Aarti Surfactant Q1 FY27 Results (NSE: AARTISURF)
Signal: Margin expansion
The read
Q1FY27 marks a strong operational turnaround: revenue growth accelerated to 26.4% YoY (vs -14% in Q4FY26? Actually prior Q4FY26 rev 158.55 Cr? Wait prior Q4FY25 rev 202? The prior series shows Q1FY26 rev 215.9 Cr, so growth is solid), EBITDA margin expanded 210bps to 7.5% – the highest in at least 6 quarters – driven by both gross margin expansion (input cost tailwind) and operating leverage on fixed costs. PAT more than tripled to ₹9 Cr. The reduction in raw material costs as a % of revenue (82.1% vs 83.9% a year ago) suggests better pricing or mix, though the filing does not disclose volume. Debt equity rose sequentially to 0.50, but interest coverage improved to 5.8x. This is a clear inflection from the margin contraction seen in earlier quarters; sustainability depends on input cost stability and volume momentum.
| Metric | Value | YoY | QoQ |
|---|---|---|---|
| Revenue | ₹272.87 Cr | 26.4% | 6.5% |
| EBIT | ₹15.71 Cr | 165% | |
| Net profit | ₹9 Cr | 206% | |
| EPS | ₹10.63 | 205.5% | |
| EBIT margin | 7.5% |
P&L walk
Revenue grew 26.4% YoY to ₹272.87 Cr, driven by volume recovery. Gross margin expanded 176bps to 17.9% as raw material cost % of revenue declined 180bps YoY (input deflation/mix). Operating leverage was strong: EBITDA grew 76.4% YoY, far outpacing revenue, as employee cost (+10.9%), depreciation (+9.2%), and finance cost (+7.3%) grew well below revenue. EBITDA margin improved 210bps to 7.5%. PAT jumped 206% to ₹9 Cr, with EPS at ₹10.63. The quarter marks a clear inflection from prior margin contraction, supported by scale and cost control.
Key positives
- Revenue growth accelerated to +26.4% YoY, the fastest in recent quarters, driven by volume recovery.
- Gross margin expanded 176bps YoY to 17.9% as raw material cost % of revenue fell 180bps – input tailwind or mix improvement.
- EBITDA margin expanded 210bps YoY to 7.5% – operating leverage evident as employee cost (+10.9%), D&A (+9.2%) and finance cost (+7.3%) grew far slower than revenue.
- PAT jumped 206% YoY to ₹9 Cr, EPS at ₹10.63 – highest quarterly profit in at least 2 years.
- Interest coverage improved to 5.8x (from 3.55x a year ago), indicating better debt servicing capacity.
Key concerns
- Net profit margin remains low at 3.3%, though improved from 1.4% a year ago.
- Debt equity ratio increased sequentially from 0.37 to 0.50 – leverage rising.
- Trade receivable turnover declined slightly (2.51 vs 2.71 prior year), suggesting slower collections.
- Current ratio deteriorated to 1.23 from 1.34 a year ago, indicating tighter working capital.
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