Atul ltd – Being Eco-Friendly

Atul is an integrated chemical company serving about 4,000 customers belonging to 27 industries across the world including Agriculture, Aerospace, Construction, Defence, Automobile Personal Care, Pharmaceutical, Textile, and Tyre. The Businesses of Atul are classified into two reporting segments, namely Life Science Chemicals Segment and Performance & Other Chemicals Segment.
Atul Ltd is one of the Multibagger Shares, identified by Dynamic Research based on technical and fundamental research.
Atul share price has touched a 52 week high of Rs. 2298.80 on 22 -Jul -2016 and a 52 week low of Rs.1186.00 on 25 -Aug -2015, and is currently trading at Rs. 1895.

Share Holding
The promoters holding in the company stood at 51.03%, while Institutions and Non-Institutions held 20.62% and 34.08% respectively.
Some of the NonPromoters holding securities more than 1% of total number of shares are

• Bodies Corporate:3.47%
• Saif Advisors Mauritius Limited A/C Saif India Iv FII Holdings Limited:2.72%
• Reliance Capital Trustee Co Ltd-A/C Reliance Mid & Small Cap Fund:2.23%
• Shivani Tejas Trivedi:1.67%
• Tejas Bhalchandra Trivedi:1.57%

Financial Analysis
Quarterly Results
For the quarter ended June 2016, the total income from operations of Atul Ltd has reported a growth of 14.92 % on the Y-o-Y basis to Rs. 675.05 cr as against Rs. 587.36 cr during the same quarter last year. A boost up in total income from operations shows strong development in business.
The operating profit of Atul Ltd on standalone has shown a growth of 14.58% Y-o-Y to Rs. 96.63 cr as against Rs. 84.33 cr during the same quarter last year, This is mainly due to rise in topline of the company.
The net profit of Atul has registered a growth of 32.16% Y-o-Y to Rs.80.54 cr as against Rs 60.94 cr during the same quarter previous year.
The earnings per share of the company have shown a growth of 34.14% Y-o-Y to Rs. 27.15 as against Rs. 20.24 during the same period last year.

Annual Results
For the year ended March 31, 2016   Atul Ltd on consolidated basis reported net sales of Rs. 2601.44 cr compared to Rs. 2656.39 cr FY2015.
For the year ended March 31, 2016 Atul Ltd, on consolidated basis, reported the net profit of Rs. 269.32 cr compared to profit of Rs. 240.65 cr FY2015. The increase in the net profit is on the back of lower total expenditure from Rs. 2315.37 cr in the year 2015 to Rs.2203.68 cr for the year 2016.

Ratio Analysis

 

The above ratio suggests that the company is operating with a very marginal level of debt. Higher current ratio implies healthier short term liquidity comfort level. The Company is generating good returns with the money the share holders have invested; the above ratio also suggests that the management is very efficiently using its assets to generate earnings.

Expansions

• During 2015-16, the Company has completed 5 expansion projects with an investment of Rs. 213 cr and invested Rs.27 cr in the areas of environment and safety.
• Atul undertook 3 expansion projects with an investment of Rs. 98 cr which will be commissioned in 2016-17.

Investment Rationale

• The size of world Crop Protection Chemicals industry is estimated at US$ 52 bn and is growing at about 4 per cent. There are about sixty major companies which dominate the world marketplace. The size of world Agriculture industry is estimated at US$ 3.
• The captive consumption of bulk chemicals is expected to grow as the Company expands manufacturing capacities of its various products. Tyre industry is projected to grow further because of increasing population on the one hand and improving standard of living on the other. The Company will participate in this growth by

1. increasing its manufacturing efficiencies,
2. widening its market reach,
3. generating and adding capacities and
4. introducing downstream products. 35 tn and is growing at about 3 per cent.

• India has the potential to grow its Specialty Chemicals industry at 9%. Atul has an advantage that its Businesses have good potential to grow (as the industries they serve are growing) and its manufacturing blueprint is reasonably complex (not complicated) and integrated, therefore not easily replicable.
• Atul Manufactures about 920 products and 460 formulations divided into Life Science Chemicals and Performance and Other Chemicals Segments.
• Atul is endeavoring improvements in many areas of operations of the Company, particularly related to i) efficiencies, ii) productivity, iii) business processes, iv) time-cycles and v) people development. Their efforts are expected to favourably impact i) environment, ii) profitability, iii) empowerment, iv) growth and v) competence.
• Undertook CapEx of Rs. 203 cr
• Introduced 65 products and 19 formulations

At CMP of Rs.1895 the stock is trading at a P/E of 19.88, the market cap of the company is 5706.32 crore. As per Dynamic Levels we recommend a buy on Atul at CMP 1895 levels which is a near its monthly support (previous month low), with a price target of Rs. 2200.