Stock to Buy Today: Buy Aarti Industries Share Price Target Rs 626 By HDFC Securities
Stocks to Buy Today: On 7 November 2023, the financial services firm HDFC Securities published the latest research report on Aarti Industries shares, assigning a ‘buy’ rating to the stock. The comprehensive analysis also provides valuable insights into the company’s financial health.
HDFC Securities is Bullish on Aarti Industries and has recommended a ‘buy’ rating on the stock with a target price of Rs 626. Let’s take a closer look at their recommendations for the Aarti Industries share price target set by HDFC Securities.
Aarti Industries Share Buy Recommendations
We continue to endorse Aarti Industries (AIL) with a ‘BUY’ rating and a price target of INR 626 per share. AIL’s dedicated investment in capital expenditure and research & development is expected to sustain its competitive edge and broaden its client base. The toluene sector in India, which is primarily reliant on imports, presents a significant opportunity for AIL to capitalize on in the long run.
AIL’s financial performance shows a 14% year-on-year decline in revenue, settling at INR 14.5 billion, though it marked a 3% quarter-on-quarter increase. Despite facing challenges such as inventory destocking and geopolitical tensions, the company managed to improve its earnings before interest, taxes, depreciation, and amortization (EBITDA) by 16% quarter-on-quarter, thanks to a better product mix and recovery in its traditional markets. However, annual profit after tax (APAT) dropped by 26%, yet it saw a 30% increase over the previous quarter.
From the recent conference call, the company anticipates a quarter-on-quarter improvement in demand, although it might take several quarters to return to normal across various products and market segments. AIL has successfully commercialized the first phase of its Acid Unit Revamp and plans to spend INR 25-30 billion on capital expenditures over the next two years. The company has already spent INR 5.75 billion in the first half and intends to invest INR 12-13 billion in FY24.
The interest cost has risen due to mark-to-market losses on unhedged long-term loans, amounting to approximately INR 120 million. Looking ahead, AIL expects to optimize operating and employee expenses further, alongside increased utilization.
We have adjusted our FY24/25 earnings per share (EPS) estimates slightly by +4.8% and -3.1%, respectively, to reflect Q2 performance and management’s outlook. Our target price is underpinned by a discounted cash flow (DCF) valuation, assuming a weighted average cost of capital (WACC) of 11% and a terminal growth rate of 4%. The stock is trading at 31 times the forecasted FY25 EPS
- CMP — Rs. 510
- Target — Rs. 626
- Type — Buy
- Report — Click Here
Shareholding Pattern
- Promoters: 43.65% (June 2023) and 43.57% (September 2023)
- FIs & Local MFs (Financial Institutions & Local Mutual Funds): 14.86% (June 2023) and 16.15% (September 2023)
- FPIs (Foreign Portfolio Investors): 12.17% (June 2023) and 10.57% (September 2023)
- Public & Others: 29.32% (June 2023) and 29.70% (September 2023)
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