CD Equisearch has reiterated 'Buy' on Aarti Industries (AIL) with revised target price of Rs 396 in its report.

Commenting on the investment rationale, the stock broker said, "Thanks to relentless decline in crude oil prices, Aarti's standalone sales tumbled 9% last quarter, the first downtick in at least eight quarters. Sale of speciality chemicals slid 12% to Rs 5,540 million, while that of pharmaceuticals’ advanced by 26.8% to Rs 820 million; hpc’s also fell by 16.2%. EBIT margins of speciality chemicals though rose to 19% ( up 420 bps), the best quarterly showing in at least three years, helped by  its business model of pricing contracts on absolute EBITDA; margins got a bump up as prices of finished products declined. Other businesses showed much less gyration in margins - pharmaceutical’s at 10.2% (+10bps); that of home & personal care chemicals(hpc) at 2.1% (90 bps).

Despite meltdown in crude oil prices, Aarti is going full hog to commence new projects. For instance, the second phase of nitro chloro benzne (ncb) expansion at Vapi (from 66000 tpa to 75000 tpa) would get over by Q3FY16, while the second phase of phenylene di amine (pda) would finish by H2FY16.

The stock currently trades at 12.6x FY16e EPS of Rs 25.25 and FY17e EPS of Rs 33.02. We reiterate our buy rating on the stock with revised target of Rs 396 (previous target of Rs 355) based on 12x FY17e  earnings over a period of 9-12 months."

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