Aarti Industries shares see 20% surge amid strategic expansion and cost optimization

ET Intelligence Group: Shares of Aarti Industries (AIL), a maker of specialty chemicals and pharmaceuticals, have gained nearly 20% in the past three months and 7% since its quarterly result announcement on May 8. This has reduced its one-year fall to 32%. A steady ramp-up in underutilised capacities, additional capex of ₹1,000 crore in the current fiscal year on top of ₹1,372 crore in FY25 and improving Ebitda from cost-optimisation efforts are expected to drive future growth. Of the planned capex, around ₹800 crore will be directed towards new product development, with the balance allocated for maintenance.

“Our large project initiatives at Zone IV (in Jhagadia, Gujarat) are being executed in a phased manner, with commissioning scheduled to progress through FY26,” said Suyog Kotecha, CEO of Aarti Industries, during the company’s earnings call.

The Zone IV facility is expected to support production of niche, high-value products used primarily in agrochemicals and pharmaceuticals, offering robust Ebitda margins.

“In FY25, several cost optimisation initiatives, both variable and fixed, were successfully completed, with plans to achieve similar targets in FY26,” said Suyog Kotecha.

For FY25, the company’s revenue rose by 15% year-on-year to ₹8,046 crore while Ebitda rose by 3% to ₹1,016 crore. The company has set Ebitda target of ₹1,800-₹2,200 crore over the next three years.

“With expanded capacity, AIL targets consistent volume growth over the next three years,” noted Axis Securities in a report. “Combined with operating leverage and cost efficiency measures, these efforts are expected to bring the company closer to achieving its FY28 Ebitda goal.” The company aims to increase utilisation of nitro chloro benzenes, di-chloro benzene, and hydrogenation units to 85% from 75% soon.”The company has recently expanded its nitro-toluene (NT) value chain, ethylation, and MMA capacities (in H2, FY25) which will be ramped up in FY26,” noted Emkay Global Financial Services in a report. “We expect gradual ramp-up tied up with demand growth which will lead to better operating leverage.” The brokerage has upgraded Aarti to ‘buy’ from ‘add’ and revised its target price to ₹525 from ₹500. Company shares fell 1% to ₹480 apiece on Thursday on the Bombay Stock Exchange.