Aarti Industries shares may rise 30%, says UBS after giving the stock a double upgrade

Brokerage firm UBS on Wednesday, May 28, projected a 30% upside on Aarti Industries shares, after double-upgrading the stock to “buy”, from its earlier rating of “sell.”

UBS has raised its price target higher on Aarti Industries ₹625 per share from ₹615 earlier. The stock ended the previous session at ₹478 apiece.

The brokerage said its earlier “sell” rating was set against the backdrop of a peaking chemical cycle and risk to guidance and consensus expectations for the energy segment (Mono Methyl Aniline or MMA).

These factors, according to UBS, have largely played out. Going forward, there is now likely to be a meaningful improvement in these metrics, aided by the new CEO’s strategic initiatives to optimise costs and new growth drivers.

The gradual improvement is also likely to be aided by low channel inventory, a steady pick-up in MMA volumes which was already visible in the last two quarters and strategic initiatives, UBS said.

Shares of Aarti Industries are trading below their five-year average Enterprise Value-to-Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA).

Earlier this month, Suyog Kotecha, the Executive Director and CEO of Aarti Industries, told CNBC-TV18 that the company is witnessing demand recovery across all end-markets and that is what it is planning for the next 12 to 18 months. “From a margin recovery standpoint, frankly, it’s not yet visible. We’re assuming that current margin levels will hold for the next few quarters, and we continue to push volumes to retain and grow market share in our key markets,” he said.

Kotecha said the company’s ₹1,800–2,200 crore EBITDA target by FY28 will be driven by cost optimisation, operating leverage, and new capex projects. While the full benefit of recent investments will reflect from FY26 onward, some contribution is expected in the current financial year.

Of the 23 analysts that have coverage on the stock, 11 have a “buy” rating, three have a “hold” rating and nine have a “hold” rating.

Shares of Aarti Industries were trading 0.86% higher at ₹482.55 apiece at 10.25 am on Wednesday, May 28. The stock has gained 11.2% in the past month.

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