Aarti Industries falls on profit booking post Q1 results; 1:1 bonus issue

Shares of Aarti Industries slipped 8 per cent to Rs 1,595 on the BSE in the intra-day trade on Friday. The stock fell 9 per cent from its early morning high on profit-booking after the management lowered FY20 revenue/profit guidance considering slowdown in end-use industries.

The stock hit an intra-day high of Rs 1,760 today. In the past three weeks, it outperformed the market by gaining 7 per cent, as compared to  a 1.5 per cent decline in the S&P BSE Sensex.

Aarti Industries reported 54 per cent year-on-year (YoY) jump in net profit at Rs 137 crore in Q1FY20 against Rs 89 crore in the year-ago quarter. However, income from operations remained flat Rs 1,086 crore.

EBITDA (earnings before interest, taxes, depreciation, and amortisation) margin improved 440 basis points (bps) to 21.8 per cent from 17.4 per cent, on account of expanding contribution of higher value products. The company planned capex of Rs 1,000 – Rs 1,200 crore for FY20.

Meanwhile, the board of directors recommended bonus shares in the ratio of 1:1 i.e. one bonus share for every share held. The company said the record date will be announced in due course.

The management lowered its revenue and profit after tax (PAT) growth guidance to double digits without indicating a specific range (earlier guided for around 15-20 per cent revenue growth and around 12-20 per cent PAT growth). Revision in guidance was attributed to the macroeconomic slowdown with auto and agrochemicals industries being the worst affected.

“H2FY20 is likely to remain weak even as the company is seeing increased sourcing enquiries from global corporations. Even though softness in end-user industries will weigh on performance in the near term, we believe that focus on value-added products and commencement of long-term contracts will drive robust revenue growth with sustained higher margin over the medium term,” analysts at SBICAP Securities said in a result review note.

In the past one year, Aarti Industries rallied 29 per cent against a 1.5 per cent decline in the S&P BSE Sensex till Wednesday. It touched an all-time high of Rs 1,819 on May 28, 2019.

At 02:46 pm, the stock was trading 8 per cent lower at Rs 1,600 on the BSE, as compared to a 0.16 per cent rise in the benchmark index. A combined 178,389 shares changed hands on the counter on the BSE and NSE till the time of writing this report.