Sharekhan's research report on Aarti Industries
Strong Q1FY2022 results with a 4%/21%/24% beat in revenue/operating profit/Adjusted PAT at Rs1,317 crore/Rs314 crore/Rs176 crore, up 8.9%/20.6%/32% q-o-q led by strong performance of specialty chemical segment. Specialty chemical’s revenue/EBIT increased strongly by 12.5%/13.1% q-o-q led by volume growth of 9-10% q-o-q and price hikes (pass-through of input & freight cost) helped sustain EBIT margin at 18.8%. Pharmaceutical revenues rose by 7.3% q-o-q but EBIT margin contracted 138 bps q-o-q to 19.8%. Management stayed upbeat on growth prospects and maintained guidance for revenue/PAT growth of 25-35% for FY2022E and a 2x increase in earnings by FY24 versus FY21. Cumulative capex plan of Rs4500-5000 crore by FY24E remain intact and would drive next phase of growth.
Outlook
We expect strong a 33% CAGR in PAT over FY21-24E and expect RoE to improve to 21.4% (versus 16.3% in FY21). Favourable dynamics of Indian specialty chemicals sector to support premium valuations. Hence, we maintain a Buy on the stock with a revised PT of Rs. 1,155.
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