Aarti Industries Q4 results highlights –
Company infra –
16 manufacturing plants
11 ZLD plants
05 Co-Gen power plants
02 R&D centers
6000 employees
Sales breakup(FY 23) –
India- 52 pc
ROW- 15 pc
N America- 13 pc
Europe- 11 pc
China- 6 pc
Japan- 3 pc
Total Sales @ 6620 cr
5 yr sales CAGR @ 22 pc
5 yr EBITDA CAGR @ 15 pc
Key strengths –
Global leader in Benzene derivatives. Among top 3 in chlorination and nitration. Among top 2 in hydrogenation
Fully backward integrated, low cost, sustainable mfg ops
100+ products
1100+ customers
End user industries –
Agrochems-30 pc
Pharma-20 pc
Pigments-12 pc
Additives-26 pc
Polymers-10 pc
HPC- 3 pc
Products in pipeline – 40 plus, half of these to be made in India for the first time
Q4 highlights-
Sales- 1854 vs 1642 cr
EBITDA- 252 vs 262 cr
PAT- 149 vs 146 cr ( due one time tax write back )
Contribution from value added products- 85 pc
Debt/Equity – 0.58
Comments on Q4 performance –
Increased volume from higher volumes and higher sales of value added products
EBITDA impacted due-
Maint shut down of one Acid plant and Kutch Unit
Slowdown in off take of dyes, pigments (textile related).Green shoots visible wef Q1
Except energy, other RMs were higher QoQ
Updates-
Commercialised 02 spec chemical blocks(for agro and pigment intermediates-for captive use)
02 more blocks to be commissioned in next 02 yrs
3rd long term contract commissioned last yr to be ramped up this yr
Macro concerns wrt demand continuing. Likely to improve in FY24
Targeting 20 pc EBITDA growth for FY 24 ie around 1320 cr vs 1090 cr for FY 23
FY 25 guidance – EBITDA of 1700 cr @ 25 pc margins due ramp up of new facilities and increased op-leverage
FY 26 and beyond – EBITDA to grow at 25 pc CAGR due zone 4 ramp up and better utilisation of zone 1,2 and 3
Other important comments-
Capex spends for FY 23 at 1300 cr
Entered into a 20 yr supply arrangement of Nitric Acid with Deepak Fertilisers to secure the key RM
Capex guidance for next 2 yrs at 1500 cr each for expansion into chloro-toulenes, which is a difficult to make product. Will target both exports and import substitution
Expect 25 pc volume growth in FY 24. EBITDA growth to be slower ( @ 15 pc or so ) as exports to non regulated Mkts increase
Global slowdown impacting demand of discretionary products
Expect employee costs to moderate going fwd in percentage terms as topline grows in FY24
Margin difference between regulated vs non regulated Mkts are as high as 10-15 pc at GM level
Supplying to both patented and non patented agrochemical makers
Long term, Europe likely to lose mkt share wrt energy intensive products as overhang of high energy prices continues
Not losing mkt share to China post China opening up
Nitro Chloro Benzene volumes to pick up in Q2
Tax rates to be around 15-17 pc next FY
Expect some debt increase in next 2 yrs as operating cash flow may not be able to absorb all capex spends
Volume growth for FY 23 has been 15 pc plus
Capacity expansions in FY 24,25 will be in NCB, Acid plant (up 22 pc), Ethylation (up 3X), Nitro Toulene
Post ramp up of capacities in FY 25, expect an asset turn of about 1.5 times
Working capital reduced post demerger of Pharmalabs
Disc: intend to add slowly on dips. Holding a small tracking position
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