This specialty chemicals stock has zoomed 42% in 2 days; hit 2-year high
Source: Business Standard
Illustration by Binay Sinha
Shares of Aarti Surfactants (ASL) hit a two-year high of Rs 909.90 on the BSE on Tuesday as they surged 18 per cent in the intraday trade. In two days, the stock of the specialty chemicals has zoomed 42 per cent from a level of Rs 641.40 on Friday, September 13.
It is trading at its highest level since September 2022. The stock surpassed its previous high of Rs 854.20 touched on January 1, 2024. It had hit a record high of Rs 1,856.65 on August 6, 2021.
ASL is engaged in the manufacturing of ionic and non-ionic surfactants and specialty products serving the home and personal care (HPC) industry. Its product portfolio includes surfactants, mild surfactants, rheology modifiers, pearlising agents, UV filters, soap bases, and conditioning agents. ASL supplies surfactants, including concentrates for shampoo, hand wash, dish wash, and oral care.
Apart from India, ASL also exports its products to USA, Europe, and Southeast Asian countries with exports accounting for 25 per cent of the sales in FY24. ASL is a preferred supplier to Hindustan Unilever, Proctor & Gamble, Patanjali, and Dabur.
Increasing demand for eco-friendly and biodegradable surfactants driven by consumer preference; rapid urbanisation and rising disposable incomes in emerging markets like India, China, and Southeast Asia are boosting demand for personal care, home care, and industrial products.
The management said the company has observed a growing demand for sustainable and bio-based surfactants driven by consumer and regulatory preferences for environmentally friendly products. The increasing demand for personal care and home care products, fueled by changing lifestyles and rising disposable incomes has led to enhance the company’s product offerings and optimise production capabilities, ASL said.
With the automotive industry shifting towards electric vehicles (EVs), it is transforming the market for metalworking fluids (MWFs) and lubricant additives. As the manufacturing process of EVs requires less oil, it has declined the demand of MWF, while simultaneously increasing the need for low-foaming systems and non-ionic emulsifiers suited for electric car production.
With the increasing popularity of e-commerce platforms, the packaging industry has significantly benefited from the rising demand, especially segments such as adhesives, inks and flexible packaging options. Additionally, in emerging economies such as India and Southeast Asia, there is a notable shift from plastic to board packaging materials, further fuelling demand for surfactants.
As the agricultural sector is transitioning towards adopting sustainable agriculture practices, it is increasing the usage of biopesticides, driving the demand for environmental-friendly surfactants such as alkyl polyglucosides and fatty alcohol ethoxylates, ASL said in its FY24 annual report.
Going forward, CARE Ratings expects the ASL’s revenue to grow by 10-15 per cent p.a. over the next two years with profit before interest, lease rentals, depreciation and taxation (PBILDT) margin sustaining above 10 per cent p.a. driven by focus on increasing export market share, new product development, and expected stability in raw material prices.
The revenue from operations has grown at a healthy compound annual growth rate (CAGR) of ~16 per cent in the last four years till FY24 to Rs 590 crore driven by steady volume growth. While the company’s revenue marginally declined in FY24 owing to correction in realisations considering reduction in input costs, the same contributed to better profitability with Ebitda margin growing by ~290 bps Y-o-Y to 10.7 per cent in FY24. The contribution of export sales has remained in the range of 25-30 per cent over the last three years, the rating agency said.
Going forward, CARE Ratings expects the company’s scale of operations to continue to grow through increase in wallet share from existing domestic clients, addition of new clients with a focus on export markets and new product development, translating into steady operating profitability over the medium term.
First Published: Sep 17 2024 | 3:26 PM IST
