After falling for three-straight trading sessions, shares of Aarti Industries Ltd rose over 3 percent in early trade on Monday, after the company signed a binding term sheet for a 20-year period with largest manufacturer of Nitric Acid in South East Asia, Deepak Fertilisers and Petrochemicals Corporation Ltd, on November 19.
According to an exchange filing, a binding term sheet has been signed for ₹8,000 crore for offtake and supply of Nitric Acid. The parties plan to execute the formal agreement by the end of 2022, and the supply arrangement comes into effect from April 1, 2023.
“After being under pressure for the last couple of weeks, and correcting from the recent swing high of 750, the stock prices have witnessed bounce back today backed by strong volumes. This bounce may extend where 690-700 is resistance level. On the flip side, 640 is the support level,” said Rajesh Bhosale, equity technical analyst, Angel One, on Aarti Industries.
The shares of specialty chemicals and pharmaceuticals company are currently trading near their 52-week low, having fallen 40.05 percent from 52-week high of ₹1,118.0.
Analysts advise to avoid Aarti Industries, however, they believe that aggressive short-term traders can buy for short term bounce towards ₹690-700, with a stop loss below ₹640.
According to a Mintgenie poll, 21 analysts on average recommend ‘hold’ on Aarti Industries.
Meanwhile, shares of Deepak Fertilisers & Petrochemicals Corporation Ltd were also trading nearly 3 percent higher.
An analyst said that so far in the November month, the stock price has corrected more than 18 percent from its high and remains under tremendous pressure and that any bounce is likely to see selling pressure at higher levels.
Furthermore on the fundamental side, according to ICICI Direct Research, a supply constraint of Nitric Acid, a crucial feedstock product, has affected the manufacturing of several specialty chemical goods in FY22 and H1FY23.
For Aarti Industries, concentrated Nitric Acid represents about 8 percent of the entire cost of raw materials. Deepak Fertilisers has an annual production capacity of 2.3 lakh MT for CNA and 8.9 lakh MT for WNA.
The brokerage believes that by providing long-term supply security for a crucial raw material, the transaction benefits Aarti Industries.
According to a Mintgenie poll, one analyst has a ‘strong buy’ call on Deepak Fertilisers.
