ATUL LTD.

INITIATING COVERAGE
REPORT
November 06, 2018
 Market Cap. (in Mn) 52 Week H/L CMP Target Price
Atul Ltd. Rs. 1,03,218 2,830/4,160 3,480 4,424
Diversified Business model with high market share and strong market presence.
STOCK DATA
Atul Ltd classifies its business in two major heads; (A) Life Science Chemicals (32% of Revenue) which covers i) crop
Recommendation BUY protection and ii) Pharma & aromatics-I and (B) Performance & other chemicals segment which covers i) Aromatics 2,
Reuters Code ATLP.BO
ii) Bulk Chemicals, iii) Colors & iv) Polymers. The company has more than 6,000 customers operating in around 27
Bloomberg Code ATLP IN industries with significant market share in each of the business sub segments it operates in. Atul Ltd operates in more
than 90 countries with its 1,350+ products and formulations.
BSE Code 500027
ATUL
Tapping the unrealized sales growth can lead to double digit revenue growth.
NSE Symbol
Atul Ltd in FY2019 had undertaken capex for debottlenecking and expanding the existing capacity of the company in
Face Value Rs. 10
a gradual manner in various segment and posses an un realized revenue potential on Rs. 5,440 Mn over the next 12-
Shares 16 months. In the last year the company has achieved growth mainly due to higher realization and increase in prices
29.7 Mn
Outstanding* due to China Debacle but we expect the prices to stabilize and major growth is expected to come on the back of
Avg. Daily higher volumes.
20,384 shares
Volume (6m) Robust return ratios, positive cash flows and strong balance sheet.
Price Performance (%) A debt free balance sheet backed by strong free cash flow to firm (6,934 over FY17-FY19) despite capex is a strong
1M 3M 6M sign of active sincere management with an intention to grow their business. Strong RoCE of 20.5%, 18.5% & 24.7% in
(4) (11) 4 FY17, FY18 & FY19 respectively and working capital days around 70 during the same period speaks efficiency in all
200 Days EMA Rs. 3610 parameters.
* On fully diluted equity Shares OUTLOOK & VALUATION
SHARE HOLDING (%) Going forward we expect the company to grow at a rate of 13.5% in FY20 and 8.9% in FY21 and the EPS for FY20 and
FY21 is expected to be Rs. 182.64 and 212.78 respectively. The growth will be majorly backed by increase in the
Promoters 44.7 volumes in the business with stable prices rather than the increase in prices in the previous year. The company is
FII 7.5 expected to realize the unrealized sales potential of Rs. 5,440 mn in the next 12-16 months which was as a result of
FI/Bank 22.9 debottlenecking of plants and increasing the existing capacities. We have valued Atul Ltd on both EV/EBITDA 13x of
Body Corporate 2.6 FY21x, P/S valuation of 2.75x of FY21 sales and P/E valuation of 20x of FY21E EPS and arrived at an average target
Public & Others 22.3 price of INR 4,424 with a 27.1% upside wrt the closing price on 29-Aug-19 and recommend a BUY rating on the stock.

Revenue EBITDA PAT NPM REPS P/E P/S P/BV

Y/E Mar
(Rs. Mn) (Rs. Mn) (Rs. Mn) (%) (Rs.) (x) (x) (x)
FY18 31,475.6 4,724.7 2704.1 8.59 91.16 38.17 3.28 4.70
FY19 39,158.1 7,361.9 4286.4 10.95 144.51 24.08 2.64 3.90
FY20E 44,432.7 8,827.7 5420.7 12.20 182.64 19.05 2.32 3.30
FY21E 48,371.0 10,303.0 6311.3 13.05 212.78 16.35 2.13 2.81
Please refer to the disclosure on last page 2
 ATUL Ltd.

COMPANY OVERVIEW
Founded in 1947 by Mr. Kasturbhai Lalbhai , Atul Ltd has panned out to be one of the most integrated chemical company catering
to more than 27 industries with 6,000+ customers with 1,350 products and formulations. Atul Ltd was the first private sector company
to be inaugurated by the first Prime Minister of India and the company was also one of the few companies to manufacture specialty
chemicals for the first time in the country.
Over the 70+ years since incorporation the company has built itself prominently as a global player in the specialty chemicals
manufacturer in the country. Currently the company has 3000+ employees working around the world with presence in 90+ countries
with its 900+ products and 400+ formulations.

KEY MILESTONES

1952-1971 1972-1991 1992-2011 2012-2015 2015 Onwards

• Inaugurated by Prime
Minister Jawaharlal Nehru
on March 17, 1952.
• Commenced the
manufacture of dyes
(including Vat dyes) for
the first time in India.
• JV with Imperial Chemical
Industries plc (50%) to
manufacture dyes.
• JV with Ciba Geigy Ltd
(35%) to manufacture
epoxy resins and curing
agents.
• JV with American
Cyanamid (65%) to
manufacture crop care
chemicals.
• Commenced the
manufacture of Phosgene
for the first time in India.
• Commenced the
manufacture of Carbamite
and 2,4-D Acid for the first
time in India.
• Constructed a central
effluent treatment plant.
• Acquired Gujarat
Aromatics Ltd.
• Commenced the
manufacture of para
Cresol for the first time in
India.
• Modernized epoxy plant
and expanded Vat dyes
manufacturing unit.
• Formed Atul USA Inc, Atul • Expanded para Cresol • Replaced mercury based
Europe Ltd and Atul China manufacturing facility – caustic | chlorine plant
Ltd. the world’s largest. with an environment-
• Merged Atic Industries Ltd • Established a 22,000 sq ft friendly, membrane based
and Cibatul Ltd. research facility to build plant.
• Acquired 88% stake in the business of APIs and • Introduced 65 products
DPD Ltd (UK) to conduct API intermediates. and 19 formulations.
research on tissue • Decreased (liquid) effluent • USFDA approval received
cultured date palm | to in 41 products by 79% on for Dapsone
import the tissue cultured an average. manufacturing plant.
date palm technology. • Converted Ankleshwar • Established a JV with
• Established a subsidiary site into a ‘zero liquid Nouryon (called ANAVEN
company, Atul Bioscience effluent discharge’ facility. LLP) to manufacture MCA
Ltd to manufacture Active • Developed 67 new in India.
Pharmaceutical products and formulations
Ingredients (APIs) and in R&D.
their intermediates. • Achieved zero liquid
• JV with Rudolf GmbH effluent discharge in 1 key
(Germany) to manufacture product.
textile chemicals

Source: Company, Sushil Finance Research

August 30, 2019 3
 ATUL Ltd.

BUSINESS OVERVIEW
Atul Ltd caters to more than 27 industries with a base of more 6,000 customers which provides great diversification to the
company reducing the dependence of the company on any one customer(s). Atul Ltd is a Value based company giving priority to
processes and operating seven dissimilar sub segment of which two have both retail and non retail verticals. The company has long
term contracts with almost all of its customers which ensures stable revenue stream for the future as well.
The company works with 2,250 distributors and retailers across India and has its own sales force of 431 professionals and
subsidiary companies in Brazil, China, the UAE, the UK and the USA. The company has 13 subsidiaries and 2 joint ventures through
whom the customers and suppliers operate on long term basis. The company being backward integrated and with new capacities being
added the fixed cost per unit of the products decrease.
The company classifies its business operations into two segments namely Life Science Chemicals segment & Performance & other
Chemicals segment which are further segregated as given below.

*TR-Total Revenue
Life Science Chemicals Performance & Other Chemicals

Bulk Chemicals &

Crop Protection Pharma & Aroma-I Aromatics-II Colors Polymers
Intermediaries
(20% of TR) (11% of TR) (16% of TR) (14% of TR) (26% of TR)
(5% of TR)
Epoxy Resins,
PRODUCTS

Textile Dyes,
Herbicides, API Intermediaries, Bulk Chemicals, Curing Agent,
Intermediaries, Pigments, Paper
Insecticides, Active Pharmaceutical Adhesion Reactive Diluents,
Perfumery. Dyes, Inks, Textile
Fungicides. Ingredient. Promoters. Sulfones,
Chemicals
Polyurethane, etc.

Aerospace,
INDUSTRIES

Automobiles,
Agriculture, Crop Fragrance, Cosmetic, Textile, Paints, Cosmetics,
Pharmaceuticals
Protection Personal Care. Dyestuff, Tyre. Coating Paper. Construction,
Defense, Electrical
Equipment etc.

August 30, 2019 4

 ATUL Ltd.

INVESTMENT RATIONALE- Segmental/Product Diversification

A) LIFE SCIENCE CHEMICAL SEGMENT

This segment constitutes ~34% of the total sales of the company and is further divided into two sub segments:- 1) Crop Protection
Segment (20% of Total Revenue) & 2) Pharmaceuticals & Aromatics segment (11% of Total Revenue).
The segment has reported revenue of Rs. 13,177 Mn in FY19 showing a CAGR of 18.1% over FY 16-19 period with share in total
sales constant at 33.7%. In the coming years we believe the life science chemicals segment to grow by 17.6% and 14.5% in FY 20 and
FY21 respectively.
The company reported EBIT of Rs. 2,170 Mn in FY19 and margins of 16.5% compared to Rs. 1,200 Mn in FY18 and margins of
11.3%.

Total Revenue

8,005 8,650 10,623 13,178 15,500 17,747

FY16 FY17 FY18 FY19 FY20E FY21E

August 30, 2019 5

 ATUL Ltd.

1) CROP PROTECTION BUSINESS

The products falling under these products group are used by customers belonging to Agriculture and Crop Protection Chemicals
industries. The product groups comprise about 60 products and formulations. 2,4-D, Indoxacarb, Isoprothilane, Propoxur and sulonl
urea herbicides are some of the key products. Crop Protection constitutes ~20% of total sales and 63% of revenue from Life science
segment.

SALES
1060
970 920
700 Bulk Sales
Brand sales
4,220 4,550 6,510 7,540 690 830 1,260 1,710

FY16 FY17 FY18 FY19 FY16 FY17 FY18 FY19

Product Market Share ( As on FY18) 4,910

4,190
2,4-D & Downstream Products 16% (World)
3,020
2,560 Domestic
Indoxacarb 7% (World)
Exports
Number of products- Technical: 20, Formulations: 40
1,660 1,530 2,320 2,630
Unrealized Sales Potential Rs. 590 Mn
FY16 FY17 FY18 FY19

The size of the world Agriculture, Forestry and Fisheries industry is estimated at US$ 3.2 Tn and is growing at about 3%. The size of the
world Crop Protection Chemicals industry is estimated at US$ 56 Bn and is growing at about 5%. The Food and Agribusiness forms a
larger US$ 5 Tn world industry. If the current trend continues, caloric demand will increase by about 70% and crop demand for human
consumption and animal feed will nearly double by 2050.

August 30, 2019 6

 ATUL Ltd.

2) PHARMACEUTICALS AND AROMATICS – I

These products group are used by customers belonging to Pharmaceutical industry for various therapeutic categories, such as anti-
depressant, anti-diabetic, anti-infective, anti-retroviral and cardiovascular. The product groups comprise about 80 products catering to
approximately 100 customers. Carbonates, chloroformates, isocyanates and organic ureas are some of the key classes of products. The
company’s revenue grew by a CAGR of 34.3% within the period between FY 16-19.
SALES
2,330

1,480 1,640 1,490 Domestic

Exports

3,110 3,420 6,510 7,540 1,630 1,780 2,180 2,930

FY16 FY17 FY18 FY19 FY16 FY17 FY18 FY19

Atul Bioscience Ltd (ABL), a 100% subsidiary company, Product Market Share ( As on FY19)
acquired manufacturing facilities of Polydrug Laboratories
Private Limited at MIDC, Ambernath. Sales of ABL for 2018-19 APIs & API Intermediaries Insignificant (World)
increased by 37% from Rs. 76 Cr to Rs. 104 Cr, primarily Dapsone 50%
because of volume; it completed 2 debottlenecking projects
Phosgene Chemicals Insignificant (World)
and undertook 2 projects for implementation.
Unrealized Sales Potential Rs. 1,500 mn (in 2 years)

The size of the world Pharmaceutical industry is estimated at US$ 1.75 Tn, of which the conventional pharmaceutical segment is
estimated to be US$ 1.3 Tn. Of this, the size of the world API industry is estimated to be US$ 160 Bn. Biologics is estimated to contribute
about 52% of sales of top 100 products by 2022, while Oncology will remain the largest therapy area in sales growing at about 12.7%
CAGR. Worldwide Pharmaceutical R&D spend is estimated to grow by 2.4% CAGR to about US$ 181 bn in 2022, with about US$ 4 bn
R&D spend per New Molecular Entities (NME) over the last 10 years.

August 30, 2019 7

 ATUL Ltd.

B) PERFORMANCE & OTHER CHEMICALS

This segment of the company consists of 4 sub segments namely:
• Aromatics –II
• Bulk Chemicals & Intermediaries
• Colors
• Polymers

The segment has recorded a topline growth of by 13.2% over the period between FY 16-19 and we expect the segment to grow by
10.4% in FY20 and 6% in FY21.

Total Revenue

19,460 21,559 22,791 28,252 31,187 33,058

FY16 FY17 FY18 FY19 FY20E FY21E

August 30, 2019 8

 ATUL Ltd.

1) AROMATICS –II
The products falling under these products group are mainly used by customers belonging to Fragrance and Personal Care industries.
The product groups comprise about 20 products. para Cresol, para Anisic Aldehyde, para Anisyl Alcohol and para Cresidine are some of
the key products. The company caters to 367 customers with the 38 product offerings it has in the sector. The revenue in this segment
grew at a rate of 32% in FY19 majorly due to growth in the volumes by 7%.
SALES
4,860
4,140
3,890
3,300

Domestic
Exports
4,690 5,370 5,390 7,110
1,390 1,230 1,500 2,250
FY16 FY17 FY18 FY19

FY16 FY17 FY18 FY19

The size of world fragrance industry is ~US$ 12.5 Bn and is
growing at ~4% every year and personal care ingredients
segment is ~US $21 Bn which is also growing by 4%. The Product Market Share ( As on FY19)
world market for “para Cresol” ATUL’s key product, is
p-Cresol (P&OC) 42%
expected to be at 64,000 MT and is estimated to grow at
2% annually. p-Cd (P&OC) 20%
To capitalize on the steady demand in coming years, ATUL
ltd has planned to: p-AA (LSC) 75%
1) Develop a project for manufacturing fragrance
intermediate p-AAI (LSC) 95%
2) Commercialization of products developed in Kilo lab.
3) Commercialize higher end products from p-MPAA. Unrealized Sales potential Rs. 1,010 Mn
4) Develop capacities for cosmetic ingredients.

August 30, 2019 9

 ATUL Ltd.

2) BULK AND CHEMICAL INTERMEDIATES

This segment consists mainly for customers belonging to the to Cosmetic, Dyestuff, Pharmaceutical and Tyre industries and it is also
used for internal consumption. The product basket consists of 24 products catering to the needs of 197 customers. Resorcinol,
Resorcinol formaldehyde raisins, 1,3 –Cyclohexanedione, Anisole, Sulphur Tri oxide, Chlorosulphuric Acid & Caustic Soda are some of
the key products. The Tyre industry is expected to grow further because of increasing population in one place and increasing standard
of living of Individuals on the other hand. The company is also expanding its manufacturing capacities for various products which can
lead to increase in internal consumption of bulk chemicals.
SALES 990

630 Domestic
490
430 Exports
1,040 1,380 1,750 2,490
610 890 1,120 1,500
FY16 FY17 FY18 FY19
FY16 FY17 FY18 FY19
Going forward the world market for Resorcinol is estimated at US$ 426 Mn
and is growing at about 2.5% also Chlor-alkali industry is estimated at US$
Product Market Share ( As on FY19)
44 Bn which is growing at about 3.2%. Demand from the Auto industry is
expected to pick up in H2FY20 leading to the healthy demand for tyre Significant (India)
Resorcinol
companies. The dye-stuff industry has been witnessing a rough patch for Insignificant (World)
couple of years; however demand scenario in this industry is anticipated to
remain sluggish. Insignificant
Resorcinol Formaldehyde
Atul Ltd aims to grow by: (under qualification at
Resins
major customers)
• Enhancing its market share in the product offerings and expanding into
new geographical locations. CSA Significant (India)
• Increasing the operations efficiency of the manufacturing facilities by
debottlenecking and also expanding the existing capacities. Unrealized Sales potential Rs. 1,360 Mn
• Introducing new and innovative products to cater to the client needs in an
efficient manner.
August 30, 2019 10
 ATUL Ltd.

3) COLORS
In this segment the company manufactures a range of products for its clients such as Pigment Red 168, Sulphur Black 1, Vat Green 1
etc for the dyestuff, pigment, dye-Intermediaries and textile chemical industry. The company is one of the largest manufacturers of Vat
dyes globally and the largest manufacturers of Sulphur black in the country. The company has around 587 products servicing around
~298 customers globally. The company reported increase of revenue by 21% in FY19 to Rs. 5,470 Mn where the company has
completed 5 projects. Rudolf chemicals a JV company formed in 2011-12 reported a sales growth of 14% to Rs. 830 Mn primarily due
to increase in volumes.
2,620
2,160
SALES 1,740 1,830

Domestic
Exports

3,940 4,070 4,520 5,470 2,200 2,240 2,360 2,850

FY16 FY17 FY18 FY19 FY16 FY17 FY18 FY19

The size of the world Dyestuff industry is estimated at US$ 6.1 Bn and is Product Market Share ( As on FY19)
growing at about 3.5% China being the largest manufacturer of dyes
followed by India. The world market for high performance pigments is Significant (India)
Textile dyes
estimated at US$ 5.2 Bn and is growing at about 4.0%. The main user Insignificant (World)
industries viz. Textile, Paper, Paint & coating are expected to continue their HP pigments Insignificant (World)
growth trajectory for the future as the population increases and the
standard of living of the people also increases. Unrealized Sales
Rs. 980 Mn
The Sector does also have certain risks like the foreign exchange risk and potential
the availability of raw material which may impact sales realization. Project Under Textile Dye 1-Rs. 2,500 Mn
Treatment cost are expected to remain high given that the manufacture of Implementation Intermediaries- Rs. 450 Mn
dyes and pigments generate significant pollutants.

August 30, 2019 11

 ATUL Ltd.

4) POLYMERS
The products falling under these products group are used by customers belonging to Aerospace, Automobile, Composites,
Construction, Defence, Electrical and Electronics, Footwear, Paint and Coatings, Paper, Sport and Leisure and Wind Energy industries.
The product groups comprise about 96 synthetic products and 300 formulations. B11, P62 and P101 are some of the key products.
During the FY 2018-19 the company showed a growth of 22% with revenue clocking at Rs. 10,480 Mn mainly due to 5% increase in
volumes.

SALES
3,370 Domestic
2,540 2,880 2,780
Exports
6,990 7,500 8,580 10,480 4,450 4,620 5,800 7,110

FY16 FY17 FY18 FY19 FY16 FY17 FY18 FY19

Product Market Share ( As on FY18)

Epoxy Resins | Curing agents Significant (India)
Bulk Sales
Sulfones Significant (World)
Retail Sales
870 850 930 1,180
Epoxy, Polyurethane, Rubber
Significant (India) 6,120 6,650 4,870 5,930
formulations
Projects under Implementation Rs. 2,910 Mn FY16 FY17 FY18 FY19

The world market for Epoxy Raising and Curing agents is estimated at US$ 7.3 Bn growing at about 2% and the Indian market if is
estimated at US$ 285 mn growing at 6%. There are only 7 companies globally dominating the world market. The world market for
Sulfones is estimated at US$ 367 mn and is growing at about 5%. Polymers is a very competitive industry due to cheap imports and
new entrants and this may also keep the margins under pressure. Two main raw material namely Bisphenol-A and Epichlorohydrin are
imported and fluctuation in the exchange rate may impact the margins of the company.

August 30, 2019 12

 ATUL Ltd.

GEOGRAPHICAL DIVERSIFICATION
4.0% 3.0%
4.0% 2.0% FY 2018-19
FY 2017-18
11.0% India
12.0%
Asia( Exc. India)
Europe
14.0% 50.0% 12.0% 50.0%
North America
South America
18.0% Africa
20.0%

180 %
Domestic Exports Total Sales 38,450
160 %

30,520
140 %

25,100 26,390 30,0 00

120 %

23,070 24,030
100 % 19,640
80%

48% 49%
15,0 00

60%
50% 50% 53% 50% 50%
40%

20%

50% 52% 51% 50% 47% 50% 50%

0% -

FY13 FY14 FY15 FY16 FY17 FY18 FY19

August 30, 2019 13

 ATUL Ltd.

INVESTMENT RATIONALE- Tapping unrealized sales growth can lead to double digit revenue growth over FY19-21
Atul Ltd reported a growth of 24.4% in FY19 where the topline stood at Rs. 39,158.1 Mn and the growth in the PAT was 58.5% standing
at Rs. 4,286.4 Mn. The growth was mainly driven by higher realization and growth of ~24% in the performance and other chemicals
business. We expect the company to continue its double digit growth trajectory with a growth rate of 11.14% between the period
FY19-21.
60,000 6,311 7,000

50,000
5,421 6,000

4,286 5,000

40,000

2,704 4,000

30,000 2,745 2,853

3,000

20,000
2,000

10,000
1,000

26,521 28,483 31,476 39,158 44,433 48,371

0 0

FY16 FY17 FY18 FY19 FY20 FY21

SALES PAT

The growth will be largely driven by higher volume growth as Category of products Investments (Rs. Mn) Sales (Rs. Mn)
the prices are un-likely to spike from current levels.
Existing products
Additionally company’s ability to penetrate into export 190 390
(debottlenecking)
markets, launching of new products, timely expansion of
capacities, along with expectation of hardships being faced Existing products
3,700 9,500
by Chinese chemical companies to continue should lead the (expansion)
company to achieve its target of INR 50,000 Mn turnover. Safety 100 -
Atul ltd with its expansion projects completed in past year
Environment 770 -
possesses an unrealized sales potential of ~INR 5,440 Mn.
Total 4,760 9,890

August 30, 2019 14

 ATUL Ltd.

Q1-FY20-PERFORMANCE
TOTAL INCOME (INR Mn) SEGMENTAL BREAKUP
10,406 67.7% 66.6% 69.4% 68.9% 67.9%
10,074 10,195
10,008

32.3% 33.4% 30.6% 31.1% 32.1%

8,881

Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20

Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20
Life Science Chemicals Performance & Other Chemicals

Total income of the company grew by 4% on a QoQ basis and 17.2% on a Life Science chemical segment de grew by 7.2% on a QoQ basis and grew
YoY basis. by 14.3% on a YoY basis. Performance & other chemicals segment de grew
by 2.6% on a QoQ basis and grew by 15.0% on a YoY basis

EBITDA & EBITDA M(%) PAT & PAT M(%)

21% 23%
3,00 0

19% 19% 25%

1,60 0

12% 11% 14% 16%

2,50 0
16% 20%
1,40 0

9% 11% 14%

1,20 0 12%

2,00 0

1,00 0 10%
15%

1,50 0 800 8%

10%
600 6%

1,00 0

400 4%

500

1,420 1,900 2,114 1,928 2,403 5%

200 842 1,190 1,169 1,085 1,477 2%

- 0%
- 0%

Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20
EBITDA Margin (%) PAT Margin (%)

EBITDA of the company grew by 24.6% on a QoQ basis and 69.2% on a PAT of the company grew by 36.0% on a QoQ basis and 75.4% on a
YoY basis. YoY basis.

Source: Company, Sushil Finance Research

August 30, 2019 15

 ATUL Ltd.

INVESTMENT RATIONALE- Strong Balance Sheet & Increasing Financial Strength

24.7%
20.5% 18.5%
1,20 0.00

893.26
300 .00

1,00 0.00

740.87 250 .00

800 .00
647.58 200 .00

600 .00 150 .00

14.9% 16.2%
12.3% 144.51
400 .00 100 .00

96.18
200 .00 50.0 0

-
91.16 -

FY17 FY18 FY19

FY17 FY18 FY19
RoE RoCE
BVPS EPS
Subsidiary & associate companies
1,20 0

1,040 500 250

210 230 300

1,00 0
190
760
200

60
800

570 150
50
600

40
140 100

400

120
130 50

200

- - - (2 00)

FY17 FY18 FY19 FY17 FY18 FY19

Atul Bio Science ltd DPD Ltd

350

320 330 400 900

730 830 400

300
260 800

700
650
250

600

200

90 100 100
500

400
150

150 150
140
300

100

200

50

100

- (1 00) - (1 00)

FY17 FY18 FY19 FY17 FY18 FY19

Amal Rudolf Atul Chemicals

August 30, 2019 16

 ATUL Ltd.

INCOME STATEMENT
Amounts in INR Mn

Y/E March FY18 FY19 FY20E FY21E

Revenue 31,475.6 39,158.1 44,432.7 48,371.0
Cost of Material 17,332.5 20,577.2 22,598.8 23,943.7
Power, Fuel & Water 3,362.6 3,915.1 4,217.6 4,546.9
Employee Benefit Expenses 1,813.4 2,185.7 3,041.1 3,337.6
Other Expenses 4,242.4 5,118.2 5,747.5 6,239.9
EBITDA 4,724.7 7,361.9 8,827.7 10,303.0
EBITDA M(%) 15.01% 18.80% 19.87% 21.30%
Depreciation 1,047.8 1,119.9 1,001.8 1,282.9
Finance Cost 89.0 36.6 75.2 77.4
Other Income 384.6 313.6 331.2 338.6
PBT (as reported) 3,972.5 6,519.0 8,081.9 9,281.4
Tax 1,268.4 2,232.6 2,661.2 2,970.0
RPAT 2,704.1 4,286.4 5,420.7 6,311.3
APAT 2,704.1 4,286.4 5,420.7 6,311.3
PAT M(%) 8.59% 10.95% 12.20% 13.05%
REPS 91.16 144.51 182.64 212.78
AEPS 91.16 144.51 182.64 212.78

August 30, 2019 17

 ATUL Ltd.

BALANCE SHEET
Amounts in INR Mn
PARTICULARS FY18 FY19 FY20E FY21E PARTICULARS FY18 FY19 FY20E FY21E
Share capital 296.8 296.8 296.8 296.8 Current Liabilities 5,566.8 5,300.5 5,870.3 6,055.8
Reserves and surplus 21,678.6 26,198.8 30,941.9 36,401.2 Trades payable 4,704.7 4,181.0 4,744.5 4,883.2
Net Worth 21,975.4 26,495.6 31,238.7 36,698.0 Other Financial Liabilities 551.8 680.9 687.3 734.0
Contract Liabilities - 81.5 81.5 81.5
Long term borrowings - - - - Other current liabilities 146.6 63.1 63.1 63.1
Short term borrowings - - - - Short term provisions 83.6 292.2 292.2 292.2
Total Borrowings / Debt - - - - Current Tax Liabilities (net) 80.1 1.8 1.8 1.8

Capital Employed 21,975.4 26,495.6 31,238.7 36,698.0 Net Current Asset 7,237.8 10,522.6 12,072.5 14,847.1

Gross Fixed Assets 9,916.6 9,913.8 11,484.0 12,099.6 Non Current Assets 6,470.3 7,721.9 9,306.3 11,472.7
Property, Plant & Equipment 9,188.7 9,178.4 10,498.6 10,664.2 Investments 5,948.1 7,286.8 8,746.8 10,495.6
Capital WIP 695.6 703.1 953.1 1,403.1 Loans 50.3 - - -
Investment Property 32.2 32.2 32.2 32.2 Other Financial Assets 24.8 22.2 22.2 22.2
Intangible Assets 0.1 0.1 0.1 0.1 Deferred Tax Assets(Net) - - - -
Income Tax Assets (Net) 6.7 37.4 37.4 37.4
Current Assets 12,804.6 15,823.1 17,942.8 20,902.9 Other Non Current Assets 440.4 375.5 499.8 917.5
Inventories 3,789.5 4,278.1 4,553.9 4,960.8
Investments - 1,976.4 2,499.1 3,486.3 Non Current Liabilities 1,649.3 1,662.7 1,624.1 1,721.4
Trade receivables 7,176.8 7,621.8 8,643.1 9,674.2 Other Financial Liabilities 225.7 250.0 250.0 250.0
Cash and cash equivalents 221.7 286.2 297.3 473.5 Long Term Provisions 177.1 187.0 187.0 187.0
Loans 20.4 49.2 51.7 55.3 Other Long Term Liabilities 1,246.5 1,225.7 1,187.1 1,284.4
Other Financial Assets 319.4 174.5 179.7 197.7
Other Current Assets 1,276.8 1,436.9 1,718.1 2,055.1 Capital Employed 21,975.4 26,495.6 31,238.7 36,698.0

Source: Company, Sushil Finance Research Estimates

August 30, 2019 18

 ATUL Ltd.

CASH FLOW STATEMENT

Amounts in INR Mn
Particulars FY18 FY19 FY20E FY21E Particulars FY18 FY19 FY20E FY21E
Cash Flow from Investing
Cash Flow from Operating Activity
Activity
Profit before tax & Extraordinary Items 3,972.5 6,519.0 8,081.9 9,281.4 (Incr)/ Decr in Gross PP&E (927.4) (894.8) (2,322.0) (1,448.5)
Depriciation & Amortization 1,047.8 1,119.9 1,001.8 1,282.9 (Incr)/Decr In Work in Progress (325.7) (7.5) (250.0) (450.0)
Finance Cost 89.0 36.6 75.2 77.4 (Incr)/Decr In Investments - (1,976.4) (522.7) (987.2)
Provision for Taxes (1,268.4) (2,232.6) (2,661.2) (2,970.0) Other Adjustments 385.5 (102.4) (351.0) (465.0)
Changes in Working Capital Cash Flow from Investing (867.6) (2,981.1) (3,445.7) (3,350.7)
(Increase)/Decrease in Current Assets (2,346.8) (948.8) (1,583.5) (1,793.0)
Cash Flow from Financing
Trade Receivables (2,106.2) (445.0) (1,021.3) (1,031.1)
Activity
Inventory (110.6) (488.6) (275.8) (406.9) (Decr)/Incr in Debt (1,340.0) - - -
Other Financial Assets (68.2) 144.9 (5.2) (18.0) (Decr)/Incr in Share Capital - - - -
Other Current Assets (61.8) (160.1) (281.2) (337.0) Interest Paid (89.0) (36.6) (75.2) (77.4)
Increase/(Decrease) in Current
1,757.3 (524.2) 62.5 (568.2) Dividend (330.7) (397.4) (677.6) (852.0)
Liabilities
Trade Payables 1,414.1 (523.7) 563.5 138.7 Other Adjustments (476.0) (602.8) (654.0) (854.0)
Other Financial Liabilities 89.2 129.1 6.4 46.7 Cash Flow from Financing (2,235.7) (1,036.8) (1,406.8) (1,783.4)
Other Current Liabilities (241.0) (83.5) - -
Incr/(Decr) in Balance Sheet
Current Provisions 7.4 208.6 - - 148.1 (48.0) 124.2 176.2
Cash
Other Adjustments 487.6 (254.7) (507.3) (753.7) Cash at the Start of the Year 73.0 221.1 173.1 297.3
Cash Flow from Operating 3,251.4 3,969.9 4,976.7 5,310.3 Cash at the End of the Year 221.1 173.1 297.3 473.5

Source: Company, Sushil Finance Research Estimates

August 30, 2019 19

 ATUL Ltd.

FINANCIAL RATIOS
Amounts in INR Mn
Ratios FY18 FY19 FY20E FY21E Ratios FY18 FY19 FY20E FY21E
Growth (%) Valuations (x)
Revenue 10.51% 24.41% 13.47% 8.86% P/E 38.17 24.08 19.05 16.35
EBITDA 0.15% 55.82% 19.91% 16.71% P/BV 4.7 3.9 3.3 2.81
EBIT -3.65% 61.41% 24.43% 14.73% P/Sales 3.28 2.64 2.32 2.13
PAT -5.22% 58.51% 26.46% 16.43% EV / EBITDA 21.8 13.98 11.66 9.97
EPS -5.22% 58.52% 26.39% 16.50% EV / Net Sales 3.27 2.63 2.32 2.12
Mcap / Net Sales 3.28 2.64 2.32 2.13
Profitability (%)
EBITDA Margin 15.01% 18.80% 19.87% 21.30% Turnover Days
EBIT Margin 12.90% 16.74% 18.36% 19.35% Debtors Days 71 69 71 73
PAT Margin 8.59% 10.95% 12.20% 13.05% Inventory Days 60.6 55.2 55.7 56.9
Creditors Days 64.8 60.8 58 56
Per Share Data WC Cycle 66.7 63.4 68.7 73.9
EPS 91.16 144.51 182.64 212.78
BVPS 740.87 893.26 1,053.17 1,237.22 Others
Sales per share 1,061.15 1,320.16 1,497.98 1,630.76 Current Ratio 2.3 3 3.1 3.5
Quick Ratio 1.6 2.2 2.3 2.6
Gearing Ratio Interest Coverage 45.6 179.1 108.4 120.9
Debt/Equity - - - - Fixed Asset Turnover 3.2 3.1 3.1 3.1

Source: Company, Sushil Finance Research Estimates

August 30, 2019 20

 ATUL Ltd.

OUTLOOK & VALUATION

Going forward we expect the company to grow at a rate of 13.5% in FY20 and 8.9% in FY21 and the EPS for FY20 and FY21 is
expected to be Rs. 182.64 and 212.78 respectively. The growth will be majorly backed by increase in the volumes in the business
with stable prices rather than the increase in prices in the previous year. The company is expected to realize the unrealized sales
potential of Rs. 5,440 mn in the next 12-16 months which was as a result of debottlenecking of plants and increasing the
existing capacities. We have valued Atul Ltd on both EV/EBITDA 13x of FY21x, P/S valuation of 2.75x of FY21 sales and P/E
valuation of 20x of FY21E EPS and arrived at an average target price of INR 4,424 with a 27.1% upside wrt the closing price on
29-Aug-19 and recommend a BUY rating on the stock.

KEY RISKS
FLUCTUATION IN RAW MATERIAL PRICES & AVAILABILITY
Although the company has shown strong execution in the past, it still faces the risk of margin pressure due to foreign currency
fluctuation which can make the price of raw material volatile thus impacting the bottom line of the company. The availability of the
raw may also be impacted due to pressure from the Chinese markets. Rebound in the Chinese market in the future may be a risk to
the company’s business as it may create a highly competitive scenario for the company.

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 ATUL Ltd.

Research Associate SALES

Dhruvin Upadhyay | +91 22 4093 4082 Devang Shah | +91 22 4093 6060/62
dhruvin.upadhyay@sushilfinance.com devang.shah@sushilfinance.com

Rating Scale
This is a guide to the rating system used by our Institutional Research Team. Our rating system comprises of six rating categories, with a corresponding risk rating.

Risk Rating
Risk Description Predictability of Earnings / Dividends; Price Volatility
Low Risk High predictability / Low volatility
Medium Risk Moderate predictability / volatility
High Risk Low predictability / High volatility

Total Expected Return Matrix

Rating Low Risk Medium Risk High Risk
Buy Over 15 % Over 20% Over 25%
Accumulate 10 % to 15 % 15% to 20% 20% to 25%
Hold 0% to 10 % 0% to 15% 0% to 20%
Sell Negative Returns Negative Returns Negative Returns
Neutral Not Applicable Not Applicable Not Applicable
Not Rated Not Applicable Not Applicable Not Applicable

Please Note
• Recommendations with “Neutral” Rating imply reversal of our earlier opinion (i.e. Book Profits / Losses).
• ** Indicates that the stock is illiquid With a view to combat the higher acquisition cost for illiquid stocks, we have enhanced our return criteria for such stocks by five
percentage points.
• Stock Review Reports: These are Soft coverage’s on companies where Management access is difficult. Views and recommendation on such companies may not
necessarily be based on management meeting but may be based on the publicly available information and/or attending Company AGMs. Hence Stock Reviews may be
just one-time coverage’s with an occasional Update, wherever possible.
…

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 ATUL Ltd.

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Sushil Financial Services Private Limited Analyst Stock Ownership No

Member : BSE / NSE - SEBI Regn. No. INZ000165135 Stock Recommended to Clients Yes
Research Analyst – SEBI Registration No. INH000000867 Remuneration/Benefits received from company in 12 months No
Regd. Office : 12, Homji Street, Fort, Mumbai 400 001. Merchant Banking Market Making activities / projects No
Phone: +91 22 40936000 Fax: +91 22 22665758 Sushil Financial Services Pvt. Ltd and Group Companies Holding Yes
Email : info@sushilfinance.com
Sushil Financial Services Pvt. Ltd and Group Directors Holding Yes
Broking Relationship with the company covered No

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