Multibagger Mid Cap Pharma Stock, Trading 6% Away From 52-Week Low, Can Surge 27%, Buy: KR Choksey

KR Choksey has given buy rating to Pharmaceuticals sector stock, Aarti Industries Ltd with a target price of Rs 841 apiece. The brokerage has downgraded the target price from Rs 1094 apiece to Rs 841 apiece. Buy Aarti Industries at the current market price of Rs 661 apiece to get a potential return of 27%. Check key takeaways below:

1. Aarti Industries Ltd Stock Performance & Return

The current market price of the stock is Rs 661 apiece on BSE with an intraday decline of 2.26%. The stock's 52-week high is Rs 1031 apiece and 52-week low is Rs 616 apiece. The mid cap company has a market capitalisation of Rs 23,979 crore as of writing the report. The stock has given a return of 64% in last 3-years and 195% in last 5-years.

2. Aarti Industries Registers Strong Revenue Growth

In Q2FY23, Aarti Industries' revenue grew 34.2% YoY/4.6% QoQ to INR 16,850 mn, supported by stable demand trajectory for its products especially which are under the essential end usages.

The revenue growth would have been much better but for the tapered demand in some products linked to end-user industry of dyes and pigments. Aarti Industries expect this demand to recover from Q4FY23 onwards.

3. Aarti Industries Key Projects, Capacity Expansion Plans

The company is on track with its capex plans. Expansion plans related to the 3rd Long Term Contract, the NCB capacity expansion, as well as several other projects are underway and will commence production in a phased manner. The plant for its 3rd long term contract at Jhagadia will be commissioned by H2FY23 and further ramp up of the plant will happen over FY24.

4. Valuation

According to KR Choksey, "After factoring in Q2FY23 results and the impact of the demerger, we have revised our FY23E/FY24E estimates which now reflect only the speciality chemicals business of the company. At CMP of INR 677, the shares of Aarti Industries are currently trading at a P/E of 46.7x/32.2x its FY23E/FY24E revised EPS. We now value the stock at 40x on its FY24E EPS of INR 21.0 (earlier 33.5x on FY24E EPS of INR 32.6) which yields a target price of INR 841 (earlier INR 1,094), giving an upside potential of 24.2% from the CMP. Accordingly, we maintain our'BUY' rating on the stock."

5. About Aarti Industries

Aarti Industries Limited (AIL) is a leading Indian manufacturer of speciality chemicals and pharmaceuticals with a global footprint. We combine process chemistry competence (recipe focus) with a scale-up engineering competence (asset utilisation) for creating a sustainable future.

Over the last decade, AIL has transformed from an Indian company servicing global markets to a global entity with state-of-the-art manufacturing facilities in India, according to its official website.

Disclaimer

The stock has been picked from the brokerage report of KR Choksey. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.