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Aarti’s Q3 EBITDA at Rs3.2bn (+38% YoY, +10% QoQ) was above the street’s and our estimates. This was mainly owing to strong MMA volumes, aided by a) resumption of US shipments, b) customer-geography diversifications, c) better blending economics. Q3 results show Aarti’s agility and swift calibration amid a challenging macro environment. The management maintained its FY28 EBITDA guidance, underpinned by cost-optimization and capacity ramp-up in Zone-IV. It raised its FY26 capex guidance to Rs11bn (from Rs10bn), driven by MMA debottlenecking from ~290kt to 360kt, DCB expansion, and select downstream projects (capex intensity to reduce from FY27). We build in the lower end of its FY28 EBITDA guidance and retain our estimates, to factor in the visible demand and margin recovery led by US trade deal, EU FTA (strategic partnerships), and China’s anti-involution efforts (benefiting the NCB chain). We retain BUY on Aarti while raising TP by ~11% to Rs500 from Rs450 (rollover to Dec-27E EPS)

Macro uncertainty persists in Q3; performance driven by strong MMA volumes Aarti posted EBITDA of Rs3.2bn (+38% YoY/+10% QoQ) in Q3FY26; the improvement was led by a) higher volumes in MMA and b) operating leverage benefits driven by higher capacity utilization. Volume growth remained strong in the energy business (+78% YoY/+13% QoQ), supported by better naphtha-gasoline spread and increased capacity, while the non-energy segment reported weaker volumes sequentially (+11% YoY/ -5% QoQ) due to delay in bulk shipments. Agrochemical volumes saw a recovery in Q3, but margins remained under pressure. The dyes and polymers (PDA) business continued to be impacted by US tariffs, while DCB performed well led by PDCB and downstream demand. After targeting US, Africa, and Middle East, Aarti now aims to scale up in Europe

Headwinds turning into tailwinds now, owing to trade deals Aarti is set to benefit from 3 recent major macro developments – US trade deal, China’s anti-involution effort, EU FTA. The US trade deal will help increase volume in MMA and PDCB, along with margin improvement, as Aarti absorbed partial impact of US tariffs. Chinese anti involution is benefitting the NCB chain (incl PNCB), where prices have already risen ~7-10%; if expanded to more products, the anti-involution can improve pharmaceutical/agrochemicals’ margins, which have been seeing pressure from Chinese dumping. EU FTA is likely to help build strategic partnerships, on a better duty structure.

Management maintains FY28 guidance; we keep our estimates unchanged The management reaffirmed its FY28 EBITDA guidance of Rs18-22bn, led by costoptimization measures (renewable power, yield improvement), ramp-up of existing capacities, and commissioning of MPPs and various blocks at Zone-IV. JV projects with Superform and Re Sustainability are on track, with commissioning by H1CY26. Aarti spent ~Rs8.5bn capex in 9MFY26 and increased FY26 capex guidance by 10% to Rs11bn, led by MMA capacity expansion and a DCB de-bottlenecking project. There will be no substantial capex in FY27. We bake in the lower end of the FY28 EBITDA guidance, to account for the volatility in energy business. Accordingly, we retain our estimates

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