Shares of Aarti Industries Ltd rose nearly 3% to ₹492 on Tuesday after UBS issued a double upgrade, shifting its stance from ‘Sell’ to ‘Buy’ and increasing the target price from ₹615 to ₹625. The move reflects growing optimism that the worst of the chemical downcycle is over.
UBS, which had maintained a bearish view on Aarti Industries due to a peaking chemical cycle and specific risks in its n-methyl aniline (MMA) business, now sees signs of recovery. Aarti Industries stock is currently down 35% from its August 2024 peak, and the brokerage believes a bottoming-out phase has been reached.
What prompted UBS to upgrade?
UBS highlighted three key drivers behind its bullish call:
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Chemical cycle recovery: Aarti is seeing a gradual rebound, aided by low channel inventories.
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MMA segment turnaround: Despite price volatility, MMA volumes have improved over the past two quarters.
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Valuation comfort: Strategic operational improvements and market initiatives are not fully priced in; stock valuation remains below the five-year EV/EBITDA average.
UBS also pointed to strategic progress under Aarti’s new CEO, with a focus on cost optimization, operational efficiency, and growth acceleration.
Long-term outlook
UBS estimates Aarti Industries’ EBITDA could increase by ₹10,000 crore during FY25–28, implying a 25% CAGR. This includes contributions from:
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₹1,500–2,000 crore via cost savings
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₹3,500–5,500 crore via volume and margin improvements
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₹3,000–4,500 crore via capex-driven expansion
Even after cutting FY26E and FY27E EPS estimates by 32% and 25%, respectively, UBS remains upbeat. The stock is now valued at 30x forward P/E, in line with its long-term average.
Conclusion
UBS’s upgraded view signals renewed confidence in Aarti Industries’ medium- to long-term prospects. With operational tailwinds and sectoral recovery underway, the stock could see improved sentiment in the quarters ahead.
