Aether Industries down 5% in trade; Kotak initiates coverage with 'Reduce'

Aether Industries shares slipped 4.6 per cent in trade and logged an intraday low of Rs 850.35 per share on BSE. On BSE 457.5 million shares were traded around 12:31 PM.

 

Meanwhile, Aether Industries share was down 1.41 per cent at Rs 879.6 per share on BSE. In comparison, the BSE Sensex was up 0.11 per cent at 81,382.85. The market capitalisation of the company stood at Rs 11,662 crore. The 52-week high of the stock was at Rs 1,066.3 per share and the 52-week low was at Rs 775 per share. 

 

Kotak Institutional Equities has initiated coverage on Aether Industries with a 'Reduce' rating for a target of Rs 810 per share. The brokerage believes that the company's valuations are full, while key projects need to demonstrate growth. 

 

Further, Aether is in the midst of an aggressive capex program, which along with stretched working capital for certain key domestic customers has weighed on Return on Invested Capital (RoIC) in recent years. 

 

"Key contracts do not have take-or-pay clauses, meaning that slippages in demand projections may put our estimates at risk," the brokerage said.

 

However, analysts at Kotak appreciate the company’s technical capabilities, track record and strong pipeline of growth projects offer some comfort. They believe a shift in revenue mix in favour of contract manufacturing projects will be the key driver of RoIC improvement.

 

"Aether seems poised for rapid growth driven by the start of commercial supplies under its numerous long-term contracts, particularly Baker Hughes to start with," the report said. 

 

It added: The company stands apart from its Indian specialty chemical peers by virtue of its differentiated base of customers, the deep chemistry expertise of its founders, and heavy investment in R&D (8-9 per cent of revenues). A sizeable and growing order book indicates potential for strong growth in the coming years.

 

The brokerage projects revenue/Ebitda/EPS compound annual growth rates (CAGRs) of 33 per cent/45 per cent/45 per cent over FY2024-27E, and our FV is based on a DCF valuation, which implies a 43X FY2027E P/E.

 

Ebitda refers to Earnings before interest, tax, amortisation, and depreciation. EPS or earnings per share is a financial metric used to measure a company’s profitability on a per-share basis.

 

In the past one year, Aether Industries shares have gained 11.1 per cent against Sensex's rise of 17 per cent.