2. Is Aarti Industries Ltd undervalued or overvalued?
The key valuation ratios of Aarti Industries Ltd's currently when compared to its past seem to suggest it is in the Undervalued zone.
3. Is Aarti Industries Ltd a good buy now?
The Price Trend analysis by MoneyWorks4Me indicates it is Semi Strong which suggest that the price of Aarti Industries Ltd is likely to Rise-somewhat in the short term. However, please check the rating on Quality and Valuation before investing.
10 Year X-Ray of Aarti Inds:
Analysis of Financial Track Record
Data adjusted to bonus, split, extra-ordinary income, rights issue and change in financial year end
Data adjusted to bonus, split, extra-ordinary income, rights issue and change in financial year end
Data adjusted to bonus, split, extra-ordinary income, rights issue and change in financial year end.
What is a Financial Track Record? How to read this chart in order to understand the data present here?
Financial track record gives insight into the company's performance on key parameters over the past ten years. MoneyWorks4me’s proprietary colour codes make it easy for retail investors to gauge the company’s past performance.
Aarti Industries Ltd has performed well in majority of the past ten years indicating its past ten year financial track record is very good
Value Creation ⓘ
Value Creation Index Colour Code Guide
ⓘ
Mar'15
Mar'16
Mar'17
Mar'18
Mar'19
Mar'20
Mar'21
Mar'22
Mar'23
Mar'24
TTM
ROCE % ⓘ
19%
20.7%
19.9%
17%
18.5%
15.9%
13.2%
22%
10.5%
7.5%
-
Value Creation Index ⓘ
0.4
0.5
0.5
0.3
0.4
0.2
0.2
1.0
-0.2
-0.3
-
Growth Parameters ⓘ
Growth Parameters Colour Code Guide
ⓘ
Sales ⓘ
2,908
3,007
3,163
3,806
4,168
4,186
4,506
6,086
6,619
6,372
7,271
Sales YoY Gr.
-
3.4%
5.2%
20.3%
9.5%
0.5%
7.6%
35.1%
8.8%
-3.7%
-
Adj EPS ⓘ
5.7
7.7
9.6
10.1
14.2
15.2
15
32.7
15
11.6
9.1
YoY Gr.
-
35.8%
24.7%
5.2%
40.1%
7.5%
-1.3%
117.7%
-54%
-23.1%
-
BVPS (₹) ⓘ
28.7
34.1
41.5
48.5
75.9
85.5
100.5
124.6
135.7
145.9
154.6
Adj Net Profit ⓘ
201
257
315
329
491
530
523
1,185
545
419
331
Cash Flow from Ops. ⓘ
340
574
470
335
736
1,102
873
519
1,319
1,204
-
Debt/CF from Ops. ⓘ
3.5
2.3
3.3
6.2
3.3
1.9
3.3
5
2.2
2.6
-
CAGR ⓘ
CAGR Colour Code Guide
ⓘ
9 Years
5 Years
3 Years
1 Years
Sales ⓘ
9.1%
8.9%
12.2%
-3.7%
Adj EPS ⓘ
8.3%
-4%
-8.3%
-23.1%
BVPSⓘ
19.8%
14%
13.2%
7.5%
Share Price
16.9%
-0.3%
-15.3%
-33.5%
Key Financial Parameters ⓘ
Performance Ratio Colour Code Guide
ⓘ
Mar'15
Mar'16
Mar'17
Mar'18
Mar'19
Mar'20
Mar'21
Mar'22
Mar'23
Mar'24
TTM
Return on Equity % ⓘ
21.3
23.8
25.2
22.3
23.3
18.9
16.1
29.6
11.6
8.2
6.1
Op. Profit Mgn % ⓘ
16
19
20.7
18.4
23.2
23.4
21.8
28.3
16.5
15.4
13.8
Net Profit Mgn % ⓘ
6.5
8.9
10.3
9
12.1
12.9
11.9
19.5
8.2
6.6
4.6
Debt to Equity ⓘ
1.2
1.1
1.2
1.3
0.9
0.7
0.8
0.6
0.6
0.6
0.3
Working Cap Days ⓘ
187
179
161
160
153
168
161
132
126
124
73
Cash Conv. Cycle ⓘ
74
81
80
83
80
90
75
64
82
79
-12
Recent Performance Summary
Sales growth is growing at healthy rate in last 3 years 12.24%
Debt to equity has declined versus last 3 years average to 0.60
Sales growth is good in last 4 quarters at 14.83%
Return on Equity has declined versus last 3 years average to 6.10%
Net Profit has been subdued in last 3 years -8.33%
Aarti Industries is India’s largest producer of benzene derivatives and a leading global player in specialty chemicals, holding a 25–40% global market share across 75% of its portfolio. It ranks among the top three globally in chlorination and nitration, top two in hydrogenation, and is the only Indian player in Halex chemistry for nitro-fluoro aromatics. The company offers over 100 specialty chemicals catering to agrochemicals, dyes, pigments, polymer additives, and surfactants, serving over 1,100 customers across 60 countries, with exports accounting for ~60% of FY25 revenue. Backed by an integrated business model and 16 strategically located manufacturing plants, over 70% of its revenue comes from value-added derivatives—ensuring competitive moat and scale advantages.
Low Valuation With Margin Of Safety
At a current price-to-book ratio of 3.1x, AIL trades 1.6 standard deviations below its 10-year median of 5.2x, placing it in the lowest 6% of historical valuations. This statistical undervaluation alone isn't sufficient to invest, but presents a compelling risk-reward proposition. Should fundamentals hold or improve, rerating potential is significant. Conversely, the current valuation offers downside protection, creating an attractive entry point for long-term investors.
2. Long-Term Conviction Backed By Disciplined Capex
Despite industry-wide pricing pressure, Aarti Industries has continued to invest aggressively in long-term growth, expanding its net fixed assets at a 20% CAGR—from Rs. 3,621 crore in FY22 to Rs. 6,505 crore in FY25. This growth is part of a Rs. 4,700 crore capex program planned over FY23–FY26E, with ~50% directed toward Zone IV (Rs. 2,350 crore), ~30% toward expanding core chemistries (Rs. 1,400 crore), and ~20% for process optimization and sustainability (Rs. 940 crore). Capex is set to peak at ~Rs. 1,000 crore in FY26 and taper off thereafter. This sustained investment, despite weak realizations, clearly reflects management’s strong conviction in the structural demand outlook and the company’s long-term earnings potential.
3. Clear Roadmap to Profitability Expansion
The current investment cycle is backed by a well-defined strategic roadmap. Management has guided for EBITDA of Rs. 1,800–2,200 crore by FY28, nearly doubling from FY25 levels (Rs. 1,000 crore). Growth will be driven by cost optimization initiatives (Rs. 150–200 crore),volume and margin uplift from better utilization across core chemistries (Rs. 350–550 crore), and capex-led expansion from Zone IV and the UPL joint venture (Rs. 300–450 crore). The guidance assumes current pricing levels, implying conservatism on behalf of the management. Importantly, if and when the pricing environment improves, it would directly enhance margins and enable EBITDA to exceed current guidance. This leaves room for upside in a more favorable market scenario.
Gross margins compressed from 51% to 36%, largely due to pricing pressures. However, employee and operating cost discipline (CAGR ~7%) cushioned the EBITDA margin decline from 23% to 14%.
Profitability was further impacted by rising depreciation and interest, linked to aggressive capex. We do not look at these costs unfavourably as these are necessary for the long term growth of the company and do not represent the current earnings power of the company.
Aarti Industries recorded a 17.5% CAGR in total volumes over FY22–FY25, driven primarily by significant ramp-up in MMA (74.6% CAGR), Ethylation (26.3%), and Nitro Toluene (22.5%). Although reported utilizations for these capacities appeared modest in FY25 (ranging between 48–65%), this was largely due to their commissioning in H2 FY25. On a normalized basis, utilizations for these capacities are already in the range of 85–98%, reflecting strong execution and healthy underlying demand.
Key capacity additions during this period included:
MMA: from 144 KTPA to 200 KTPA in Q3FY25
Nitro Toluene (NT): from 30 KTPA to 45 KTPA in Q4FY25
Ethylation: from 10–15 KTPA to 25–30 KTPA in Q4FY25
This volume growth sets a solid foundation for operating leverage and margin recovery as these capacities stabilize and scale fully in the coming quarters.
Volumes in KTPA
FY22
FY23
FY24
FY25
FY25 Utilization*
3Y CAGR
NCB
76.6
77.8
73.5
85.3
79%
3.65%
DCB
74.6
84.2
80.7
88.6
74%
5.9%
Hydrogenation
35.7
37.2
39.1
44.4
74%
7.54%
PDA
6.5
4.2
4.4
3.9
33%
-15.67%
NT
16
23.9
30.5
29.4
65%
22.48%
Ethylation
7.2
11.9
10.5
14.5
48%
26.28%
MMA
23.1
37.8
89.3
123
62%
74.62%
Total
240
277
328
389
-
17.5%%
*Utilization based on commissioned capacity by end-FY25.
Abbreviations:
NCB - Nitro chloro benzene
DCB - Dichlorobenzene
PDA - Phenylenediamine
NT - Nitrotoluene
MMA - Mono Methyl Aniline
The ramp-up indicates a solid foundation for margin recovery as demand picks up.
PDA continues to face pressure from Chinese competition (33% utilization), but overall portfolio utilization is set to improve from FY26 onward—unlocking operating leverage and earnings growth.
6. Future Outlook and Strategic Growth Drivers
Aarti Industries is well-positioned to benefit from favorable macro and sector-specific developments:
Agrochemicals (18% of revenue): Inventory normalization and just-in-time procurement are driving volume-led recovery.
Energy Additives (36%): Strong gasoline–naphtha spread continues to support MMA margins.
Polymers (15%): U.S. tariffs on Chinese PDA open export opportunities; current utilization of PDA at just 33%.
Pharma (10%): The U.S. Biosecure Act and China+1 sourcing strategy are likely to boost PNCB demand, starting H1 FY26.
Risks
Chinese price pressure – If Chinese dumping intensifies, it could further depress prices and margins, particularly in agrochemicals and PDA, which could hinder our assumptions and delay the achievement of guided EBITDA.
Gasoline-naphtha spread volatility – If gasoline-naphtha spreads remain unfavourable, MMA demand and profitability could come under further pressure, as the economics for refiners would become unattractive. This, in turn, could lead to underutilization of Aarti’s capacities or sub-optimal margins. However, considering the 13-year spread history, current spreads appears to be bottoming out, suggesting limited downside from here.
Contract cancellations – If key long-term contracts are cancelled, it could result in underutilised capacities, impacting earnings and returns on the capex as planned.
Capex execution risk – If end-user demand remains sluggish, the ramp-up of new capacities could be delayed, affecting returns on capex.
Stock pulse is a format where we explore the most important questions to understand the company's performance.
What are the revenue drivers for the company and future outlook?
Aarti Industries Ltd (AIL) is a leading global specialty chemical company specializing in benzene-based derivatives. Key value chains include Nitro Chloro Benzenes, Di-Chlorobenzenes, Phenylenediamines, Nitro Toluene value chain and Sulphuric Acid as well as other downstream products. With a presence in over 60 countries, it caters to various industries such as Agrochemicals, Polymer and additives, Pharmaceuticals, Dyes, pigments, and printing inks. Half the revenues earned by the company are from exports and major export markets are North America, Europe, and China.
AIL has recorded 15% revenue/EBITDA CAGR over FY18-23. Recently, in Q1FY24 revenue declined 12% YoY; while Q2FY24 witnessed volume-backed recovery. H2FY24 is anticipated to be better than the first half. The medium-to-long-term trend continues to be appealing backed by steady demand recovery in key end-user industries, management expects FY25 to be a normalizing year.
Source: Annual report, Moneyworks4me research
Can the company continue to maintain its margin profile?
AIL demerged its pharma business effective 1st July, 2021. This strategic decision was taken with the rationale of achieving operational efficiencies by streamlining the businesses. Currently, the company only deals in the specialty chemical segment (FY19-22 avg. EBITDA margin 20%+). Management hinted that margins have bottomed out in H1FY24 (~15%). We expect margin recovery from FY25E, on improvement in demand from the agro and pharma sector.
What are the Capex plans of AIL?
The company incurred a CAPEX of approximately Rs. 575 crore in H1FY24 for various expansion opportunities (including chlorotoluenes value chain, comprising over 40 value-added specialty products). The products from this project are characterized by their niche and high-value range, with a potential strong EBITDA margin of around 25-30%.
The targeted annual CAPEX for FY24 is expected to fall within the range of Rs. 1200-1300 crores. Overall, the company is dedicated to allocating Rs. 2,500 to 3,000 crores for the outlined growth initiatives over two years, anticipating rapid growth in the Indian Chemical industry. This commitment aims not only to strengthen proficiency and capabilities in existing and newer high-end chemistries but also to expand the addressable market size and meet the rising demand from key customers.
Source: Annual report, Moneyworks4me research
What are the concern areas?
Demand slowdown- The global macroeconomic slowdown, primarily driven by Europe, along with uncertainty regarding the resurgence of demand in China, has resulted in a global imbalance between supply and demand. This has consequently affected pricing and demand for products such as dyes, dyestuff, pigments, etc., collectively contributing to ~30% of Aarti's overall revenue.
Return ratios to remain subdued- Capex plans of Rs. 2500+ Crore over FY24-25E will require the company to raise debt. This will impact RoEs over the medium term.
Aarti Industries: Q2FY24 result update - 10 Nov 2023
Particulars
Q2FY24 (Rs. Crs)
YoY Trend
Comments
Revenue
1,454
-14%
Domestic/export sales declined 19/8% respectively
EBITDA
233
-13%
EBITDA Margin
16%
Flat
Margin recovered QoQ
PAT
91
-27%
Increase in depreciation and interest cost further impacted profit
Results were subdued on global inventory destocking, recessionary trends across end markets and slowdown in exports though EBITDA margin recovery needs to be noted.
Aarti Industries reported 12% growth in sales over previous year, and 20% growth in operating profit in Q4FY21. The company is growing backed by rapid capacity expansion and robust orderbook. Aarti Industries largely has cost plus business wherein costs are passed with additional margin. One must not look at operating margin but absolute profit as margins would change based on raw material costs.
Our Opinion: Chemical sector is at the core of China+1 beneficiaries as China stopped chemical manufacturing due to heightened pollution concerns in China as well as developed markets searching for alternatives sourcing away from China. Aarti Industries has consistently grown over last 10 years and one of the remarkable growth stories. Currently these positives are already known and priced for.
Even if the profit doubles in next 3 years (management guidance), the stock price already reflects this growth which lowers upside potential from current price. We recommend 50% SELL based on elevated valuation. Chemicals companies unlike other asset light business have limited positive surprises as their growth is capped to their investment in capacities. Besides, it operates on fixed profit margin with limited pricing power, any slippage in execution or raw material costs can impact/delay profit growth.
Company share prices are keep on changing according to the market conditions. The closing price of Aarti Inds on 18-Jul-2025 16:59 is ₹446.4.
What is the market cap of Aarti Inds?
Market capitalization or market cap is determined by multiplying the current market price of a company's shares with the total number of shares outstanding. As of 18-Jul-2025 16:59 the market cap of Aarti Inds stood at ₹16,184.4.
What is the P/E ratio of Aarti Inds?
The latest P/E ratio of Aarti Inds as of 18-Jul-2025 16:59 is 47.60.
What is the P/B ratio of Aarti Inds?
The latest P/B ratio of Aarti Inds as of 18-Jul-2025 16:59 is 2.88.
What is the 52-week high and low of Aarti Inds?
The 52-week high of Aarti Inds is ₹767.1 and the 52-week low is ₹347.4.
What is the TTM revenue of Aarti Inds?
The TTM revenue is Trailing Twelve Months sales. The TTM revenue/sales of Aarti Inds is ₹7,304 ( Cr.) .
About Aarti Industries Ltd
Aarti Industries Limited is listed entity incorporated in India. Aarti Industries is a leading Indian manufacturer of Speciality Chemicals and Pharmaceuticals with a global footprint. Chemicals manufactured by the company are used in the downstream manufacture of pharmaceuticals, agrochemicals, polymers, additives, surfactants, pigments, dyes, etc.
Business area of the company
Aarti Industries is engaged in manufacturing and dealing in speciality chemicals and pharmaceuticals.
Products offered by the company
Chemical products
Chlorination
Nitration
Hydrogenation
Ammonolysis
Halex
Dinitro chlorination
Alkylation
Hydrolysis
Methoxylation
Esterification
Diazaotiation
Sulphonation
Condensation
N-Alkylation
Oxidation
Other (inorganic)
Pharma
Anti Hypertensive
Ramipril
Quinapril HCL
Benazepril HCL
Benazepril HCL Polymorph B
Perindopril Tert-butylamine
Perindopril Arginine
Ranolazine Di-HCL / Base
Anti Asthamatic
Budesonide
Bambuterol HCL
Salmeterol Xinafoate
Ipratropium Bromide
Ciclesonide
Fluticasone Propionate
Fluticasone Furoate
Mometasone Furoate Monohydrate
Formoterol Fumarate
Montelukast Sodium
Anti Cancer
Bicalutamide
Ifosfamide
Ifosfamide Sterile
Cyclophosphamide
Cyclophosphamide Sterile
Mesna
Mercaptopurine
Azathioprine
Capecitabine
R-Salbutamol Sulphate
Levalbuterol HCL
Levalbuterol Tartrate
Milestones
1984
Incorporated Aarti Organics Private Limited.
1986
Commenced 1,200 Tonnes Per Annum (TPA) unit for Nitro Chloro Benzenes (NCB) in Sarigram, Gujarat.
1990
Set up the first large-scale organic plant in Vapi - 4,500 TPA unit for NCB.
2001
Set up a large-scale hydrogenation and nitration unit at Jhagadia (hydrogen gas via pipeline).
2005-08
Expanded the NCB and sulphuric acid capacity.
Set up a large-scale speciality chemical unit in Kutch.
Received US FDA approval for an Active Pharmaceutical Ingredient (API) unit in Tarapur.
2011
Upgraded the hydrogenation unit from batch to continuous.
Received USFDA approval for the custom synthesis division at Vapi.
Commenced bulk shipment for global markets.
2016
Commissioned an ethylation facility at Dahej SEZ (ethylene gas via pipeline).
Expanded the NCB capacity from 57 KTPA to 75 KTPA.
2017
Commenced the functioning of the calcium chloride facility.
Started operations at co-generation and solar power plants.
2018
Commissioned the Nitro Toulene plant.
Signed two large multi-year contracts with global players.
Manufacturing facility being set up at Dahej SEZ.
2019
Commissioned the Nitro Toulene hydrogenation facility at Jhagadia.
Signed another multi-year contract with a global player.
2020
Operationalised Aarti Research and Technology Centre (ARTC) at Mahape, Navi Mumbai.
Commissioned two units at Dahej SEZ for high-value speciality chemicals.
Company quality is determined using minimum hurdle rate for return on capital employed and free cash flows for last 10 years.
Companies with smaller size have higher hurdle rate.
High quality stocks are important for long term investment.
Value
Valuation is computed by comparing relevant price multiples versus industry and its own history.
One unique and very important modification is our adjustment for company's financials for cyclicality and normalized profitability.
or based on whether current ratio is lower or higher than median values. See graph for better assessment.
Valuation is important for long term investment.
Actual valuation done by our Equity Analysts may differ from the Free DeciZen maker valuation. Subscribe to our premium products for more information on actual valuation
Price
Price rating is given based on stock price strength using moving averages and relative strength on shorter timeframe.
Short term time frame has little to no significance for long term investing but it can help in deciding how fast or how slow one can add a stock top your portfolio.
Only after a stock satisfies Quality and Value parameters, use price trend to build a position. Add slowly if price trend is Red or Orange. Add quickly if price trend is Green.
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ranking agency, however it is required that users have a way of selecting funds and building a Portfolio. The method used by it are described below to enable users to understand the logic behind the rating and ranking Subscriber will find more details on this in the
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MoneyWorks4Me rates and ranks mutual funds based on the following data-driven system:
Performance Consistency: This is measure based on whether the fund has beaten the benchmark index consistently. For
this we compare the 3-year rolling returns of the fund with the benchmark for a minimum of 5 years and preferable 10
years. The period of rolling is one month and holding period is 3 years. Fund are color-coded Green on Performance when
the fund beats the benchmark more than 90% of the time. It is Orange if it beats 80% to 90% of the time and Red if less
than 80%. Funds with less than 5 year data are color-coded Grey.
Quality of Portfolio Holding: Moneyworks4Me has color-coded stocks as Green, Orange and Red based on whether the
company's performance has generated a ROCE above a threshold level (cost of capital) over 10 years (minimum 6 years) and
generated positive Free Cash Flow. For Banks it checks whether ROE is greater than 15% and sales has grown over previous
year. Stocks that perform consistently on these combined metrics are color-coded Green (min score 14 out of 20), Orange
(between 8 and 14) and Red (less than 8 out of 20).
Fund are color-coded Green provided the portfolio has 70% holding in Green stocks but not more than 20% in Red stocks.
Funds with more than 20% Red stocks in the portfolio are color-coded Red. The rest are Orange funds
Funds ranking in screeners: Performance Consistency and Quality are two parameters used for ranking funds for SIP. The
ranking as follows GG, GO, GR, OG, OO, OR, RG, RO and RR.
With the same color-coded funds, the one with the higher Average 3-year rolling returns (over 5 to 10 years), the number
that appears in the Performance tag, ranks higher.
Here is the summary:
The third tag Upside Potential is not relevant for SIP. It is relevant for lumpsum investments in Mutual Funds.
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