Aarti Industries (AARTIIND) Q3 24/25 earnings summary

Executive summary

• Q3 FY25 revenue rose 8% year-over-year and 14% sequentially, reaching INR 2,035 crores, with sequential EBITDA improvement despite ongoing pricing pressures; strong volume growth in both non-energy and energy businesses, supported by cost efficiencies, product diversification, and geographic expansion.

• Non-energy business volumes grew 14% YoY and 8% QoQ; energy business volumes up 14% YoY and 10% QoQ, though impacted by shipment timing.

• Major developments include signing two renewable energy PPAs and forming a JV for advanced plastic recycling, targeting 500 TPD capacity by 2030.

• Board approved audited standalone and consolidated results for the quarter and nine months ended Dec 31, 2024; financial statements reviewed by Audit Committee and auditors issued unqualified opinions.

• Pricing pressure persisted across product chains, with agrochemicals remaining soft and energy applications showing growth.

Financial highlights

• Q3 FY25 revenue at INR 2,035 crores, up 14% QoQ and 8% YoY; EBITDA at INR 236 crores, up 17% QoQ but down 12% YoY; PAT at INR 46 crores, impacted by INR 23 crores Forex MTM loss on ECB loan due to rupee depreciation.

• Export revenue for Q3 was INR 1,009 crores, up from INR 900 crores in the previous quarter.

• 9MFY25 revenue was INR 5,833 crores, up 15% YoY; 9MFY25 EBITDA reached INR 749 crores, a 7% increase YoY; 9MFY25 PAT was INR 235 crores, down 18% YoY.

• Gross margin pressure in Q3 due to inventory liquidation and pricing, but cost optimization initiatives are 30-40% complete, with more benefits expected over the next 12-18 months.

• Net debt at end of December quarter was approximately INR 3,600 crores; net debt-equity ratio (consolidated) at 0.7.

Outlook and guidance

• Confident in meeting short- and medium-term guidance; targeting 20-25% CAGR EBITDA over 3-5 years and EBITDA of INR 1,800–2,200 crores in three years, with Debt/EBITDA below 2.5x and ROCE above 15%.

• CapEx for FY25 guided at INR 1,300–1,500 crores; FY26 CapEx expected to be below INR 1,000 crores.

• Key EBITDA growth drivers include cost optimization, volume ramp-up, and new product development; strategic focus on R&D, asset-light growth, and sustainability initiatives.

• Company retains long-term issuer and bank facilities credit ratings of AA/Stable from CRISIL and India Ratings.