Why Aarti Industries Share Price is Falling? Is it a Trap or Opportunity?

With market volatility affecting investor sentiment, Aarti Industries (CMP: ₹566.2) presents a potential opportunity for those looking for long-term growth amidst short-term concerns. Despite a sharp correction driven by cautious commentary, the company’s fundamentals remain robust, and investors should consider the upcoming capacity additions and strategic growth plans.

Table of Contents

• Introduction to Aarti Industries
• Technical Analysis
• Short-, Mid-, and Long-term Targets
• Fundamental Insights
• Capex Plans
• Valuation and Growth Projections
• FAQs
• Disclaimer

Introduction to Aarti Industries

Aarti Industries has long been a leader in India’s specialty chemical sector. With a diversified portfolio, it serves both domestic and export markets, producing intermediates for pharmaceuticals, agrochemicals, and polymers. The stock’s sharp correction in Q1 FY25 may offer a solid entry point for investors focused on the long-term growth outlook.

Technical Analysis

• Current Market Price: ₹566.2
• Moving Averages:
  • 21-month moving average: ₹582.62
  • 10-month moving average: ₹661.2
• RSI: 45.21 (nearing oversold territory)
• MACD: Showing a bearish crossover, but any reversal from the current price levels could confirm an upward movement.
• Volume Analysis: Volumes have been decreasing, indicating weak selling pressure.

Short-, Mid-, and Long-term Targets

Term	Target Price	Support	Stop Loss	Details
Short-term (1-3 months)	₹620-₹630	₹530	₹515	A potential bounce-back above ₹530 may lead the stock to hit ₹630, if it sustains its upward momentum.
Mid-term (6-12 months)	₹700-₹750	₹530	₹515	Mid-term targets depend on Aarti’s ability to reclaim the ₹660 resistance level.
Long-term (1-3 years)	₹800-₹900	₹450	₹430	With significant capex plans and new capacities online, long-term targets suggest strong growth potential.

Fundamental Insights

Aarti Industries delivered robust volume-led growth in Q1 FY25, despite global headwinds. Here are a few fundamental points investors should consider:

• Revenue Mix: Export share increased to 55.5% of total revenue.
• EBITDA Margins: Margins have recovered to 16.4%, but remain below historic highs of 23-28%.
• Debt: Debt-to-equity ratio is 0.58x, indicating moderate leverage.
• Demand Outlook: Recovery in downstream demand is expected to boost growth.
• Valuation: At a P/E ratio of 17.7x FY26e EV/EBITDA, Aarti Industries is fairly valued relative to growth prospects.

Capex Plans

Aarti Industries is on an ambitious growth trajectory with a planned capex of ₹1,500-₹1,800 crore for FY25. Key projects include:

• Nitro Toluene Expansion: Expected to significantly improve output for high-demand markets.
• Greenfield Chloro Toluene Project: Expected to commence in FY26, opening new revenue streams.
• JV with UPL: A joint venture for amine derivatives manufacturing will contribute to revenue by FY27.

Valuation and Growth Projections

• Revenue Growth: A 20-30% volume increase is projected over FY25-26.
• EBITDA Margin Expansion: Margins are expected to recover to 20-25% over the next 1-2 years.
• Long-term Growth: By FY27, Aarti Industries could see significant upward growth with new projects coming online.

FAQs

Disclaimer

This analysis is for educational purposes only and should not be considered as financial advice. Please conduct your own research or consult a financial advisor before making any investment decisions.