Reduce Aarti Industries; target of Rs 612: CD Equisearch

CD Equisearch's research report on Aarti Industries

Despite shortage of nitric acid, revenues of Aarti's speciality chemicals business rose by a stunning 43.8% to Rs 1765.59 crs in Q1 compared to Rs 1227.70 crs in the same quarter a year ago. Higher share of value added products (74%) too galvanized product realizations, thus propping revenues. Thanks to its pricing model - absolute margins per kg - speciality chemicals EBIT dropped to 14.2% as against 18.9% in the same quarter a year ago. Higher volume ramp up is expected largely due to higher capacity utilization of assets related to first and second long term contracts. Its pharmaceuticals business was barely left behind for its revenues grew by a blistering 47.8% not least due to higher of take of generic products and xanthine. Passing of higher input prices too boosted the topline. Its EBIT margin was all but stable for it dropped by some 30 bps to 18.7% as against 19% in the same quarter a year ago. Pharmaceutical business will scarcely stymie not least due to commencement of commercial production of USFDA approved API facility at Tarapur sometime in early Q2.

Outlook

Balancing odds, we maintain our reduce rating on the stock with revised target of Rs 612 (previous target: Rs 765) based on 22x FY24e earnings over a period of 9- 12 months.

More Info

At 16:00 hrs Aarti Industries was quoting at Rs 746.00, up Rs 12.20, or 1.66 percent.

It has touched an intraday high of Rs 749.25 and an intraday low of Rs 725.60.

It was trading with volumes of 48,804 shares, compared to its thirty day average of 48,580 shares, an increase of 0.46 percent.

In the previous trading session, the share closed down 6.03 percent or Rs 47.05 at Rs 733.80.

The share touched its 52-week high Rs 1,168.40 and 52-week low Rs 669.00 on 19 October, 2021 and 20 June, 2022, respectively.

Currently, it is trading 36.15 percent below its 52-week high and 11.51 percent above its 52-week low.

Market capitalisation stands at Rs 27,042.80 crore.

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Aarti Industries - 300922 - cd