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Systematix Research Report
Atul Ltd.'s Q4 FY24 operating performance was broadly in line, with revenue/Ebitda recording +1%/-1% YoY and +7%/-3% QoQ growth, respectively. While revenue in its performance and other chemicals segment was up 5% YoY and 3% QoQ, its life science chemicals segment reflected 12% QoQ growth but 8% YoY fall.
The crop protection division suffered on account of increased capacity in China but lower demand, although pharmaceuticals fared well. Gross margin expanded 392 bps YoY and 261 bps QoQ to 49.7% versus our estimate of 46.5%.
Ebitda margin contracted 32 basis points YoY and 116 bps QoQ to 12.2% on higher other expense. Ebitda fell slightly by 1% YoY and 3% QoQ to Rs 1.5 billion but was broadly in line. Higher depreciation (+48% YoY, +24% QoQ) and interest expense (+132% YoY, +139% QoQ) along with lower other income (-47% YoY, -14% QoQ) led to profit before tax tumbling 34% YoY and 23% QoQ.
Adjusted profit after tax at Rs 584 million fell 38% YoY and 18% QoQ, 16% lower than our estimate. Management cited QoQ improvement in outlook for POC, and expects the segment to generate profitability Q1 FY25 onwards.
However, in the LSC segment, high channel inventory of 2,4D and weak demand outlook could pressure profitability. We have cut Ebitda margin by 50 bps, Ebitda by 17% and EPS by 32% for FY25E.
We roll forward estimates to FY26 and maintain Hold with a revised target price of Rs 5,949 (Rs 7,295 earlier), based on a 30 times FY26E price/earning (unchanged)
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