While year-on-year growth in the company’s financial were strong, analysts pointed to slowdown on a sequential basis
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Shares of Aarti Industries fell nearly 4 percent on May 31 as investors were unimpressed by the company’s guidance for 2022-23 and the March quarter earnings.
While year-on-year growth in the company’s financial were strong, analysts pointed to slowdown on a sequential basis.
Aarti Industries reported a 50 percent on-year surge in consolidated revenue to Rs 2,018 crore during the quarter, while its operating profit rose 30 percent on-year to Rs 339 crore.
Brokerage firm Kotak Institutional Equities noted that sequentially, consolidated operating profit fell 4 percent likely because the company ceased to account for compensatory receipts from Bayer AG since December.
Earnings momentum in the specialty chemicals segment remains somewhat slow, with segment quarterly operating profit at Rs 245 crore still only marginally above the levels of three years ago, Kotak Equities said.
Further, investors were disappointed by the management’s guidance that consolidated operating profit will grow at high single digit in 2022-23 suggesting a year of consolidation ahead for the company.
The slowdown in operating profit growth would be because of lack of receipts from Bayer and new projects at lower margins.
Kotak Equities said that given the growth guidance, heavy capital expenditure and risk of global economic slowdown, the company’s valuations are “still rich”.
“Earnings growth, particularly in specialty chemicals, has been subdued over FY2019-22 despite nearly Rs 40 billion (Rs 4,000 crore) of capex incurred in the past three years, leading to relatively low return ratios compared to leading peers,” Kotak Equities said.
At 11:00 am, shares of Aarti Industries were down 3.8 percent at Rs 780.5 on the National Stock Exchange.
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