Aarti Inds on the rise

about 4 months ago
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Aarti Industries has been on the top five gainers list of the BSE since yesterday; in fact between today and yesterday, it has notched up gains of almost 19%. The stock today rose to an intraday high at Rs.1114.80, a rise of 9.5%.

This is the largest producers of Benzene based basic and intermediate chemicals in India. Specialty Chemicals (SC) segment is touted to be positively impacted by Coronavirus: Aarti does not have any significant imports or exports to and from China. The recent Coronavirus outbreak could positively impact its Speciality Chemicals division in the near term. In Q3FY20 management commentary indicates that some chemical product prices have increased owing to short supply from China and thus may benefit its SC division. Besides, company is seeing increased enquires from leading global players for its products, entailing a shift in supply chain that is independent of China.

The company supplies to diverse end-user industries such as polymer additives, pigments, dyes, paints, pharmaceuticals, agro-chemicals, fertilizers, and fast-moving consumer goods, and is insulated from downturn in any particular industry.

As mentioned in our Market Whispers column, going forward, Aarti's operating performance is expected to remain strong, supported by improving share of high-margin value-added products and contribution from long term contract manufacturing agreements entered by company in FY18 and FY19, with global multinational companies (MNCs). This is expected to result in assured business of Rs. 15,000 cr (as compared to FY20e Revenue of appx Rs. 4,300 cr) over the contract period with healthy operating margins, with supplies commencing from Q4FY20. To cater this demand, company has 2 upcoming project sites at Dahej SEZ and 4th R&D center at Navi Mumbai.

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