Aarti Industries Limited Research Report By Motilal Oswal

Aarti Industries is a high quality proxy play two key emerging trends: (1) rising demand for specialty chemicals in India (15% CAGR FY15-FY20E) and (2) eastward migration of global chemical manufacturing (Asia to have 70% production share by 2030). We expect EBIT/Ton to improve in Speciality Chemicals segments due to benefits of operating leverage and better product mix. The company is setting up capacities for different chemistries which gives us visibility of volume growth for the next three years. We expect the company to grow its profits at 21% CAGR over FY16-17E and improve its ROCE from 17% in FY15 to 19% in FY18E. We value the company at 15x FY18E EPS at INR 630 providing for an upside of 20%