Buy Aarti Industries; target of Rs 1340: ICICI Direct

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ICICI Direct's research report on Aarti Industries

Aarti Industries’ Q3FY21 revenues grew 9.5% YoY to Rs 1186.8 crore, mainly due to 31.8% growth in pharma segment to Rs 232.2 crore. Speciality chemical revenues grew 3.5% YoY to Rs 1078.8 crore, lower than I-direct estimates of Rs 1162.7 crore. EBITDA margins improved 55 bps YoY, 233 bps QoQ to 24%. Improvement in gross margins by 303 bps YoY, 339 bps QoQ was partially offset by increase in other expenditure. EBITDA grew 12.1% YoY to Rs 285 crore. PAT grew 18.2% YoY to Rs 165.3 crore. Delta vis-à-vis EBITDA was mainly due to lower interest cost.

Outlook

We maintain BUY with a TP of Rs 1340 (22x of FY23E EPS of Rs 56.1) vs. earlier target price of Rs 1235.

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