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CD Equisearch
Atul (Buy)
Target: ₹7,381
CMP: ₹5,895
According to a report by Grand View Research, Inc, the global specialty chemicals market is estimated to grow by 3.7 per cent CAGR to $844.2 billion during 2016-27 periods not least due to higher performance achieved by the application of specialty chemicals when compared to their conventional counterparts. Increasing disposable income, growing awareness, higher healthcare and construction spending, infrastructural development, and population growth are factors likely to increase the product sales across end-use industries such as construction, personal care, and cosmetics and electronics.
Though earnings would barely struggle to revive next fiscal (expected to rise by 22.9 per cent) not least due to traction in economic growth and perceptible recognition of revenues from ₹372 capital investments of subsidiaries, JVs and associates - mostly pertinently of commissioning of Atul Bioscience's Ambernath site this fiscal. Yet expected redundancies in existing capacities and mounting pile of liquid assets would scarcely help in alleviating the return on capital - ROE estimated at 18.7 per cent for FY22 Vs 23.2 per cent in FY20. On balance we retain our Buy recommendation on the stock with revised target of ₹7,381 (previous target: Rs 4,663) based on 28x FY22 earnings over a period of 9-12 months.
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