Aarti Industries Ltd. share price forecast

In Q2FY23, Aarti’s revenue grew 34.2% YoY/4.6% QoQ to INR 16,850 mn. During the quarter, the demerger of Pharma Business from Aarti Industries into its wholly owned subsidiary Aarti Pharmalabs Limited was approved by National Company Law Tribunal (NCLT), on September 21, 2022

Mahanagar Gas: Our ADD recommendation on Mahanagar Gas (MGL) with a target price of INR 950 is premised on (1) lower volume growth compared to peers and (2) uncertain long-term volume growth visibility since no new geographical areas (GA) won in the 9/10/11th round of CGD bids. Q2FY23 EBITDA, at INR 2.5bn, and APAT, at INR 1.6bn, came in below our estimates, owing to the marginally lower-than-expected volume and higher gas cost. KNR Constructions: KNR posted a strong quarter; revenue/EBITDA/APAT of INR 8.2/1.6/0.8bn beat our estimates by 5/9/0%. FY23 revenue guidance was unchanged at INR 35bn (with a buffer of +-5%), with EBITDA margin pegged at 18-19%. At the standalone level, the gross/net debt stood at INR2/1.3bn as of Sep'22, with net D/E at 0.05x, vs. INR 1.3/0.8bn and net D/E of 0.03x, as of Jun'22. The balance HAM equity requirement is INR 5.6bn as of Sep'22 with INR 3/1.6/1.1bn to be invested in H2FY23/FY24/FY25. KNR incurred a Capex of INR 750mn in H1 vs. FY23 guidance of INR 1-1.2bn. The NWC days stood at 54 as of Sep'22 (vs. 60 as of Jun'22). The irrigation receivables as of Sep'22 stood at INR 9bn vs. INR8.5bn as of Jun'22. We maintain a BUY with an increased TP of INR 367/sh (18x Sep-24E EPS, HAM 1x P/BV). PNC Infratech: PNC Infratech (PNC) reported Q2FY23 revenue/EBITDA/APAT at INR 15.6/2.1/1.3bn, missing our estimates on all fronts by 5.5/6.9/4.4%. PNC was impacted by delays in JJM water projects' DPR approvals on INR 80bn OB. About INR 23/40/17bn of DPR approvals...

Bharat Forge: Bharat Forge (BHFC) standalone Q1 earnings at INR 1.6bn were in line with our estimates. However, overseas subsidiary margin declined 350bps QoQ to 4.7% due to the recently commissioned US Al facility and sharp rise in energy costs in Europe. Going forward, we expect standalone demand momentum to be strong for BHFC, led by: (1) sustained recovery in domestic demand, both in auto and non-auto segments; (2) strong export demand in PVs and aerospace and stable demand from oil and gas. Overseas subsidiary margins are expected to normalise as the US Al forging facility ramps to full capacity. Also, near-term cost headwinds are likely to be partially mitigated by favourable currency movement and healthy revenue growth. Reiterate BUY with a revised TP of INR 867 (from INR807 earlier) as we roll forward to June-22 estimates. NHPC: NHPC operated at a PAF of 98.6% in Q1FY23 vs 92.5% YoY. As a result, incentives and deviation charges increased 36.6% YoY and 90% YoY respectively in Q1FY23. NHPC reported revenue of INR25.9bn (+19.5% YoY), led by 11.4% YoY increase in generation, while EBITDA grew 10% YoY to INR14.1bn. PAT for the quarter came in at INR10.5bn (+15.0% YoY). With Parbati IV and Subansiri expected to be commission partially in FY24, NHPC's capacity is expected to reach 8521MW and regulated equity is expected to increase by 70% by FY24 to INR220bn. The company has received approval for Kwar Hydroelectric project worth INR45bn and it is foraying into green hydrogen technology, for which it has signed two MoUs with...

In Q1FY23, Aarti’s revenue grew 49.8% YoY/12.3% QoQ to INR 19,720 mn, beating our estimate by 9.3%

We maintain our estimates and TP of Rs 875/share, valuing the company at 20x its FY24E EPS and change our recommendation from BUY to Hold. The TP implies an upside of 7.3% from the CMP.

Oil India: Our BUY recommendation on Oil India with a target price of INR 300 is premised on (1) increase in crude price realisation and (2) improvement in domestic gas price realisation. Oil price realisation for FY22 improved to USD 76.7/bbl, vs USD 43/bbl in FY21, given the expected global economic rebound, post COVID. Q4FY22 revenue was 2% below our estimate, while EBITDA was 1% higher than the estimate, owing to lower-than-expected employee expenses and lower other expenses. RPAT came in 29% above the estimate, given lower depreciation, higher other income, and lower tax rate of 20%. Crompton Consumer: Crompton's Q4FY22 revenue was a miss but the EBITDA margin was in line. Similar to peers, the company too was impacted by Omicron in Jan and slow channel filling. Feb/March saw double-digit growth along with healthy secondary growth. Revenue growth, at 2% YoY (HSIE 8%, 9% three-year CAGR), was also impacted by pumps (industry-level issue). ECD clocked in 3% growth (ex-pump 7%, FY22 15%), with a healthy three-year CAGR of 12.5%. Fan growth was at 9% YoY (32% three-year CAGR, 19% in FY22), resulting in a 3% share gain to exit share of 29%. Lighting revenue was down by 4%, with continuous impact of B-B and B-G conventional lighting. Crompton remained one of the best among peers in cost control, and hence, despite several headwinds, EBITDA margin came in flat YoY/QoQ at 15% (a slight beat). We remained confident of healthy growth for fans, appliances and B-C lighting. However, a part of the portfolio (pump, B-B/B-G lighting)...

AARTI Industries Ltd (ARTO) is a global leader in Benzene based derivative products. The company has a diversified product portfolio with end users in pharma, agrochemicals, specialty polymers, paints & pigments. 9MFY22 revenue grew by 40% YoY & PAT grew by 41% YoY, led by improved realization and volume off-take....

Prince Pipes: We maintain our BUY rating on Prince Pipes, with an unchanged target price of INR 940/sh (18.5x its Dec-23E EBITDA, implying 31x P/E). We continue to like Prince for its large product portfolio and robust pan-India distribution. The Lubrizol deal should further contribute to its industry leading growth. In Q3FY22, while weak demand led to 12% YoY volume decline, improving product mix helped the company deliver gross margin expansion (on per kg basis). This offset the impact of op-lev loss and elevated other expenses. Subsequently, revenue/EBIDTA/APAT rose 21/8/1% YoY. Mahindra Lifespaces: Mahindra Lifespaces Developers Ltd (MLDL) reported strong sustenance presales of 0.32msf (+3.2%/-18% YoY/QoQ), valued at INR 2.5bn (+28%/-17% YoY/QoQ). The IC&IC segment saw strong performance, with 51.1acres leased for INR 1.4bn. MLDL believes this performance is not a one-off and would sustain. The run-rate and enquiries in this segment are now better than pre-COVID levels. The segment also expects to benefit from the proposed legislative changes for SEZs in the recent budget, with MWC Jaipur expected to benefit the most. On new land/gross development value (GDV) addition, MLDL expects to close INR 20bn of GDV by Mar/Apr-22. Further, it is in advanced talks on projects in the INR 80bn worth of prospect pipeline, which may add INR 20-25bn GDV in FY23E. It has taken price hikes across projects (~1.5% hike every quarter). Given the tailwinds in industrial business, a robust balance sheet, trustworthy brand image, and a strong pipeline, we remain constructive on MLDL and maintain a BUY rating, with an unchanged NAV-based...

Aarti ranks among the top five globally for 75% of its portfolio. Its 200+ products are sold to 700+ domestic and 400+ export customers across the globe in 60 countries with a major presence in the US, Europe and Japan...

We recommend BUY with a TP of Rs 1,080/share.

AARTI Industries Ltd (ARTO) is a global leader in Benzene based derivative products. The company has a diversified product portfolio with end users in pharma, agrochemicals, specialty polymers, paints & pigments. Q2FY22 revenue grew by 32% YoY & PAT grew by 26% YoY, led by revival in specialty chemicals & stable growth in Pharma segment....

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Owing to strong growth guidance over FY21-24E, we maintain our estimates and recommendation a BUY with a revised TP of Rs 1,080/share and multiple of 35x to its FY24E EPS.

We revise our recommendation from HOLD to BUY and upgrade our target price to Rs 1,080 (from Rs 925 earlier) while raising our multiple to 35x (from 30x earlier). We value the stock at 35x to its FY24 EPS.

Aided by the specialty chemicals business - whose revenues surged by an eye-popping 56.6% in Q1 and EBIT by gravity-defying 84.2% - Aarti Industries posted 40.5% growth in overall sales and 98.4% rise in post tax earnings on yoy basis. Despite sharp increase in raw material prices, freight and fuel prices, operating profit advanced by 72.4% to Rs 313.81 crs, thus pulling up OPMs to 23.8% from 19.4% (21.5% in Q4); finance costs though rose sharply not least due to M2M impact on unhedged ECBs. Much of the business growth last quarter was aided...