Aarti Industries Q1 Results Review - Capex Outlay Intact Amid Persisting Challenges: Dolat Capital

Dolat Capital Report

Aarti Industries Ltd.'s Q1 FY24 performance was weak (below estimates) as revenue/ Ebitda/profit after tax declined by 12%/ 28%/ 48% YoY; gradual recovery expected from H2 FY24.

Aarti Industries' management indicated FY24 Ebitda to be lower vs. earlier guidance of 15% YoY growth. Previous FY25 guidance of Rs 17 billion is likely to be revised down.

Capex outlay and timelines intact (Rs 25-30 billion over next two years) as management believes medium-long term outlook is largely unchanged and near term challenges are transient in nature.

We assign ‘Reduce’ rating with target price of Rs 480 (25 times FY25E) as slow ramp-up of capacities on demand challenges, coupled with high cash outflows on capex to weaken balance sheet and keep return ratios subdued (less than 10%)

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