Buy Atul; Target Of Rs 6725: Sharekhan
Sharekhan is bullish on Atul has recommended buy rating on the stock with a target price of Rs 6725 in its research report dated October 23, 2020.
Oct 27, 2020 / 04:03 PM IST
Sharekhan's research repor on Atul
Atul Limited’s (Atul) Q2FY2021 performance was impressive with 7.9% and 106 bps beat in revenue and EBITDA margin, respectively, at Rs. 1,002 crore (down 4.2% y-o-y but much lower than our expectation of 8.3% y-o-y decline) and 26.1% (up 460 bps y-o-y; up 204 bps q-o-q). Revenue beat was driven by better-than-expected revenue from life science chemicals at Rs. 348 crore (up 5.3% y-o-y) due to recovery in domestic revenue; margin beat was led by better margin for performance and other chemicals segment (EBIT margin up 411bps y-o-y to 23.1%). Atul is well placed to benefit from structural revenue growth drivers such as higher domestic demand, rising exports, and import substitution for specialty chemical. Hence, we expect revenue/EBITDA/PAT CAGR of 14%/17%/16% over FY2021E-FY2023E.
We recommend Buy on Atul with a PT of Rs. 6,725, given robust earnings growth outlook and strong balance sheet (nil debt) with RoE of ~18%. The stock trades at 23.8x its FY2022E EPS and 21.4x its FY2023E EPS.
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