CD Equisearch is bullish on Atul has recommended buy rating on the stock with a target price of Rs 4169 in its research report dated December 18, 2018.
CD Equisearch's research report on Atul
According to Market Research Future (MRFR), the global specialty chemicals is estimated to over $1 trillion by 2023 from $700 bn in 2017 driven by increasing population which would push up demand in the construction, food & agro and textile industry. In addition, increased urbanization would propel demand for water chemicals for recycling wastewater. Further, improving quality of consumers’ lifestyle worldwide has fortified sales of luxury items such as automotive and personal care products and cosmetics. Region wise, APAC holds the forte triggered by rising demand for crop protection chemicals and accelerating growth of construction chemicals - fallout of rising demand for public, residential and commercial buildings..
The stock currently trades at 24.4x FY19e EPS of Rs 137.93 and 21x FY20e EPS of Rs 160.33. Earnings would barely impede (average earnings growth of 31.2% though on small base) on higher margins and robust volumes, thus enlivening both return on equity and asset turnover ratios. In light of current uptick in earnings we revise upwards our current year earnings by 19.4%. Yet effect of tweaks in product processes through debottlenecking and widening of product portfolio like high performance pigments and fragrance intermediates would barely have far reaching impact in short term. On balance we advise buying the stock with revised target of Rs 4169(previous target: Rs 3234) based on 26x FY20e earnings.
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