Aarti Industries Q1 FY27 Results (NSE: AARTIIND)
Signal: Margin expansion
The read
Q1FY27 results mark the fifth consecutive quarter of margin expansion (OPM 14.54% vs 11.35% in Q1FY26) and the third straight quarter of accelerating revenue growth (+42.4% YoY after +25.8% in Q3FY26 and +29.0% in Q2FY26). The recovery is driven by a strong input-cost tailwind — raw material costs as a % of gross revenue declined ~400bps YoY — and operating leverage as employee costs rose only 10% against 40% revenue growth. PAT at ₹155 Cr is the highest since Q3FY26 and more than tripled YoY, though the base was depressed. Net debt-equity has increased from 0.66 to 0.80 YoY, and current ratio remains below 1 (0.82), indicating ongoing working capital intensity. The divestment of Shanti Intermediates (immaterial) is a clean-up step. Overall, the trajectory is positive, but the high P/E of 42x already prices in this recovery.
| Metric | Value | YoY | QoQ |
|---|---|---|---|
| Revenue | ₹2,387 Cr | 42.4% | 8.2% |
| EBIT | ₹361 Cr | 41.0% | |
| Net profit | ₹155 Cr | 260.5% | |
| EPS | ₹4.27 | 258.8% | |
| EBIT margin | 14.54% |
P&L walk
Revenue surged 42.4% YoY to ₹2,387 Cr, the third straight quarter of accelerating growth, with OPM expanding 319bps YoY to 14.54% — the fifth consecutive quarter of margin expansion — driven by input cost tailwind (RM % of gross revenue fell to 62.7% from ~67% in Q1FY26, per prior series, a ~200bps benefit) and operating leverage as employee costs grew only 10.1% YoY and other expenses grew 60.2% YoY on a low base, while finance costs rose 38.3% YoY. PAT jumped 260.5% YoY to ₹155 Cr, benefiting from the operating improvement and a lower effective tax rate (current tax ₹24 Cr vs ₹8 Cr, offset by deferred tax and MAT credit). EPS rose to ₹4.27, tracking PAT growth closely.
Key positives
- Revenue growth of 42.4% YoY to ₹2,387 Cr, the highest in at least 5 quarters, driven by volume recovery.
- OPM expanded 319bps YoY to 14.54%, the fifth consecutive quarter of margin improvement, on input cost tailwind and operating leverage.
- PAT soared 260.5% YoY to ₹155 Cr, reflecting high operating leverage on the low base of Q1FY26.
- EPS of ₹4.27 grew 258.8% YoY, tracking PAT closely with minimal dilution.
- Interest service coverage ratio improved to 3.34 from 1.74 a year ago, indicating better debt-servicing capacity.
Key concerns
- Net debt-equity ratio rose to 0.80 from 0.66 YoY, indicating increased leverage to fund working capital or capex.
- Current ratio remains below 1 at 0.82, signalling persistent working capital strain.
- QoQ revenue growth (+8.2%) is modest versus the YoY surge, suggesting some seasonality may flatten sequential gains.
- Other expenses grew 60.2% YoY, partly on a low base, but still outpaced revenue growth — a line to monitor for cost discipline.
Research and educational content only. Not investment advice.