Aarti Industries Ltd Q1 FY23 Result Updates. Robust revenue momentum was supported by higher volumes.

Aarti Industries Ltd Q1 FY23 Result Updates.
Robust revenue momentum was supported by higher volumes.

Q1FY23 revenue of Aarti Industries grew by 9.8% YoY & by 12.3% QoQ to Rs19.7bn. Robust revenue momentum was supported by higher volumes & better realisations. Healthy volumes was majorly because of commercialization of 1st & 2nd long term contract which benefitted the company. The speciality chemicals segment increased by 44% YoY and by 8% QoQ to Rs17.65bn and the pharmaceuticals segment increased by 48% YoY and by 5% QoQ to Rs4.07bn in Q1FY23. Higher raw material prices has led to contraction of gross margins by 935bps YoY and 318bps QoQ to 44.3% in Q1FY23.
EBITDA grew by 17.7% YoY & by 8.9% QoQ to Rs3.7bn in Q1FY23. EBITDA margins declined by 510bps YoY and by 59bps QoQ to 18.7% in Q1FY23.
Consolidated PAT grew by 15% YoY & declined marginally by 2% QoQ to Rs1.89bn in Q1FY23.

Pharma margins increased sequentially.

EBIT margins in pharma segment stood at 18.7% in Q1FY23 vs 17.2% in Q4FY22 vs 19% in Q1FY22. The company has been able to pass on the cost inflation to its ends user industries, which led to improvement in margins during the quarter. The company has started commercialization of its capacities in API’s & intermediates business at Tarapur facility which will lead to contribute to revenue in the coming quarters. The off-patented approach is paying off well to drive growth. The new API capacity commercialization has started and would contribute to revenues from the next quarter once capacity ramps up faster.
The company reported slight decline in EBITDA margin on sequential basis by 59bps to 18.7% in Q1FY23 vs 19.3% in Q4FY22 majorly because of rising raw material prices of benzene, Aniline, PAN etc. Capex incurred for Q1FY23 is Rs2bn. The major capex is in the downstream chemistries of benzene & NCB business, chlorotoluene value chain, Acid division in the speciality chemical segment. In the pharma segment, the Tarapur API USFDA approved facility has been commercialized in Q1FY23. Demand from pharma, agrochemicals etc segment remained strong.

The shares of Aarti Industries Ltd are trading at Rs. 831.10, up by 2.55%.

Valuations:
The return on equity (ROE) is 27.8% for the quarter ended June 2022. The price-to-earning (P/E) ratio stood at 22.6. The return on capital employed (ROCE) for the company is 22.7%. The price to book value of Aarti Industries Ltd. is 5.13. The EV/EBITDA is 16.1. EPS during the quarter came at Rs. 36.7.