Shares of Aarti Industries witnessed a robust surge of over 9% during the morning trade on November 6, as investors enthusiastically embraced the company’s optimistic commentary and improved sequential performance, choosing to overlook the disappointing results for the September quarter.
The specialized chemicals firm reported a 27% year-on-year decline in net profit (PAT), amounting to Rs 91 crore, and a nearly 14% decrease in sales. According to the management, the company’s performance exhibited sequential improvement due to increased volumes in several of its products.
On a sequential basis, the net profit increased by 15%, while total income grew by 2.8%.
The company acknowledged that it faced challenges during the quarter, including inventory destocking, export market demand pressures, and geopolitical uncertainties.
Despite these challenges, the company’s management remains optimistic about the medium-to-long term outlook, as they anticipate a steady recovery in demand from key end-user industries. They believe that demand will gradually normalize across various segments and product lines in the coming quarters, with the second half of FY24 expected to outperform the first half.
Looking ahead to FY25, the management envisions it as a more typical year, considering the ongoing pace of recovery. In the quarter ending September 2023, the company’s EBITDA performance was bolstered by volume expansion, stable-to-improved realization for certain products, and a balanced contribution from both regular and non-regular markets.
Furthermore, the company benefited from higher tax depreciation and exemptions, resulting in a lower tax liability and the accrual of deferred tax assets worth Rs 9 crore.
Aarti Industries successfully commercialized phase 1 of the acid unit revamp during the reviewed quarter, and other projects are progressing as planned. The company also has ambitious plans to introduce more than 40 products through an integrated value chain and increase its chloro-toluene base capacity to around 42,000 tonnes per annum.
The benzene-based specialty chemical company has indicated a capital expenditure (capex) of approximately Rs 2,500-3,000 crore for its chemicals division.
As of 11:13 AM, Aarti Industries was trading at Rs 501.45 on the National Stock Exchange (NSE), marking an impressive 8.8% increase.
It’s worth noting that the share price has experienced a decline of more than 30% over the past year and is down 17% since the beginning of this year.
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