Aarti Industries Ltd. share price target

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...

pharma business and allied activities of the company, which will be demerged into Aarti Pharmalabs Ltd (formerly known as Aarti Organics Ltd), a wholly owned subsidiary company of Aarti Industries Ltd. The demerged undertaking also includes a part of the specialty chemical business, which is a backward integrated facility providing feeding material to the pharma business. This part of the specialty chemical business accounts for less than 3% of revenues of the speciality chemical...

Upcoming capex bodes well for growth outlook About the stock: Established in 1984 by first generation technocrat Rajendra Gogri, The company primarily operates in two segments speciality chemicals...

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.