AARTIIND - Fundamental Analysis: Financial Health & Valuation

Last Updated Time : 20 Dec 25, 11:16 pm

Fundamental Rating: 2.7

📊 Core Financials

• Revenue & Profitability: PAT improved from 44 Cr. to 79 Cr. (Qtr Var +43.6%), showing recovery but still modest scale.
• Margins: ROE at 6.22% and ROCE at 6.43% reflect weak efficiency and profitability compared to peers.
• Debt: Debt-to-equity ratio of 0.69 indicates moderate leverage, manageable but not ideal.
• Cash Flow: Dividend yield of 0.27% is minimal, offering limited shareholder returns.

💹 Valuation Indicators

• P/E Ratio: 49.8 vs Industry PE of 26.6 — significantly overvalued.
• P/B Ratio: Current Price 369 ₹ vs Book Value 158 ₹ → ~2.3x, moderately expensive.
• PEG Ratio: -1.46, highlighting poor earnings growth relative to valuation.
• Intrinsic Value: Current valuation exceeds fundamentals, leaving limited margin of safety.

🏢 Business Model & Competitive Advantage

• Aarti Industries operates in specialty chemicals, catering to pharmaceuticals, agrochemicals, and polymers.
• Competitive advantage lies in diversified product portfolio and established client relationships.
• However, profitability metrics remain weak, limiting long-term resilience unless margins improve.

📈 Entry Zone & Long-Term Guidance

• Entry Zone: Attractive near 340–355 ₹ range, closer to support levels and below DMA 200.
• Long-Term Holding: High-risk investment at current valuations; suitable only for aggressive investors betting on chemical sector recovery.

✅ Positive

• PAT growth (+43.6%) indicates recovery momentum.
• Diversified specialty chemicals portfolio serving multiple industries.
• Debt-to-equity ratio (0.69) is moderate and manageable.

⚠️ Limitation

• High P/E (49.8) compared to industry average (26.6).
• Weak ROE (6.22%) and ROCE (6.43%).
• PEG ratio (-1.46) signals poor earnings growth alignment.

📉 Company Negative News

• FII holding reduced slightly (-0.04%).
• DII holding reduced significantly (-2.17%), showing declining domestic institutional confidence.

📈 Company Positive News

• PAT improved quarter-on-quarter, showing operational recovery.
• Stock trading near DMA 50, providing short-term technical support.

🌐 Industry

• Industry PE at 26.6, lower than Aarti’s valuation, indicating sector optimism but company trades at premium.
• Specialty chemicals sector benefits from global demand in pharma, agrochemicals, and polymers.

🔎 Conclusion

• Aarti Industries shows recovery in profits but remains weak in efficiency and margins.
• Valuations are stretched compared to industry peers, making current entry unattractive.
• Best suited for accumulation near 340–355 ₹ levels.
• Long-term holding viable only if profitability improves and sector demand strengthens.