacity addition (commissioning in the next 2-3 quarters), growth can be accelerated further. Specialty Chemicals' margin performance was affected as the...

For Q2FY21, Aarti Industries (AIL) sales were ahead of our Revenue/EBITDA/PAT estimates. Consol Income from Operations stood at Rs. 1,173cr (Rs. 1,108cr our estimate) higher by 9% YoY driven by strong 24% YoY growth in Specialty Chemical and 22% growth in Pharma sales.

The company is a preferred partner for customers from multiple industries for benzene-chain based solutions due to strong chemistry prowess, backward integration, larger products basket that is backed by continuous innovation and leadership position in its key products. It is the only domestic player to have products until the sixth level derivative of benzene chemistry. It also expects to leverage on its existing clientele to promote its toluene and other derivatives. Most contracts are long term cost+ contracts that offer better control on the overall cost structure. Recently, it signed three...

Aarti Industries reported consolidated sales growth of 18.7% YoY to Rs 11.7bn (D.est: Rs 9.88bn), which were ahead of our estimates as the company was able to recoup volumes in the domestic market (which are expected to reach pre-covid levels in 3QFY21). EBITDA was flat at Rs 2.54bn, with an EBITDA margin of 21.7% (down 403 bps YoY). Margins remained under pressure as bulk of the discretionary application sales witnessed realisation pressure coupled with lower sales coming from regulated markets (wherein margins...

Strangled by pandemic induced lockdown which all but decimated supply networks and brought factory production to a grinding halt in April and some part of May, Aarti report 50% drop in its speciality chemicals production in April, thus precipitating some 11% decline in its gross speciality chemicals revenues (consolidated) in Q1 (yoy). Whence speciality chemicals EBIT plunged by a distressing 39.2% not least due to lower sales and higher expenses on account of commissioning of first phase of Dahej SEZ and R&D; Centre at Navi Mumbai in Q4, thus little protected by...

As per management, Q1 performance was largely in line with expectations and the outlook shared previously. During the quarter, Specialty Chemicals production in April was at about 50%, which subsequently ramped up to 80% in the month of...

Incorporated in 1984, Aarti Industries Ltd is the leading producer of Benzene based basic and intermediate specialty chemicals in India, manufacturing ~120 products in chemistry of benzene, aniline, sulphuric acid, toulene etc. Company is preferred partner of choice for more than ~1000 customers globally and supplies benzene based intermediates and pharmaceuticals to manufacturers of dyes, pigments, agrochemicals, automobile etc. Company's business is diversified across 2 segments such as specialty chemicals and pharmaceuticals each contributing 84%...

Aarti Industry's specialty chemicals plants were running at 50% utilization in April-20 and increased to 80% in June-20 after easing in the lockdown. Decline in specialty chemicals was largely due to the domestic market wherein most of the customers didn't resumed operations till June-20. Auto, Aero, Textiles, Paint manufacturing customers had greater impact on volumes while essential segments of economy like Agri, Pharma, FMCG customers were relatively stable (60% of specialty chemicals revenue). EBIT margin of specialty chemical segment contracted 717bps/208bps YoY/QoQ basis while that of Pharma...

EBITDA was down by 25.7% YoY to Rs 1.75bn, while PAT fell by 40.7% YoY to Rs 815 mn. ARTO reported gross margin expansion of 133bps YoY to 52.2%. Staff costs grew by 29.9% YoY to Rs 868mn, while other expenses were controlled substantially at Rs 2.09bn up only by 4.3% YoY. Interest costs saw a sharp decrease of 16.9% YoY to Rs 252mn...

macro-economic situation. Cancellation of high margin and higher profile agrochemicals contract is a major setback as it would have opened doors to other large contracts in the segment. AIL with a diversified product portfolio of 200 products remains well placed to capitalize on rising investment in domestic downstream industries along with production shift from China. We remain structurally positive on AIL's growth prospects but will wait for better...

sulted in softening of key input materials like Benzene, Toluene, Phenol, Xylene etc. Although price correction in derivative products has been lower, resulting in higher spreads. We believe most of the outlook will be key things to monitor. Overall our Chemical coverage would post Revenue/EBITDA/ PAT decline of 13.6%/15.8%/22.7% YoY respectively. We expect the EBITDA margin of our cover- We expect Aarti Industries to report revenue decline of 13.5% on YoY basis, mainly due to decline in...

Aarti Industries received an early termination notice from its customer for the 1st multiyear deal to supply high-value agro chemical intermediary to be used in a Herbicide. The contract was estimated to generate revenue of Rs. 4,000cr over 10 year period.