Geojit is bullish on Aarti Industries has recommended buy rating on the stock with a target price of Rs 1396 in its research report dated May 30, 2018.
Geojit's research report on Aarti Industries
AARTI Industries Ltd (ARTO) is a global leader in Benzene based derivative products. Has a diversified product portfolio with end users in pharma, agrochemicals, specialty polymers, paints & pigments. Q4FY18 Revenue robust 23%, while PAT grew by 14% YoY. EBITDA margins declined by 80bps YoY to 17.5% due to higher raw material cost and other expenses. Long term supply contracts of value added agro chemical is expected provides higher growth opportunities. Capacity additions, focus on high margin products and robust off-take from Pharma segment, we reiterate our positive stance on ARTO. We trim our EPS estimates by 2.7% for FY19E to factor in higher cost. Despite this, PAT is expected to grow by healthy 27% CAGR over FY18-20E.
Outlook
We value ARTO at P/E of 21x (20x earlier) FY20E given strong earnings outlook and ROE of above 24%; we upgrade to BUY from Accumulate with a target price of Rs1396
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