Aarti Industries shares plunge 6% on Q4 results, guidance. Further fall ahead for stock?

Shares of Aarti Industries Ltd plunged 6 per cent in Wednesday's trade as Ebitda for March quarter missed analyst estimates and the FY24 guidance came in a bit softer than the Street projections.

Kotak Institutional Equities said Aarti’s March quarter Ebitda missed its estimate by 12 per cent, with management attributing the miss to a maintenance shutdown and subdued demand from discretionary end-uses, although tax refunds helped profit after tax exceed its estimate by 3 per cent.

"FY24 Ebitda growth guidance of 15 per cent is modestly below our previous expectations, leading us to trim FY25 EPS by 1-6 per cent. Our March 2024E fair value stays at Rs 520," it said.

Shares of Aarti Industries fell 5.80 per cent to hit a low of Rs 525.15. Kotak's target suggests limited downside ahead. Phillip Capital has cut the rating for Aarti Industries to neutral with a reduced stock price target of Rs 600.

The management guided for a 25 per cent volume growth, a 15 per cent Ebitda growth and a tax rate of 15-17 per cent for FY24.

"Aarti Industries' Q4 performance slipped below our expectations on account of cost pressure. Going ahead, we believe Aarti Industries may sustain volume growth led by multi-year supply contracts and multiple expansions but the elevated cost will mount margin pressure in the near future," it said.

In order to factor the uncertain macro factors and earnings miss in Q4, the brokerage has cut its FY24 and FY25 estimates by 12 per cent and 15 per cent, respectively.

"Also factoring the volatility and little control on cost, we cut valuation multiples to value Aarti Industries at Rs 600, implying limited upside of 8 per cent in the near term," it said.

Dolat Capital Markets expect supplies to non-regular markets to taper down in FY25 which coupled with ramp up of capacities will help in achieving the guided Ebitda of Rs 1700 crore in FY25.

This brokerage has cut its EPS estimates but sees a sizable upside potential of 34 per cent for the stock.

“We remain constructive of the company’s mid to long term growth prospects led by ramp-up of capacities and expansion of existing value chains and addition of newer value chains and products. We maintain our

Buy rating on the stock with a revised target price of Rs 747 per share,” it said.

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