The company, which has its presence in the chemical industry, fetched the attention of Emkay Global Financial, citing numerous reasons. In this article, we will look at the rationale assigned by the firm to this company.
Price Movement
With a market capitalization of Rs 18,313 crore, the shares of chemical company Atul Ltd are currently trading at Rs 6,220 per share, down by 24 percent from its 52-week high of Rs 8,180 per share. During the last six months, the stock has given a negative return of 18.19 percent.
Brokerage Rationale
On Monday, brokerage firm Emkay Global Financial initiated coverage on the stock with a ‘Buy’ rating. The brokerage has set a price target of Rs 8,500 per share, signalling an upside of 37 percent from its current market price of Rs 6,212 per share.
Atul Ltd. has budgeted Rs 2,000 crore over FY22 and FY24 for increasing capacity for such products as Liquid Epoxy Resin (50,000 tonnes a year) and Caustic Soda (300 tonnes per day), and backward integration for critical inputs such as MCA employed in the production of 2,4-D.
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This expansion, coupled with improved utilization of existing capacities, may increase Atul’s top-line revenue of Rs 2,500 Rs 3,000 crore in the next 2–3 years, primarily through increased sales volume. The brokerage also expects this to enhance profit margins due to cost savings from backward integration and improved efficiency.
Atul has generally taken a path with minimal capital expenditure, even with a robust balance sheet, though in the last three years, it has spent Rs 2,000 crores.
Atul’s stock is fairly priced, Emkay added, and is looking forward to robust earnings growth, expecting 15 percent annual growth in revenue, 30 percent in EBITDA, and 37 percent in profit over FY24-FY27.
About the company
Atul Ltd is an international chemical company engaged in Life Science Chemicals and Performance & Other Chemicals businesses. It produces aromatics, bulk chemicals, agrochemicals, APIs, and epoxy products.
The company also makes tissue culture plants and has retailing businesses in crop protection and polymers. Its diverse product line caters to agriculture, automotive, pharmaceutical, construction, and textile industries. Atul’s chemicals find application in everything ranging from flavors and fragrances to electronics and personal care.
Written by Satyajeet Mukherjee
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