IGI Logo

Revenue growth despite near-term volume headwinds

ARTO reported revenue of Rs24bn, registering a 43% YoY and 8% QoQ increase, primarily driven by the pass-through of higher input prices. EBITDA margin expanded 340bps YoY, supported by inventory gains and favorable foreign exchange movements. However, Energy business volumes declined 17% QoQ due to geopolitical disruptions in the Middle East, with the region's revenue contribution falling to ~2% from ~15% earlier.

The Non-Energy segment delivered 12% YoY volume growth, although volumes declined 7% QoQ due to elevated raw material costs. Management expects margins to improve from Q2FY27, supported by easing input costs and demand from newly launched products. In the Polymer & Additives business, export contribution declined to 39% in Q1FY27 from 95% in Q4FY26, primarily due to bulk shipments to the US in the previous quarter, with polymer volumes expected to normalize from Q2FY27.

On the growth front, the company continues to advance multiple expansion initiatives, including the commissioning of the Calcium Chloride plant and ongoing projects such as MMA debottlenecking, MPP, PEDA, and Zone IV developments. These projects, along with incremental capacity from MMA and DCB debottlenecking and planned project commissioning during CY26, are expected to support medium-term growth. While near-term margins are likely to remain under pressure from elevated input costs, improving non-energy demand and upcoming capacity additions should support earnings growth over the medium term. We maintain our Accumulate rating with a target price of Rs526, valuing the stock at 28x FY28 EPS. The stock is currently trading at 26x FY28 EPS.

Revenue increases by 43%YoY/8%QoQ: Consolidated net revenue 43% YoY/ 8% QoQ to INR23.9 bn (PLe: INR20.9bn, Consensus: 21.5bn), actual revenue was 14% higher than our estimates. Revenue growth was primarily driven by higher input prices passed on to customers. Gross Margin decreased by 430bps QoQ to 35.8% (vs 40.1% in Q4FY26 and 33% in Q1FY26), decreased due to higher raw material cost.

EBITDA increases by 81%YoY/12% QoQ: EBITDA increased 81% YoY and 12% QoQ to INR3.8bn (PLe: INR3.2bn, Consensus: INR3bn). EBITDAM stood at 16% (PLe: 15.4%) as against a margin of 12.6% in Q1FY26 and 15.5% in Q4FY26, increased by 340bps YoY. PAT stood at INR1,550mn increased by 260% YoY/ 13% QoQ. PAT margins were 6.5% vs 2.6% & 6.2% in Q1FY26 & Q4FY26 respectively. The effective tax rate was 14% in Q1FY27, compared with -23% in Q4FY26 and -5% in Q1FY26.

Please refer disclaimer at https://www.plindia.com/disclaimer/

SEBI Registration No. INH000000271