Sharekhan's research report on Atul
Q1FY24 was a positive surprise with a 18%/11% beat in EBITDA/PAT at Rs. 182 crore/Rs. 102 crore, up 22%/13% q-o-q led by sharp margin recovery in performance and other chemicals (POC) despite challenging demand/pricing environment for chemicals industry especially for companies focused on discretionary end-user industries. POC revenues/EBIT was up 5%/5.7x q-o-q to Rs. 874 crore/Rs. 89 crore. A key positive surprise was a sharp 828 bps q-o-q rise in EBIT margin to 10.2%. Life Science Chemical (LSC) segment’s performance was soft with 14%/42% q-o-q decline in revenue/EBIT to Rs. 350 crore/Rs. 52 crore with steep 726 bps q-o-q decline in EBIT margin to 14.9%. Despite outperformance in POC segment, challenges like sharp price erosion led by rise in supply from China, reduction in inventory by customers and weak global demand persist for chemical industry. This makes us cautious about near term outlook for Atul Limited.
Outlook
Current valuation of 36/29x its FY2024E/FY2025E EPS seems rich given volatile earnings due to the commodity nature of the business. Hence, we maintain Hold rating on Atul Ltd. with a revised PT of Rs. 7,550.
For all recommendations report, click here
Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
Find the best of Al News in one place, specially curated for you every weekend.
Stay on top of the latest tech trends and biggest startup news.