Reduce Aarti Industries; target of Rs 635: Prabhudas Lilladher

Prabhudas Lilladher recommended reduce rating on Aarti Industries with a target price of Rs 635 in its research report dated August 12, 2024.

Broker Research

August 19, 2024 / 14:15 IST

Reduce

26 Aug, 2025 12:21

Volume

Todays L/H

Prabhudas Lilladher's research report on Aarti Industries

ARTO reported a topline of Rs18.5bn, marking a 31% YoY and 5% QoQ increase. This growth was driven by a 6% QoQ and 30% YoY rise in volumes. The management anticipates 20-30% volume growth in FY25, although margins are expected to remain under pressure for at least next 1-2 quarters due to continued dumping from China. Additionally, increases in the prices of key raw materials, such as benzene and aniline, has impacted gross margins. In Q1FY25, ARTO formed a 50:50 joint venture with UPL Limited to manufacture downstream derivatives of amines, which have diverse applications in agrochemicals and paints. This project is expected to be operational by FY27. The company also completed its acid plant expansion, and other growth initiatives are progressing well. The Nitrotoluene project and its downstream initiatives are scheduled to commence in H2FY25, followed by the Chlorotoluene project in FY26. Although some volume-led growth is anticipated in the near term, pricing pressures are expected to continue to affect performance. We forecast an EPS CAGR of 29% during FY24-26E.

Outlook

The stock is currently trading at approximately 38x FY26 P/E. We value the stock at 33x FY26E EPS and maintain "Reduce" rating with a target price of Rs635.

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