MOSL: ATUL (Neutral)-In-line results; banking on strong growth in FY22
ATUL: In-line results; banking on strong growth in FY22
(ATLP IN, Mkt Cap USD3.7b, CMP INR9254, TP INR10000, 8% Upside, Neutral)
- Atul (ATLP) reported revenue/EBITDA in line with our estimates, with further decline in the EBITDA margin to 21.9% during the quarter.
- Despite increase in contribution of high margin Performance & Other Products segment from 60% of revenues in 1QFY21 to 67% in the quarter, gross margin witnessed a compression of 5% YoY. However, better cost control arrested EBITDAM decline to meagre 2.1% YoY.
- Ongoing projects have been delayed by about six months. That said, ATLP plans to participate in growth in the Crop Protection and Pharma segments - by focusing on providing its customers with the best quality research and products as well as securing access through additional registrations.
- Furthermore, ATLP has recently formed a 100% subsidiary company (called Atul Products Ltd), which would invest INR7b over the next two years.
- ATLP has reiterated its focus (in its recently published Annual Report) on (a) enhancing people productivity and manufacturing efficiencies, (b) deploying technologies in every function, and (c) working with customers on ideas of high potential. On these factors, we build a revenue and EBITDA CAGR of ~13% over FY21-24E. Considering ATLP's rich valuations, we maintain Neutral on the stock.
Atul Ltd is an integrated chemical company. The Company's products and services include basic chemicals and other chemical products. The Company operates through two segments: Life Science Chemicals, and Performance and Other Chemicals. The Life Science Chemicals segment includes two sub-segments, including Crop Protection and, Pharmaceuticals and Intermediates. The Life Science Chemicals segment consists of active pharmaceutical ingredients (APIs), API intermediates, fungicides and herbicides, among others. The Performance and Other Chemicals segment consists of adhesion promoters, bulk chemicals, epoxy resins and hardeners, intermediates, perfumery and textile dyes, among others. It serves industries, such as adhesives, agriculture, animal feed, automobile, composites, construction, cosmetic, defense, footwear, fragrance, glass, home care, horticulture, hospitality, paint and coatings, paper, personal care, soap and detergent, sports and leisure, textile, tire and wind energy.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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