Atul earnings beat lifts estimates as Performance Chemicals margins expand

Investment View and Earnings Update

Motilal Oswal Financial Services reiterated its BUY rating on Atul in its July 25, 2026 results update, following a strong 1QFY27 earnings beat driven by operating leverage and growth in Performance & Other Chemicals. The broker raised its FY27E and FY28E adjusted PAT estimates by 15 per cent and 14 per cent, respectively, after the quarterly performance.

At the report CMP of Rs 6,408, the broker's target price is Rs 8,400. Motilal Oswal values Atul at 25 times FY28E EPS to derive the target price.

1QFY27 Financial Performance

Atul reported 1QFY27 revenue of Rs 1,850 crore, up 25 per cent year-on-year. Performance & Other Chemicals revenue increased 34 per cent year-on-year to Rs 1,420 crore, while Life Science Chemicals revenue rose 4 per cent to Rs 470 crore.

Profitability improved materially despite gross margin remaining unchanged at 48.7 per cent versus 1QFY26. EBITDA margin expanded 540 basis points year-on-year to 21.3 per cent, exceeding Motilal Oswal's 16.2 per cent estimate. Consolidated EBITDA rose 67 per cent year-on-year to around Rs 400 crore, compared with the broker's estimate of Rs 280 crore. Adjusted PAT increased 92 per cent year-on-year to Rs 250 crore, versus the estimate of Rs 160 crore.

Life Science Chemicals delivered EBIT of Rs 92.8 crore and an EBIT margin of 19.8 per cent, up 450 basis points year-on-year. Performance & Other Chemicals generated EBIT of Rs 240 crore and an EBIT margin of 16.8 per cent, up 740 basis points year-on-year.

Capacity Expansion and Growth Initiatives

Atul has proposed capex of Rs 167 crore for a manufacturing facility for Mecoprop-p, with capacity of 1,000 tonnes per annum, and 2-methyl 4-chlorophenoxyacetic acid, with capacity of 750 tonnes per annum. The project is intended to broaden the Phenoxy herbicides portfolio, strengthen Atul's position in that market and produce value-added downstream products of o-Cresol and MCA used in agrochemicals. The facility is expected to commence operations after 67 weeks.

Motilal Oswal expects Atul's healthy momentum to be supported by:

• Capacity additions in key aromatics and bulk chemicals.
• New projects and unrealised revenue potential from existing capacities.
• Debottlenecking across major segments.
• Entry into value-added chemical intermediates.
• In-house novel crop-protection products.
• Expansion into new geographies.

Broker Estimates

The revised broker estimates forecast revenue, EBITDA and adjusted PAT growth for FY27E and FY28E as follows:

Valuation

At the report CMP of Rs 6,408, Atul traded at around 21.2 times FY27E EPS and 18.5 times FY28E EPS. On an EV/EBITDA basis, the stock traded at 13.9 times FY27E and 12.1 times FY28E.

Motilal Oswal values Atul at 25 times FY28E EPS to arrive at its Rs 8,400 target price and maintains its BUY recommendation.