Shares of Aarti Industries Ltd., a leading specialty chemicals company, witnessed a sharp decline of over 14% on Tuesday, August 13, following the company’s decision to suspend its financial guidance for the fiscal year 2025 due to ongoing market uncertainties. This significant drop marks the most substantial single-day fall for Aarti Industries since January 2008.
The company’s management, during an earnings call, expressed concerns about the volatile market conditions, particularly highlighting the pressure from China and fluctuating profit margins. As a result, they announced plans to reassess their Earnings Before Interest, Tax, Depreciation, and Amortisation (EBITDA) guidance, which was initially projected to be between ₹1,450 crore and ₹1,700 crore. Despite these challenges, the company maintained its volume growth projection of 20-30% for the current financial year.
The management also noted that the ongoing Red Sea crisis has disrupted the global supply chain, potentially affecting volumes in certain segments. This disruption has added to the already complex market dynamics that Aarti Industries is navigating.
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In its financial performance, Aarti Industries reported consolidated revenue of ₹2,012 crore, reflecting a modest growth of 3% quarter-on-quarter and a robust 28% year-on-year increase. The company’s profit after tax (PAT) stood at ₹137 crore, indicating a sequential growth of 4% and a remarkable 96% rise on an annual basis. EBITDA for the quarter grew by 10% sequentially and 55% year-on-year, reaching ₹311 crore.
The mixed financial outlook has led to a division among analysts regarding the company’s future. Nuvama, for instance, remains optimistic, maintaining a “buy” rating on the stock and raising its price target from ₹854 to ₹903, suggesting a potential upside of 23% from its last closing price on August 12. According to Nuvama, Aarti Industries’ revenue growth was primarily driven by increased volumes. The firm also observed that the non-discretionary segment continued its upward momentum, while discretionary segments like agrochemicals showed early signs of recovery, with expectations of further growth in the second half of the fiscal year.
On the other hand, Morgan Stanley adopted a more cautious approach, assigning an “equal-weight” rating to Aarti Industries with a price target of ₹615, indicating a potential downside of 16%. The brokerage noted some positive developments in the agrochemicals segment but highlighted that the implied EBIT per tonne was only marginally higher on a sequential basis.
Emkay, another brokerage firm, revised its earnings forecasts for Aarti Industries, reducing its Earnings Per Share (EPS) estimates for FY2025 and FY2026 by 11% and 5%, respectively, to account for the anticipated margin volatility.
Overall, the sentiment among analysts remains mixed. Out of the 25 analysts covering Aarti Industries, 12 have issued a “sell” rating, five recommend holding the stock, and eight maintain a “buy” rating.
As of 11:30 AM on Tuesday, Aarti Industries shares were trading at ₹627.95 on the NSE, down by 14.5%. The sharp decline has erased the stock’s gains for the year, turning it negative on a year-to-date basis. The company now faces the challenge of navigating through the turbulent market conditions while attempting to restore investor confidence.
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