Buy Atul: target of Rs 6690: ICICI Securities

Moneycontrol • 6 days ago

Original source

Key Investment Pillars

  • Atul's Q2FY27 revenue rose 21% YoY, driven by price increases to offset higher input costs, but EBITDA dipped 7.8% YoY due to lower gross margins and inventory losses.
  • The Life Sciences segment's EBIT fell 31% YoY, impacted by weak demand in crop protection and compression in 2,4-D spreads.
  • The Performance and other chemicals segment's EBIT rose 23.1% YoY, driven by the ramp-up of the newly commissioned epoxy plant, but margins were impacted by inventory losses and lower spreads.
  • Atul announced a share buyback of up to INR 900mn, which is expected to be positive for the stock.

Thesis Validation Checklist

  • Investors should watch for signs of margin recovery, driven by improvements in gross margins and operating leverage, as well as growth in the pharmaceuticals segment.
  • The company's ability to pass on higher input costs to customers and maintain pricing power will be crucial in determining the success of the investment thesis.
  • Any improvement in demand for crop protection chemicals and a recovery in 2,4-D spreads will be positive for the stock.
  • The progress of the epoxy plant and its contribution to the company's profitability will also be an important factor to monitor.