CD Equisearch has given Reduce recommendation for Aarti Industries with a target price of Rs. 612 in its research report issued on Sep 30, 2022

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.


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.

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