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Dolat Capital Report
Atul Ltd.'s Ebitda decline of 30% YoY/ 15% QoQ to Rs 1.55 billion was ~4% below estimates while profit after tax down by 39% YoY/ 13% QoQ to Rs 903 million was in-line but aided by higher other income (+170% QoQ).
Persisting macro-headwinds will result in delayed ramp-up of newly commissioned and upcoming projects (Rs 17.6 billion over FY23-25E) and will keep profitability under check.
Outlook and Valuation
We believe persisting demand weakness across its key sub-segments will restrict realizing full sales potential of its newly commissioned plants. This in-turn will keep return ratios muted in the medium term.
We cut our FY24 and FY25 earnings by 18%/14% to factor slower recovery and retain ‘Sell’ rating with revised target price at Rs 5700 (26 times September-25E earnings per share).
Faster than expected demand revival in Atul’s key products remains a key risk to our rating/ target price.
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