Geojit recommended accumulate rating on Aarti Industries with a target price of Rs 1232 in its research report dated November 12 , 2020.
Geojit's research report on Aarti Industries
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. Q2 revenue grew by 9% YoY, as revenue from Specialty chemicals & Pharma grew by ~24% & 22% YoY. EBITDA margins declined by 190bps YoY due to weak product mix and higher cost. Consequently, PAT was down by 5% YoY. Revival in discretionary portfolio, ~40% of specialty chemicals (Auto, industrial, dyes/pigments), is expected to take some more time. Recent expansion in new capacities/new products, which are either backward or forward integrated, is margin accretive. Pharma segment continues to gain traction led by value added products. We remain constructive on ARTO given its niche capabilities including wining of multi year contracts, expanding value added products, strong off-take from Pharma segments and improved outlook on account of issues in China.
We value ARTO at P/E of 25x as we roll forward to FY23E, with a target price of Rs1,232 and downgrade to Accumulate from Buy.
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