Aarti Industries down 15% on doubts over EBITDA guidance, China squeezing margins

There has been fair amount of volatility in global prices and pressure of dumping from China.

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Shares of speciality chemicals maker Aarti Industries are sharply lower in trade, down by as much as 14 percent on concerns over pressure on margins.

The management spoke to analysts during a concall on August 12 and said they will be able to decide on the EBITDA guidance of Rs 1,450 crore only after assessing the global landscape. There has been fair amount of volatility in global prices and pressure of dumping from China. However, the volume growth guidance for the fiscal year has been maintained at 20-30 percent, though logistical concerns arising from disruptions in the Red Sea could hurt volume in some segments, the company admitted.

Aarti Industries said the company's discretionary portfolio continues to see recovery, an 'all-round revival is anticipated later this fiscal year'. The management is hopeful that a recovery of volumes and ramp-up of capacities along with higher operating leverages should be able to drive EBITDA growth.

Company's proposed capex could take the debt on books slightly higher to Rs 3,600 crore, the management said during the analyst concall.

Brokerage Emkay has cut the FY25 and FY26 EPS guidance due to lack of clarity on EBITDA guidance.

Morgan Stanley in its note on Aarti Industries has given an Equal-weight call with a target price of Rs 615 per share, adding that the management has cited 'significant competitive pressures', especially from China. Uncertainties regarding pricing too could weigh on the margins, Morgan Stanley note said. The brokerage said an evolving product mix is the reason behind volatility in the margins.

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