Buy Atul; target of Rs 9995: Motilal Oswal

Motilal Oswal's research report on Atul

Atul (ATLP) reported in-line revenue in 2QFY25. Revenue in the Life Science Chemicals segment increased 13% YoY, while it rose 18% YoY in the Performance & Other Chemicals segment. Gross margin came in at 53.1% (+900bp YoY), while EBITDAM expanded 440bp YoY to 17.4%. PAT increased 53% YoY to INR1.4b in 2QFY25.
The Life Science segment performance was fueled by an increased demand for intermediates used in the pharma and personal care industries, with high demand for crop protection chemicals in the international market. Performance Chemicals’ sales and profitability were aided by an improvement in demand for epoxy and sulphones product groups, along with an improved performance of the subsidiaries.

Outlook

The stock is trading at ~33x FY26E EPS of INR224 and ~19x FY26E EV/EBITDA. We value the stock at 40x Sep’26E EPS (discount of 9% to five-year average of 45x) to arrive at our TP of INR9,995. We reiterate our BUY rating.