Aarti Industries: Target Price Set at Rs 529 by Prabhudas Lilladher

Aarti Industries Registers 13% YoY Revenue Growth Despite QoQ Decline

Aarti Industries, a leading industrial chemicals company, has reported revenue of Rs22 billion in its recent financial update, marking a 13% year-over-year (YoY) increase. However, the company's quarterly revenue declined by 5% compared to the previous quarter. The notable YoY growth was driven by higher volumes across key products such as methyl methacrylate (MMA), nitro toluene (NT), and dichlorobenzene (DCB).

Key Segment Performance

The energy segment, which comprises MMA, registered a significant 98% YoY increase in volumes. However, this growth was offset by a 4% QoQ decline due to disruptions arising from the West Asia crisis. The non-energy segment, on the other hand, delivered a healthy 9% YoY and 13% QoQ volume growth, although margins remained under pressure, particularly in the agrochemical portfolio.

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Near-Term Risks and Medium-Term Growth Drivers

Despite the strong YoY growth, the company continues to face risks, particularly in the MMA segment, due to volatility in the gasoline-naphtha crack spread. Rising input costs are also likely to sustain margin pressure in the near term. However, the company is advancing multiple initiatives, including the recent commissioning of calcium chloride, which is expected to support medium-term growth.

Outlook and Rating

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We maintain our Accumulate rating for Aarti Industries with a target price of Rs529, valuing the stock at 28x FY27 EPS. The stock is currently trading at 26x FY28 EPS.