CD Equisearch Pvt Ltd June 9,2015 Equities Derivatives Commodities Distribution of Mutual Funds Distribution of Life Insurance Aarti Industries Ltd (AIL) No. of shares (crore) 8.9 Mkt cap (Rs crs) 2814 Current price (09/06/2015) 318 Price target (Rs) 396 52 week H/L (Rs.) 381/172 Book Value (Rs.) (fv:5) 115 P/BV (16e/17e) 2.4/2.0 P/E (16e/17e) 12.6/9.6 EPS growth (FY15/16e/17e) 30.2/10.5/30.8 ROE (FY15/FY16e/FY17e) 21.5/20.4/22.6 Beta 1.1 Daily volume (avg. monthly) 76396 BSE Code 524208 NSE Code AARTIIND Bloomberg ARTO IN Reuters ARTI.BO Shareholding pattern % Promoters 59.2 MFs / Banks / FIs 12.3 Foreign 1.1 Non-Promoter Corp. 1.4 Public & others 25.9 Total 100.0 As on Mar 31, 2015 Recommendation BUY Analyst KISHAN GUPTA, CFA, FRM Phone: + 91 (33) 4488 0043 E- mail: [email protected]Consolidated figures (Rs crs) FY13 FY14 FY15 FY16e FY17e Income from operations 2096.25 2632.49 2907.96 2916.22 3602.48 Other Income 3.76 10.97 9.01 5.44 5.84 EBITDA (other income included) 364.96 412.45 474.70 507.23 610.01 Net Profit after MI & EO item 134.05 155.51 202.40 223.68 292.60 EPS (Rs) 16.94 17.55 22.84 25.25 33.02 EPS growth (%) 32.1 3.6 30.2 10.5 30.8 Company Brief AIL is one of India's leading manufacturers of chemicals and pharmaceutical intermediates: dyestuff; pigment; agro chemicals; speciality chemicals; active pharmaceutical ingredient (API); intermediates of API. Quarterly Highlights Thanks to relentless decline in crude oil prices, Aarti’s standalone sales tumbled 9% last quarter, the first downtick in at least eight quarters. Sale of speciality chemicals slid 12% to Rs 554 crs, while that of pharmaceuticals’ advanced by 26.8% to Rs 82 crs; hpc’s also fell by 16.2%. EBIT margins of speciality chemicals though rose to 19% ( up 420 bps), the best quarterly showing in at least three years, helped by its business model of pricing contracts on absolute EBITDA; margins got a bump up as prices of finished products declined. Other businesses showed much less gyration in margins - pharmaceutical’s at 10.2% (+10bps); that of home & personal care chemicals(hpc) at 2.1% (- 90 bps). Windfall gains in margins buoyed operating profit by 12.3% and post tax profit by 5.2% last quarter. For the full year, standalone sales jumped 9% precipitated by solid growth in both pharmaceuticals (+21.8%) and hpc (+24%), whereas the speciality chemicals reported a mere 6.5% growth. Higher EBIT margins in speciality chemicals (16.7% vs 15%) - the flagship business - helped save the blushes for it still accounts for over 90% of total allocable EBIT. EBIT margins in pharmaceuticals have started to stabilize at 12%, thus providing stability to earnings. Net profit grew by eye-popping 29.8% not least due to combined effect of higher operating margins and lower depreciation and taxes. Despite meltdown in crude oil prices, Aarti is going full hog to commence new projects. For instance, the second phase of nitro chloro benzne (ncb) expansion at Vapi (from 66000 tpa to 75000 tpa) would get over by Q3FY16, while the second phase of phenylene di amine (pda) would finish by H2FY16. The stock currently trades at 12.6x FY16e EPS of Rs 25.25 and FY17e EPS of Rs 33.02. We reiterate our buy rating on the stock with revised target of Rs 396 (previous target of Rs 355) based on 12x FY17e earnings over a period of 9-12 months.
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CD Equisearch Pvt Ltd June 9,2015
Equities Derivatives Commodities Distribution of Mutual Funds Distribution of Life Insurance
Equities Derivatives Commodities Distribution of Mutual Funds Distribution of Life Insurance
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