Mar'25 View on Aarti Industries Ltd

Aarti Industries Ltd, the flagship company of the Aarti group, manufacturing organic and inorganic chemicals at its major facilities in Vapi, Jhagadia, Dahej and Kutch, in Gujarat and in Tarapur in Maharashtra. The company has a strong market position in the NCB-based specialty chemicals segment. The stock had made a high of 750 recently and fallen to 370 level and now recovered to 400 but the weakness still persists in the stock due to following inputs • Profit margins remained under pressure in Q3FY25, amid pricing pressures. • Meeting the FY25 EBITDA guidance of Rs1000-1050 cr will require a substantial qoq jump in Q4FY25. • But the spillover of one bulk shipment of MMA to January 2025 should help. • We cut earnings estimates to factor in margin pressures, partially offset by a lower tax rate. • EBITDA margins remained weak at 12.6%. • Persistent pricing pressure and liquidation of high-cost aniline stocks. • Finance costs increased sharply owing to a Rs23 cr mark-to-market loss on foreign currency. • For demand environment, management highlighted that agrochemical industry remains soft. • External environment remains challenging amid Chinese overcapacity and demand weakness.