3 Bonus, 1:2 Split, 50 Dividends Rewarded So Far: This Specialty Chemical Stock Falls 8% In 1-Day; Here's Why

Specialty chemicals company, Aarti Industries share price nosedived by 8% on November 8, 2024. The reason behind the bearish trend is due to 43% decline in net profit for Q2FY25. The company's margins also contracted sharply. Aarti Industries holds the record of rewarding investors with strong bonus issues, hefty dividends, and one stock split. However, the stock is under pressure in 2024 so far.

After market hours of November 8th, Aarti Industries stock closed at Rs 474.75 apiece, down by 7.8% on BSE with market cap of Rs 17,210.60 crore.

During the trading hours, the midcap stock dipped by 8.3% to hit an intraday low of Rs 472.40 apiece. This will be Aarti Industries new 52-week low as well. While the stock is far away from its 52-week high of Rs 769.50 apiece on BSE. YTD, the stock has dipped by 27%. Its price-to-equity ratio is at 35.52x, and return to equity is at 9.16%.

Aarti Industries Q2 Results:

The company posted decline of 43% year-on-year and 62% quarter-on-quarter in its consolidated net profit to Rs 52 crore in Q2FY25. Its profitability was at Rs 137 crore in Q1FY25 and at Rs 91 crore in Q2FY24.

Further, consolidated revenue from operations was at Rs 1,786 crore, registering a mixed performance. Revenue surged by 12% YoY but dropped by 11% QoQ.

EBITDA as well came in under pressure. In Q2FY25, the company posted operating profit of Rs 202 crore, registering a decline of 13% YoY and 35% QoQ.

Aarti Industries posted decline of 1% YoY and 36% QoQ in its energy business volumes. While it also said that steep drop in refining margins & gasoline-naphtha delta impacted the volumes in the Energy application.

Highlighting about Q2FY25 performance, Aarti Industries said the following:

- While YoY volume grew by ~15%, margin pressures across various product / enduses resulted in lower gross profits.
- Fixed costs remained constant.
- Exceptional Income of 2.3 crs constitutes the gain on account of divestment of stake in a step down subsidiary, ie Nascent Chemical Industries Ltd
- Interest costs remained constant. Benefit for interest rates to accrue gradually from next quarter.
-Depreciation increase attributable to commercialisation of expanded capacities/projects.
- Basis H1FY25 numbers, the company's tax liability is declining and corresponding deferred tax assets are accrued.

Aarti Industries Outlook:

Aarti expects operating leverages and cost optimisation initiatives to drive EBITDA growth beyond volume growth. Further, the company estimated a CAPEX of Rs 1,300 to Rs 1,500 crore for FY25, which is lower compared to its previous estimates of Rs 1,500-1,800 crore. For FY26, the CAPEX is projected to be around Rs 1,000 crore.

While Aarti is targeting EBITDA in the range of Rs 1800-2200 crore in 3 years; coupled with Debt/EBITDA of 15%.

Aarti Industries Corporate Actions:

Bonus Issue: The company has delivered 3 bonuses so far. The first bonus issue was of 2:1 ratio in February 2005, followed by 1:1 bonus issue each in September 2019 and June 2021.

Stock Split: The company has carried only one stock split so far. In January 2006, the company split its share in the ratio of 1:2 ratio, where its face value of Rs 10 each was cut to Rs 5 each.

Dividends: The company rewarded investors up to 50 dividends since February 2001, as per Trendlyne data. In past 12 months, the company paid dividends of Rs 1 per share.