Aarti Industries Ltd. share price target

We maintain our HOLD rating and await lower levels to enter into the stock.

We maintain our FY22/23 estimates for Aarti Industries (AIL) as our estimates capture aggressive earnings growth of 30.6%CAGR over FY21-24E. For Q1, AIL reported strong profits with EBIDTA/PAT of Rs3bn (+23%Q/Q; PLe Rs2.3bn) and Rs1.6bn (+21%Q/Q; PLe Rs1.3bn) fueled by rising demand and operating leverage from higher utilization. AIL plans to invest Rs50bn over...

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. Q4FY21 revenue grew by 12% YoY, led by revival in specialty chemicals & stable growth in Pharma segment. EBITDA margins improved by 120bps YoY to 21.5% led by better volume & value added products. PAT grew by 23% YoY. Revival in discretionary portfolio ~40% of specialty chemicals (Auto, industrial, dyes/pigments) to pre-Covid levels is positive. Focus is on new products/import substitutes, by value addition...

We revise our rating to HOLD (BUY earlier) and await for lower levels to enter the stock. Key risks- slower than expected ramp-up in commissioning of multi-year deals and other Capex projects, volatility in RM prices and forex, COVID led uncertainty.

Q4 numbers were impacted by annual shutdown and commissioning of new plants. Demand for speciality chemical has almost reached to pre-COVID level. Based on visibility, the management has given ambitious revenues, EBIT and PAT guidance of 1.7-2x growth from FY21-24E. Leveraging on core knowledge of benzene-based derivatives, the company is continuously expanding product basket towards value added products covering the entire value chain. In pharma, strong growth is expected from developed markets backed by integrated model and new launches. Margins are also expected...

Aarti Industries Limited is a well-diversified chemicals company.

We maintain BUY on AIL, Galaxy Surfactants, Sudarshan Chemical; ADD on NFIL, Balaji Amines, Alkyl Amines, SRF; while maintaining SELL on Vinati Organics. We are also initiating coverage on Fine Organic and NOCIL with a BUY and Deepak Nitrite with an ADD recommendation. The first half of CY20 was an unanticipated turning point for the chemical industry. The dual effects of the COVID-related economic downturn and disruption in chemical supply chain impacted the industry adversely. However, this sector was amongst the first few that returned to normalcy. We have assessed the current situation of the industry and our analysis compels us to uphold our positive stance on our specialty chemicals universe.

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. Q3FY21 revenue grew by 10% YoY, led by strong off-take from Pharma segment, which grew by ~32% YoY....

EBITDA for the quarter stood at `2,850mn showcasing growth of ~12% Y-o-Y and 12% Q-o-Q and EBITDA margins improved to ~24.0% in Q3FY21 from 23.5% in Q3FY20. Company recorded highest gross margin ~54.1% up 303 bps...

We maintain BUY and update Target Price to Rs. 1,298 /share valued at 27x of FY23E EPS of Rs. 48.9