Multibagger stock Aarti Industries, which has delivered about 2,800 per cent return to its long-term investors in the last ten years, has seen some weakness of late.
Shares of this chemical player have tumbled over 33 per cent from its 52-week high of Rs 1,031.40. However, some recovery is visible from a June 20 low of Rs 616.82.
Brokerages largely have a bullish stance on the speciality chemicals sector, given better pricing, stable crude oil prices and a boost from the China+1 policy. Aarti Industries is seen as one of the beneficiaries.
The company had been witnessing higher volume offtake and better realisation for its products both in its speciality chemicals and pharmaceutical segments, said KRChoksey in a recent report.
The speciality chemical segment witnessed sustained scale-up from the long-term contract in the last few quarters.
The company remains focused on addressing the large opportunity arising from import substitution and supply chain diversification by global majors, the brokerage said, adding that the China+1 strategy has bolstered the export momentum for both its speciality chemicals and pharma segments.
KRChoksey has a ‘Buy’ rating on the stock with a target price of Rs 1,094, suggesting an upside potential of 59 per cent from the prevailing market price.
PhillipCapital said moderation in logistics and input costs would drive margin on a like-to-like basis.
“Continued elevated product prices and commissioning of a new supply contract in speciality chemicals (despite visible moderation in discretionary demand) and continued strong pharma sales led by expansion as well as better realisation would ensure 34 per cent sales growth,” it added.
Prabhudas Lilladher has an ‘accumulate’ rating on the stock with a target price of Rs 880. “While the prolonged gas crisis is likely to boost outsourcing of speciality chemicals (Europe+1) over the medium to long term, benefitting Indian manufacturers, production disruption can have a negative impact in the near term,” it said.
The brokerage firm said the demand outlook is cautious given weak consumer confidence, adding that chemical companies’ capex programmes are on track.
CD Equisearch believes sales growth would be moderate for Aarti Industries over the next two years due to a fall in crude oil prices.
“Despite opportunities posed by China +1 and greater available capacities, business scaling over the next two years would be little propelled not least due to raw material shortage and no trivial gestation period in optimization of newly commissioned capital projects – partly reflected in barely imposing ROE,” it said while suggesting a target of Rs 612 on the stock.
In August 2021, the company announced a demerger plan to separate its speciality business (to operate under Aarti Industries) and pharma business (Aarti Pharmalabs), with October 20, 2022, as the record date for the demerger.
“The proposed demerger of Pharma Undertaking will facilitate a focused approach to the growth opportunities into respective segments, also enable the segment to take strategic calls as may be needed to capture onto these opportunities to grow,” the company said in its investor presentation.
Aarti Industries is a speciality chemicals company dealing in Benzene-based derivatives. It operates in two verticals, namely pharma and speciality chemical divisions.
At 11:35 hours, the scrip was trading 0.44 per cent higher at Rs 690.10 on Tuesday. Market cap of the firm rose to Rs 25,016.40 crore on BSE.
