Aether Industries - Expansion, Diversification: HDFC Securities

HDFC Securities Institutional Equities

Aether Industries Ltd. has experienced sectoral environmental challenges in the fiscal year 2023-24. The broader operating environment presented hurdles, including volatile macroeconomic conditions, ongoing geopolitical tensions, slowdowns due to inventory de-stocking, and margin pressures from aggressive competition from Chinese manufacturers.

Additionally, last year the company was fraught with the unfortunate fire incident at the company’s primary manufacturing facility. All this put the company on the back foot.

Despite these hurdles, the company has successfully diversified across various industries, including oilfield drilling services, electronic chemicals, sustainable polyols, circular plastic recycling technology, and numerous other rapidly advancing projects within research and development and pilot plant facilities.

Aether has commissioned site 4 to execute the strategic supply agreement with Baker Hughes. It has received the revocation of the closure order from the Gujarat Pollution Control Board for site two. The expansion project at sites 3+ and 3++ is on track and will be commissioned by FY25-end. This will accelerate its revenue growth in near term.

Phase I at site 5 (Panoli) is proceeding according to the planned commissioning schedule by end of FY26. The company’s strategic capital investments are being fuelled by internal accruals and money raised (Rs 7,500 million) through QIP. We expect a revenue CAGR of ~43% and an earnings CAGR of ~58% over FY24-27E.

Maintaining Buy with a target price of Rs 1,117.

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