Aarti Industries Limited Missed EPS By 47% And Analysts Are Revising Their Forecasts –

Aarti Industries Limited (NSE:AARTIIND) came out with its quarterly results last week, and we wanted to see how the business is performing and what industry forecasters think of the company following this report. Results overall were not great, with earnings of ₹5.22 per share falling drastically short of analyst expectations. Meanwhile revenues hit ₹20b and were slightly better than forecasts. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We’ve gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

View our latest analysis for Aarti Industries

Taking into account the latest results, the consensus forecast from Aarti Industries’ 18 analysts is for revenues of ₹79.8b in 2023, which would reflect a reasonable 4.2% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to nosedive 35% to ₹23.71 in the same period. In the lead-up to this report, the analysts had been modelling revenues of ₹76.6b and earnings per share (EPS) of ₹26.14 in 2023. Overall it looks as though the analysts were a bit mixed on the latest results. Although there was a a reasonable to revenue, the consensus also made a small dip in its earnings per share forecasts.

There’s been no major changes to the price target of ₹951, suggesting that the impact of higher forecast sales and lower earnings won’t result in a meaningful change to the business’ valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Aarti Industries, with the most bullish analyst valuing it at ₹1,294 and the most bearish at ₹625 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It’s pretty clear that there is an expectation that Aarti Industries’ revenue growth will slow down substantially, with revenues to the end of 2023 expected to display 5.6% growth on an annualised basis. This is compared to a historical growth rate of 19% over the past three years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 11% annually. So it’s pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Aarti Industries.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Aarti Industries. Fortunately, they also upgraded their revenue estimates, although our data indicates sales are expected to perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that said, the long-term trajectory of the company’s earnings is a lot more important than next year. We have forecasts for Aarti Industries going out to 2025, and you can see them free on our platform here.

That said, it’s still necessary to consider the ever-present spectre of investment risk. We’ve identified 1 warning sign with Aarti Industries , and understanding it should be part of your investment process.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.