Buy Aarti Industries ; target of Rs 845: YES Securities

YES Securities is bullish on Aarti Industries has recommended buy rating on the stock with a target price of Rs 845 in its research report dated November 22, 2022.

Broker Research

November 22, 2022 / 10:51 IST

YES Securities' research report on Aarti Industries

ARTO’s 2QFY23 Adj. Ebitda at Rs 2.7bn (+31.5% YoY; ‐5.2%), stood largely in‐line with our estimates. The YoY growth stemmed from adjustment for shortfall fee of Rs 520mn in base quarter. Higher raw material volatility, lower volume due to maintainance shutdown at Jhagadia and muted demand for discretionary products (dyes & pigments) coupled with QoQ higher operating expense led to sequential drop in operating profits. Going ahead, while Ebitda for 2HFY23 could remain flat (vs 1H), a stronger 25% CAGR is expected over FY24‐25e driven by a) expansion in NCB and Ethylation capacities, b) ramp‐up in LT‐2 (revenue potential : Rs 5.5bn) c) commissioning and ramp‐up of LT‐3 (revenue potential: Rs 940mn) and d) launch of 50+ molecules currently under R&D. Maintain BUY.

Outlook

We maintain BUY rating on ARTO with a revised TP of Rs 845/sh, as we align our estimates to re‐stated, post demerger financials and roll estimates forward to FY25e. Our TP is premised upon an operating earnings growth CAGR of 10% (FY22‐30e) and RoEs of ~15‐16%.

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