Comments
Target: ₹1,065
CMP: ₹739.75
Despite disrupted key raw material supplies, higher utility costs and crude oil prices, Aarti’s FY22 revenue/EBITDA/PAT rose 41 per cent/32 per cent/38 per cent. With utilisation picking up at the recently-commissioned capacities, starting of revenue from long-term contracts and rising share of downstream and value-added products, we expect the strong growth momentum to persist.
Aarti’s Q4 revenue (adjusted by excluding the ₹630-crore termination fees in Q3 FY22) grew 45 per cent year-on-year to ₹1,750 crore (but was flat quarter on quarter), backed by better realisations (on sharp spikes in raw material costs and other utilities passed on) and good volume gains. .
The management says growth could have been higher, but shortage of nitric acid (a key raw material) curbed production.
Aarti’s FY22 capex was ₹1,300 crore. Its major expansion projects (third long-term contract, pharma US FDA expansion, NCB capacity expansion) are expected to come on stream in FY23. Capex is expected to be ₹3,000 crore by FY24. The management guided high single-digit growth in EBITDA in FY23 and significant increase in EBITDA in FY24 as capacity utilisation is expected to reach 80-90 per cent.
Risks: Delay in implementing capex; a slow ramp-up of added capacities and delay in LT contracts.
Comments
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.