Aarti Industries Ltd., incorporated in the year 1984, is a Mid Cap company (having a market cap of Rs 34443.32 Crore) operating in Pharmaceuticals sector.
Financials
For the quarter ended 30-06-2021, the company reported a Consolidated Total Income of Rs 1316.81 Crore, up 8.88 % from last quarter Total Income of Rs 1209.36 Crore and up 40.45 % from last year same quarter Total Income of Rs 937.55 Crore. Company reported net profit after tax of Rs 165.08 Crore in latest quarter.
Investment Rationale
The brokerage has upwardly revised revenue estimate by 9% and 21% for FY22E and FY23E, respectively. It has also increased reported PAT estimate by 68% and 7% for FY22E and FY23E, respectively. Introducing estimates for FY24E, it expects ARTO’s revenue, EBITDA and PAT to witness 26%, 28% and 32% CAGR, respectively over FY21-FY24E, which will lead to improvement in return ratios. Accordingly, it expects ARTO’s RoCE/RoE to improve by 310bps/257bps over FY21-FY24E. Hence, it is increasing valuation multiple to 23x now from 14x earlier, it values ARTO’s chemicals business at 24x of FY24E EBITDA and pharma business at 15x of FY24E EBITDA. It has compared ARTO’s chemical business with PI Industries (PI) and observed that target multiple is at 10% discount to PI. It maintains BUY on ARTO with an upwardly revised 2-Year Target Price of Rs1,232 (from Rs1,209 pre-bonus issue of 1:1), which implies 29% upside from the current level.
Promoter/FII Holdings
Promoters held 47.6 per cent stake in the company as of Sept 30, 2020, while FIIs held 7.5 per cent, DIIs 15.8 per cent and public and others 29.2 per cent.
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