Hold Aarti Industries; target of Rs 540: CD Equisearch

CD Equisearch recommended hold rating on Aarti Industries with a target price of Rs 540 in its research report dated September 27, 2023.

Broker Research

September 27, 2023 / 14:57 IST

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CD Equisearch's research report on Aarti Industries

Increased dumping by China coupled with depreciation of Chinese currency had its after effects for Aarti saw its margin erosion deepened in Q1 - OPM: 14.1% Vs 15.2% in Q4. Inventory correction across industries witnessed almost throughout the globe led to significant demand contraction which hindered Aarti's exports and domestic supply focused on global markets. Thence, revenues tumbled over 12% to Rs 1414 crs from Rs 1610 crs in the same quarter a year ago. Inventory corrections seemingly have been induced by high interest rates and barely sober inflation. Falling logistics cost has also made hoarding of materials less profitable thus prompting manufacturers to trim inventories of intermediates. Aarti reckons that the effect of inventory correction was more pronounced in agro chemicals while dyes, pigments etc also suffered due to prolonged weakness in demand.

Outlook

Execution holds key for the company has lined up no puny capex program. On balance, we assign hold rating on the stock with target of Rs 540 based on 35x FY25e earnings over a period of 6-9 months.

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