Motilal Oswal's research report on Atul
Management highlighted that there was pricing pressure, although volumes have improved in some of the businesses that have done well throughout FY24. A couple of subsidiaries have suffered losses at the PBT level, which has led to a decline in earnings of the consolidated entity. Volume growth was driven by consumption, and management is confident of achieving higher volume growth in FY25.
Outlook
We highlight that the continued weakness in the agrochemical industry will have an adverse impact on earnings in the short to medium term. ATLP is also facing teething issues while stabilizing its operations and is unable to reach the desired product quality and production. We expect the ongoing earnings fluctuation to continue until these issues are resolved. The stock is trading at 37x FY26E EPS of INR 162 and 20.7x FY26E EV/EBITDA. We value the stock at 35x FY26E EPS to arrive at our TP of INR 5,670. We reiterate our Neutral rating on the stock. The upside risk could be a faster-than-expected ramp-up of new projects and products. Downside risks include weaker-than-expected revenue growth and further margin compression.
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