Motilal Oswal's research report on Atul
Atul (ATLP) reported in-line revenue with a 14% QoQ decline in the Life Science Chemicals segment and a 5% QoQ increase in the Performance & Other Chemicals segment in 1QFY24. Gross margin came in at 46.5% (-200bp YoY), while EBITDAM expanded 290bp QoQ to 15.4% during the quarter. The Life Science Chemicals segment’s contribution to EBIT dipped to 37% in 1QFY24 (from 84% in 4QFY23), whereas the contribution of Performance & Other Chemicals to overall EBIT jumped to 62% in 1Q (from 15% in 4QFY23). Management highlighted that revenue remained weak due to lower realization and weaker demand amid geopolitical headwinds. Profitability was also hit primarily by higher fixed costs coupled with declining sales volumes that resulted in fixed costs being inadequately absorbed during the quarter.
Outlook
We expect revenue/ EBITDA/ PAT of 6%/ 1%/ 1% during FY23-25. We largely maintain our estimates. The stock is trading at 33.9x FY25E EPS of INR206.7 and 22x FY25E EV/EBITDA. We value the stock at 30x FY25E EPS to arrive at our TP of INR6,200. On a one-year forward basis, ATLP trades at 36.5x. We maintain our Neutral rating on the stock.
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