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INVESTMENT INSIGHTS

Check Before You Invest : Aarti Industries Ltd

BSE: 524208 NSE: AARTIIND ISIN: INE769A01020
  |   Sector:  Chemicals & Fertilizers   |   Industry:  Chemicals

Snapshot

Q.1 Which industry/sub-sector does Aarti Industries Ltd belong to?
Aarti Industries Ltd belongs to the Chemicals & Fertilizers sector, operating specifically within the Chemicals segment.
Q.2 Is Aarti Industries Ltd a good quality company?
Aarti Industries Ltd is a good quality company, based on a consistently good multi-year financial track record.

This assessment is based on company’s performance on Revenue growth, ROCE, Equity and Assets, key margin ratios, cash conversion cycle, and debt to cash flow from operations and how it compares with its long term averages.

Q.3 Is Aarti Industries Ltd undervalued or overvalued?
Aarti Industries Ltd appears Undervalued, as its key valuation ratios are lower than their past averages.

Based on the industry it operates in, the relevant valuation ratios include one of the following, P/E, P/BV, P/Sales, EV/EBITDA or a combination of two or more.

Valuation Ratios Current 5-year
Historic Median
Price to Earnings 42 42.28
Price to Book 2.95 3.52
Price to Sales 2.12 2.69
EV to EBITDA 18.69 18.99
Q.4 Is Aarti Industries Ltd a good buy now?
Aarti Industries Ltd is a good buy now, based on strong price trend analysis suggesting prices may rise. However, you need to check its quality and valuation before making a decision

Performance Analysis

We have analysed the performance of the company on the following:

  • How has it performed on generating Profits?

    By checking its Revenue growth, Gross, Operating and Net Margins compared to its last 5-year median.

  • How efficiently has it utilized Capital?

    By checking its ROCE, ROA, ROE and its Cash Conversion Cycle.

  • How is it managing its Debt?

    By checking its Debt to Equity and Cash Flow from Operations.

A: What are the trends in revenue and profit margins?

Q.1 Revenue growth of Aarti Industries Ltd?
Aarti Industries Ltd revenue growth is 14.1% for FY-2025, which is above its 5-year CAGR of 11.68%, indicating faster growth.

Q.2 Gross Profit margin of Aarti Industries Ltd?
Aarti Industries Ltd Gross profit margin which is the profit after deduction of direct costs, is 9.2% for FY-2025, which is below its 5-year median of 12.6%, indicating decreasing margins.

Q.3 Operating Profit Margin of Aarti Industries Ltd?
Aarti Industries Ltd Operating Profit Margin which is the profit after deduction of all operating costs, is 13.78% for FY-2025, which is below its 5-year median of 16.45% indicating decreasing margins.

Q.4 Net Profit Margin of Aarti Industries Ltd?
Aarti Industries Ltd Net Profit Margin is 4.55% for FY-2025, is below its 5-year median of 8.24%, indicating decreasing margins.
Current Level 5-year
Historic Median
Gross Profit Margin (%) 9.2 12.6
Operating Profit Margin (%) 13.78 16.45
Net Profit Margin (%) 4.55 8.24

B: Does the business utilize capital efficiently?

Q.5 Return on Asset of Aarti Industries Ltd?
Aarti Industries Ltd Return on Asset is 3.17%, which is below its 5-year historical median of 6.67%, indicating deteriorated asset utilization efficiency.

Q.6 Return on capital employed (ROCE) of Aarti Industries Ltd?
Aarti Industries Ltd Return on capital employed is 6.39% for FY-2025, which is below its 5-year historical median of 10.48%. The current ROCE is below its estimated weighted average cost of capital (WACC) of 13.5%, indicating value preservation.

Q.7 Return on Equity (ROE) of Aarti Industries Ltd?
Aarti Industries Ltd Return on equity is 6.08% for FY-2025, which is below its 5-year historical median of 11.56%, indicating the business is making worse use of its shareholders capital.

Q.8 Cash conversion cycle of Aarti Industries Ltd?
Aarti Industries Ltd Cash conversion cycle is 42 days, below its 5-year historical median of 74 days, indicating improved working capital management. However, you need to compare this with its peers in the industry.
Current Level 5-year
Historic Median
Asset Turnover (x) 0.77 0.77
ROE (%) 6.08 11.56
ROCE (%) 6.39 10.48
Cash Conversion Cycle 42 days 74 days

C: How much debt does the business have and is it at a sustainable level?

Q.9 Debt to Equity ratio of Aarti Industries Ltd?
Aarti Industries Ltd Debt-to-Equity ratio is 0.68, which is above the industry average of 0.13, indicating higher debt levels in the industry.

Q.10 Debt to cash flow from operations of Aarti Industries Ltd?
Aarti Industries Ltd Debt to cash flow from operations is 3.05, which is at a moderate level.

Ownership & governance

D: Promoter shareholding and pledge status of Aarti Industries Ltd?

Q.1 Promoter shareholding and pledge status of Aarti Industries Ltd?
Promoters hold 42.09% of the Aarti Industries Ltd, with 3.57% of their stake pledged, indicating low pledge risk.

Peer comparison (industry-wise, mcap)

E: How does Aarti Industries Ltd performance compare with that of its Peers?

Q.1 Revenue growth of Aarti Industries Ltd vs industry peers?
Aarti Industries Ltd revenue CAGR is 11.68%, compared to the industry median CAGR of 7.53%, indicating faster growth and gaining its market share.
Profit Metrics
Current Level 5-year
Industry Median
Revenue Growth (%) 14.1 7.5
Gross Profit Growth (%) -4.5 12.1
Operating Profit Growth (%) 2.4 11.7
Net Profit Growth (%) -20.4 9.7
Operating Efficiency
Current Level 5-year
Industry Median
Asset Turnover (x) 0.77 0.93
ROE (%) 6.08 10.17
ROCE (%) 6.39 12.96
Cash Conversion Cycle (days) 41.91 62

Valuation & price assessment

Q.1 Stock return of Aarti Industries Ltd over the last decade?
Over the last 9 year(s), the stock has delivered a CAGR of 14.6% based on the current price.
9Y 5Y 3Y 1Y
Share Price
CAGR		 14.6% -10.7% -1.2% 8.8%
Q.2 Valuation ratios of Aarti Industries Ltd vs historical?
The current P/E ratio of 42 is in line with than its historical median of 42.28, indicating that the stock is trading near its historical average valuation.
Q.3 How do the current valuation ratios compare with 5-year historical median and industry numbers?
Valuation Ratios Current 5-year
Historic Median		 5-year
Industry Median
Price to Earnings 42 42.28 28.17
Price to Book 2.95 3.52 2.22
Price to Sales 2.12 2.69 1.93
EV to EBITDA 18.69 18.99 14.20

Check more companies

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10. Anupam Rasayan India

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