Dolat Capital recommended reduce rating on Atul with a target price of Rs 4797 in its research report dated July 24, 2020.
Dolat Capital's research report on Atul
Atul Ltd reported in line sales of Rs 6.60bn (D.est: Rs 6.70) down by 36.5% YoY. Gross margins expanded by 575bps YoY to 57.0%, which were significantly above our estimate of 51.0%. We believe, gross margins have largely expanded due to benign input costs. EBITDA (D.est: Rs 547mn) de-grew by 34.0% YoY to Rs 1.58bn, with an EBITDA margin of 24.0%. The company has controlled its other expenses and power and fuel costs, down by 38.3% YoY and 33.8% YoY respectively. Tax rate stood at 28.0% against 31.8% against 1QFY21, PAT (D.est: Rs 223mn) de-grew by by 20.1% YoY to Rs 1.17bn. We were anticipating a much weaker quarter and believed FY21E to be a turbulent year due to volume de-growth, however benign input costs and controlled opex has kept Atul Ltds 1QFY21 performance quite healthy.
Outlook
We are valuing Atul’s investment book of ~Rs 5.2bn @20% discount at Rs 142/share and 21.0x FY22E EPS to Rs 4,797/share and recommend investors to reduce.
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