A company is said to be ‘Fundamentally Strong’ when it is equipped with strong margins and stable financial numbers. Moreover, such firms have the ability to survive during financial distress in the industry.
Herein this article, we will analyze one of such fundamentally strong stocks:
Aarti Industries Limited
Aarti Industries Limited is engaged in manufacturing and selling chemicals and chemical-based products. The company, broadly, has 2 operating segments such as the ‘Specialty Chemicals’ which sells benzene-based chemicals used in dyes and pigments, agricultural products, fragrances, etc. Another one is the ‘Pharmaceuticals’ segment selling drugs that are used for treating inflammation, asthma, etc.
The company’s stock closed at a price of Rs 509 and has a market capitalization of Rs 18,440 crores.
Having a look at the latest consolidated financials reported by the company, the net profits have witnessed an up movement in the last 3 quarters with the most recent shift being from Rs 137 crores in Q3 v/s Rs 149 crores in Q4.
Moving further with the profitability parameters, the coverage ratios such as the interest coverage ratio have improved from 4.58 times in the December quarter to 5.29 times during the quarter ended March 2023. Moreover, the debt-to-equity ratio went down from 0.65 to 0.58 during the same period.
Having a positive outlook for the company, HDFC Securities gave a ‘Buy’ tag to the company with a target price of Rs 726 indicating an upside of 43 percent as compared to the current price levels.
The rationale behind giving such a recommendation pertains to the company’s continuous efforts on R&D activities and capex done for exploring new aspects helping them expand their customer base.
As per the latest shareholding pattern data for the March quarter, promoters hold a 44.07 percent stake in the company, and Foreign Institutional Investors (FIIs) hold a 12.32 percent stake in the company.
Written by Amit Madnani
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