Hold Aarti Industries; target of Rs 1002: East India Securities

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East India Securities' research report on Aarti Industries

Net Sales from on-going business of Aarti Industries declined by 0.9% YoY owing to decline in speciality chemical and pharma revenue of 0.4% & 3% YoY respectively during Q4FY20. Gross margins fell by 72bps YoY to 48.3%. EBITDA margins reported at 20.3% vs 22.0% in Q4FY19 because of operating deleverage. Other expenses stood at 20.7% in Q4FY20 as against 18.8% in Q4FY19. PAT declined by 11.9% to Rs1,104mn in Q4FY20. However, the full year fiscal performance of FY20 is far better. The company reported revenue and EBITDA growth of 0.4% & 1.3% respectively in FY20. EBITDA margins reported minor expansion of 19bps to 23.3% in FY20. PAT reported a growth of 8.4% to Rs5,468mn in FY20.

Outlook

The stock is trading at FY22E P/E of 23.6x on FY22E earnings basis. We value the stock on a forward PE multiple of 24x and arrive at target price of 1002 per share which offers 1.9% upside from current valuations. Hence, we assign HOLD rating on the stock.

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