Aarti Industries Ltd, a leading manufacturer of specialty chemicals and pharmaceuticals has the potential to reach ₹1,085/share from its current market price of ₹790.95, implying a 37.19 percent potential upside, HDFC Securities said in a research report.
Since the beginning of the year, the stock has been under selling pressure. On January 22, the stock reached ₹1,106, just 5.30% below its 52-week high of ₹1,168, set on October 19, 2021. However, the stock has fallen 28.93% since then.
In April, the stock dropped 7.21%; in May, it fell 8.55%; and in June, it dropped 13.93%. However, the buying pace picked up in July and the stock saw positive gains of over 14.08%. In the last three years, Aarti Industries' share price has surged from ₹373 to the current level of ₹790.95, ascending to the tune of nearly 112.02 percent in this period. Further, in the last five-year period, this chemical stock has surged from ₹220 to ₹790.95 a piece, logging nearly 259 percent. In the last decade, this multi-bagger stock has risen 4,323 percent, from around ₹17.88 to ₹790.95.
At the prevailing price, the stock traded at 21.53 times its trailing 12-month EPS of ₹36.73 per share and 4.85 times its book value.
AIL's constant focus on Capex and R&D will enable it to remain competitive and expand its customer base. The toluene segment in India is mainly untapped and catered to through imports; AIL will benefit in the long term by entering this segment, HDFC Securities said in a report.
The company reported a 14.67 percent YoY increase in consolidated net profit of ₹189 crore in the first quarter of fiscal year 2022-23 (Q1FY23), compared to ₹164.9 crore in the same quarter last year.
The revenue increased 49.87% year on year to ₹1,972.4 crore, driven by higher volume offtake for key products and favorable realization gains. It was supported by incremental volume coming from newer capacities added in the recent past. HDFC Securities said the 1st and 2nd long-term contracts have seen a ramp-up during the quarter, and this is expected to further improve in the ensuing quarters.
EBITDA increased by 18% year on year to ₹369.3 crore, but EBITDA margin fell by 510 basis points to 19% in Q1 due to higher input and utility costs, logistical challenges, and a mark-to-market impact on ECBs due to a steep depreciation in currency rates during the quarter.
On the ratio front, the company reduced its debt to equity ratio to 37.5% from 114.2% in the last five years. The company's ROE has consistently increased in the last 5 years. In the March quarter, the ROE rose to 22.10 percent, compared to 14.94% in the March 2021 quarter.
An average of 19 analysts polled by MintGenie have a 'buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
