Buy Atul: target of Rs 11000: Sharekhan

Sharekhan is bullish on Atul has recommended buy rating on the stock with a target price of Rs 11000 in its research report dated April 26, 2022.

Broker Research

April 27, 2022 / 05:24 PM IST

The research firm ICICI Securities believes earnings of apparel brands and retail companies under their coverage may surprise positively from Q3FY22E as the likely demand recovery may result in better than expected margin performance. Some of the costs savings achieved during pandemic may sustain and coupled with high operating leverage may lead to higher than pre-covid margins from Q3FY22E. Stocks like Trent, V-Mart and Aditya Birla Fashion and Retail are the preferred picks backed by their strong and consistent track record of execution.

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Sharekhan's research report on Atul

Atul Limited’s (Atul) Q4FY2022 PAT of Rs. 126 crore sharply missed our estimates due to weaker-than-expected OPM and lower other income, offsetting strong revenue growth of 23% y-o-y. Revenue grew strongly by 29%/18% y-o-y from POC/LSC segments; however, EBIT margin disappointed with a steep decline of 1,030 bps/240 bps y-o-y to 12.1%/14.1% due to contraction in gross margin and higher operating cost. Atul has done cumulative capex of Rs. 913 crore over FY2021-FY2022 to augment capacities of key products (like sulphur black dyes, para-cresol, para-cresidine). Ramp-up of capacities, price hikes, and likely normalisation of energy/logistics cost should drive strong earnings growth (expect 31% PAT CAGR over FY22-24E) on a low base of FY22 (PAT de-growth of 8% y-o-y).

Outlook

Atul is expected to be a key beneficiary of structural growth tailwinds (China plus One strategy) for Indian specialty chemicals space and sustained capex to augment capacities would result in long runway for earnings growth. Hence, we maintain a Buy on Atul Ltd with an unchanged PT of Rs. 11,000.

For all recommendations report, click here