Aarti Industries (ARTO IN) – Q4FY26 Result Update – Rising Input costs to weigh on margins – ACCUMULATE

ARTO reported revenue of Rs22bn, registering a 13% YoY increase but a 5% QoQ decline. YoY growth was primarily driven by higher volumes across key products such as MMA, NT, and DCB. Volumes in the energy segment largely comprising MMA surged 98% YoY but declined 4% QoQ due to disruptions arising from the West Asia crisis. Overall EBITDA margins expanded by 170bps QoQ, supported by inventory gains and favorable FX movements. However, continued volatility in the gasoline–naphtha crack spread remains a key risk for the MMA segment in near term. The non-energy segment delivered a healthy volume growth of 9% YoY and 13% QoQ, although margins remained under pressure, particularly in the agrochemical portfolio. Growth was broad-based across most products, except MPDA, which was impacted by heightened competition from Chinese players. On the growth front, the company is advancing multiple initiatives, including the recent commissioning of calcium chloride, along with ongoing projects such as MMA debottlenecking, MPP, PEDA, and other developments in Zone IV. These are expected to support medium-term growth. However, rising input costs are likely to sustain margin pressure in the near term. With several projects slated for commissioning over CY26 and incremental capacity coming from debottlenecking of MMA and DCB, should drive near-term growth. We maintain our Accumulate rating with a target price of Rs529, valuing the stock at 28x FY27 EPS. The stock is currently trading at 26x FY28 EPS.