Aarti Industries Limited (AIL) is a leading Indian manufacturer of specialty chemicals and pharmaceuticals with a global footprint. It manufactures chemicals used in the downstream manufacturing of pharmaceuticals, agrochemicals, polymers, additives, surfactants, pigments and dyes. The Specialty Chemicals stock is currently trading down about 30% from its highs.
“Aarti applied all around 43 billion capex on FY19-22 and targeting 30 billion over the next two years. “It intends to enter the chloro-toluenevalue chain, establish a new range of Universal Multi-Purpose Plant (UMPP), value-added and specialty products and custom manufacturing,” said Anand Rathi, a domestic brokerage and research firm.
The brokerage expects to continue strong growth momentum, with increased utilization of recently introduced capabilities, introduction of revenue from longer-term contracts, and an increasing share of downstream and value-added products. It has maintained a buy rating on specialty chemical stock with a target price of 960.
The company’s revenue increased 50% from the year-ago quarter, thanks to a higher volume of off-take for key products as well as favorable realization gains. This was supported by incremental volume coming from new capabilities added in recent times.
Management maintains its investment guidance 30 billion over the next two years to add capacity to the chloro-toluene value chain, setting up of Universal Multi-Purpose Plant (UMPP), a new range of value-added and specialty products and custom manufacturing. This guided it to maintain its Q1 revenue rate in the coming quarters.
“We expect healthy revenue / EBITDA / PAT CAGR of 18% / 21% / 24% (adj for termination charges) in FY 22-24E, increasing capacity utilization (high capex intensity) 45-50 bn on FY22-24E (focus on value-added derivatives) import substitution, rising domestic demand and China +1 strategy,” analysts at brokerage Prabhudas Lilladher said with target price maintaining ‘accumulate’ rating on the stock. 880.
It further added that the recently commissioned plants, Jhagadia chlorination capacity and ramp-up of Dahej Phase 2 unit are to drive revenue of specialty chemicals, while pharma revenues are to be channeled into regulated markets, value-added products and new intermediate products. to be operated in excess. In addition, upcoming projects to aid entry into major therapies (anti-hypertension, cardio-vascular, oncology, corticosteroids).
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