Buy Atul; target of Rs 8500: Emkay Global Financial

Emkay Global Financial's research report on Atul

Atul has invested ~Rs20bn over FY22-24 toward capacity expansion in existing products like Liquid Epoxy Resin (50ktpa) and Caustic Soda (300tpd), and in the backward integration of some key products (MCA for 2,4 D). These new capacities, along with ramp up in certain existing underutilized capacities, drive revenue potential of ~Rs25-30bn for the next 2-3 years, purely from the volume growth perspective. This would also lead to broad-based margin expansion led by backward integration and operating leverage. We expect Atul to log revenue/EBITDA/PAT CAGR of 15%/30%/37% over FY24-27E. Relatively inexpensive valuation of ~20x FY27E EPS and strong earnings growth forecast make us constructive on Atul’s growth potential over the next couple of years.

Outlook

We initiate coverage on Atul with BUY and TP of Rs 8,500 (30x Mar-27E EPS).