Accumulate Aarti Industries; target of Rs 737: Geojit Financial Services

Geojit Financial Services recommended accumulate rating on Aarti Industries with a target price of Rs 737 in its research report dated August 29, 2024.

Broker Research

August 29, 2024 / 10:46 IST

Accumulate

26 Aug, 2025 12:21

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Geojit Financial Services 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. Revenue grew by 31% YoY, although at a lower base, it was supported by high volume growth of 30% YoY. EBITDA grew by 52% YoY and margins expanded by 220bps, led by higher volumes and a fall in employee expenses & lower other expenses, which was better than expected. Considering heighted competition and dumping from China, management has hinted that margins are likely to remain under pressure. Given this scenario, management has suspended their earlier EBITDA guidance of Rs.1,450cr -Rs1,700cr for FY25E-26E. Although our estimates remained lower than consensus, we have cut our EPS estimates by 12.4% & 6.5% for FY25E-26E given the potential impact on earnings in the near term. However, we remain positive given the green shoots of recovery shown in Q1FY25, intact volume growth guidance of 20%-30%, and healthy offtake from the long-term contract. Further, any improvement in the pricing scenario in the near term will also boost earnings.

Outlook

Post-earnings downgrade, we anticipate PAT to grow by 31% CAGR (at a lower base) over FY24-26E. We value ARTO at a P/E of 36x in FY25E, and we reiterate our Accumulate rating on the stock with a target price of Rs.737.

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