Top Conviction Ideas : Buy Aarti Industries Ltd for Target Rs. 530 - Axis Securities Ltd
Recommendation Rationale
* Robust Volume Growth and Margin Rebound: Aarti Industries delivered a strong performance in Q2FY26, with revenue up 29% YoY, driven by higher volumes—particularly in the MMA business—and the recognition of bulk shipments deferred from Q1. The energy segment reported an impressive 118% YoY volume growth, while the non-energy segment grew 17% YoY, indicating a broad-based recovery across end markets. EBITDA margin improved to 14%, supported by operating leverage from higher capacity utilization.
* De-risking Through Geographic Expansion: Despite headwinds from US tariffs, AIL delivered healthy growth driven by diversification of its product portfolio and regional rebalancing. The company continues to strengthen its presence across Europe, the Middle East, and Africa, while refining its US market strategy to maintain long-term competitiveness. Management reiterated confidence in achieving its FY28 EBITDA targets, supported by volume growth, cost optimization, operating efficiency, and the commissioning of ongoing capex projects.
* Gradual Capacity Enhancement Through Disciplined Capex: During Q2FY26, the company incurred capex of Rs 267 Cr, primarily directed toward ongoing expansion initiatives. Execution at Zone-4 projects remains on schedule, with multiple projects planned for commissioning in a phased manner over the next one and a half years. These strategic expansions will be undertaken selectively and are expected to strengthen integration, enhance product diversification, and support margin sustainability.
* Valuation & Recommendation: We continue to value the stock at 23x Sept’27E EPS, with a target price of Rs 530/share. Accordingly, we recommend a BUY rating on the stock.
For More Axis Securities Disclaimer https://simplehai.axisdirect.in/disclaimer-home
SEBI Registration number is INZ000161633
