Aarti Industries Ltd. share price target

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...

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.

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.

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...

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....

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

Aggressive expansion to support long term growth Aarti has spent | 3000+ crore in capex in FY17-20, on three multiyear projects. Of this, one was recently cancelled (expects to receive | 900-975 crore as compensation) while the remaining two projects have multiyear peak annual potential of | 590 crore (exhibit 3). Apart from this, it has spent on new R&D; unit, expansion of hydrogenation, NCB, de-bottlenecking in various specialty chemicals, and pharma. Going ahead, Aarti is likely to spend at least | 1000-1200 crore per annum in the next four to six years to...

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...