CMP 361.50

Target Price 409.00

ISIN: INE100A01010

Jan 19th

, 2013

ATUL LIMITED Result Update: Q3 FY 13

BUYBUYBUYBUY

Stock Data

Sector Agrochemicals

BSE Code 500027

Face Value / Div. Per Share 10.00

52wk. High / Low (Rs.) 472.25/153.00

Volume (2wk. Avg ) 30000

Market Cap ( Rs in mn ) 10722.09

Annual Estimated Results (A*: Actual / E*: Estimated)

Years FY12A FY13E FY14E

Net Sales 17955.70 19606.05 20782.41

EBITDA 2092.30 2879.75 3184.82

Net Profit 881.10 1461.65 1618.50

EPS 29.71 49.28 54.57

P/E 12.17 7.34 6.62

Shareholding Pattern (%)

1 Year Comparative Graph

BSE SENSEX ATUL LTD

Source: Company Data, Firstcall Research

SYNOPSIS

Atul Ltd is a member of Lalbhai Group, one

of the oldest business houses of India, with

interests mainly in textiles and chemicals.

Atul Ltd operates in six business division

namely Agrochemicals. Aromatics, Bulk

Chemicals & intermediates, Pharmaceuticals

Color, & Intermediates and Polymers.

During the quarter, the Life Science

Chemicals segment of the company

generated 16% growth of revenue to Rs.

1787.00 millions as compared to Rs.

1537.80 millions in corresponding quarter

of previous year.

During the quarter, the robust growth in

the Net Profit of the company, increased by

8.31% to Rs. 279.00 million.

Gujarat Pollution Control Board has

permitted to restart manufacturing

operations at Valsad site.

Atul Ltd owns Subsidiary marketing

companies in Brazil, China, Germany, the

UK and the USA.

Net Sales and PAT of the company are

expected to grow at a CAGR of 10% and 22%

over 2011 to 2014E respectively.

Peer Groups CMP Market Cap EPS P/E (x) P/BV(x) Dividend

Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)

Atul Ltd 361.50 10722.09 29.71 12.17 1.67 45.00

Clariant Chemicals India 597.70 15935.10 40.40 14.79 3.28 600.00

Asahi Songwon Colors 76.00 932.70 15.03 5.06 0.81 35.00

Sudarshan Chemical Industries 430.00 2976.80 355.80 12.09 1.10 125.00

Investment Highlights

Results updates- Q3 FY13,

Atul Ltd is one of the oldest business houses of India,

and the member of Lalbhai Group. With interests

mainly in textiles and chemicals reported its

financial results for the quarter ended 31st Dec,

2012.

Months Dec-12 Dec-11 % Change

Net Sales 4508.20 4616.50 -2.35%

PAT 279.00 257.60 8.31%

EPS 9.41 8.69 8.31%

EBITDA 601.30 591.70 1.62%

The company’s net profit jumps to Rs. 279.00 million against Rs.257.60 million in the corresponding quarter

ending of previous year, an increase of 8.31%. Revenue for the quarter fell 2.35% to Rs.4508.20 millions from Rs.

4616.50 millions, when compared with the prior year period. Reported earnings per share of the company stood

at Rs.9.41 a share during the quarter, registering 8.31% increase over previous year period. Profit before

interest, depreciation and tax is Rs. 601.30 millions as against Rs.591.70 millions in the corresponding period of

the previous year.

Expenditure :

During the quarter Total expenditure in Q3 FY13

was at Rs. 4156.90 millions as against Rs.4020.00

millions in Q3 FY12. Purchase of Stock in trade

expenses grew by 3% than corresponding period of

last year. Employee benefit expenses was stood at

Rs.308.40 millions against Rs.292.40 millions in the

corresponding period of the previous year. Other

Expenditure was at Rs. 533.40 millions and

Consumption of Raw Materials was at Rs. 2466.60

million in Q3FY13 and Power Fuel & Water are the

primarily attributable to growth of expenditure by

20% i.e at Rs. 480.60 millions.

Latest Updates

� Credit Ratings

Atul Ltd has informed that Credit Analysis & Research Ltd (CARE) has assigned following ratings:

1. For long term borrowing facilities (Rs 257 cr): AA- (Double A Minus)

2. For short term borrowing facilities (Rs 178 cr):A1+ (A one Plus)

3. For Commercial Paper (Rs 50 cr): A1+ (A one plus)

Company Profile

Atul Ltd is one of the oldest business houses of India and a member of Lalbhai Group. Incorporated in 1947 and

became the first private sector company of India to be inaugurated by Jawaharlal Nehru, the first Prime Minister

of the country. Atul Ltd formerly Atul Products Ltd was founded by Kasturbhai Lalbhai with interests mainly in

textiles and chemicals and make India self reliant in chemicals, generate employment on a large-scale and create

wealth for the society. The Company thus commenced its business with just a few dyestuffs, the know-how of

which was brought from foreign companies. Now the Company profile has changed and diversity. The company

has started presenting its businesses under two new Segments, namely Life Science Chemicals and Performance

& Other Chemicals.

Atul Ltd joined hands with American Cyanamid Corp (1952), Imperial Chemical Industries plc (1955) and Ciba-

Geigy Ltd (1960) to form respectively 3 joint venture companies, namely, Cyanamid India Ltd, Atic Industries

Ltd and Cibatul Ltd respectively.

Consequent to worldwide divestment of dyes and polymers business by ZENECA plc (formerly a part of ICI plc)

and Ciba Ltd respectively, Atic Industries Ltd and Cibatul Ltd were merged into Atul Ltd in 1995 and 1998

respectively.

Atul's registered office is in Ahmadabad whereas its corporate headquarters are located in Atul, Gujarat. The

Company also has offices in the USA, the UK, Germany, China and Vietnam that service its international

customers.

Products

Atul Ltd operates through six business divisions, namely, Agrochemicals, Aromatics, Bulk Chemicals &

Intermediates, Colors, Pharmaceuticals & Intermediates and Polymers. Each business, in step with the company

vision, develops and implements its growth plans.

� Agrochemicals

� Herbicides

� Phenoxy Group

� Sulfonyl Ureas

� Urea Herbicides

� Fungicides

� Triazoles

� Organo sulphur

� Insecticides

� Neonicotinoids

� Pyrethroids

� Carbamates

� Nereistoxins

� Aromatics

� Cresols and Cresol derivatives

� Oleums

� Sulphuric Acid

� Others

� Polymers

� Floras

� Pharmaceuticals & Intermediates

� Phosgene Derivative Intermediates

� Chloroformates

� Isocyanates

� NCA

� Carbonate & Dicarbonate

� Chloride

� Others

� Ureas

� N,N'-Carbonyl Diimidazole

� Tetra Butyl Ureas

� Bulk Actives

� Acyclovir USP

� Dapsone

� Roxithromycin EP

� Bethanechol chloride USP(*)

� Bulk Chemicals & Intermediates

� Caustic soda

� Chlorine

� Chlorosulphonic acid

� Sulphuric acid

� Oleums

� Sodium Suphide

� Potassium sulphate

� Sodium sulphite

� Gypsum

� p-Hydroxy benzoic acid

� Resorcinol

� Dyestuffs

� Vat dyes

� Solubilised vat dyes

� Acid dyes

� Fluorescent brightening agents

� High exhaust brand reactive dyes

� Cold brand reactive dyes

� Reactive dyes for printing

� Direct dyes

� Sulphur dyes

� Disperse dyes

� Azoic coupling components

� Azoic diazo components

Business Divisions

� Agrochemical

� Aromatics

� Bulk Chemicals & Intermediates

� Colors

� Pharmaceuticals & Intermediates

� Polymers

� Floras

Subsidiary Companies (As per Annual Report 2011-12)

Name of Subsidiary Companies Country of Incorporation Extent of Holding

Ameer Trading Corporation Ltd India 100%

Atul Bioscience Ltd India India 100%

Atul Brasil Qumicos Ltda Brasil 100%

Atul China Ltd {formerly known as Atul International Trading (Shanghai) Co Ltd}

China 100%

Atul Deutschland GmbH Germany 100%

Atul Europe Ltd UK 100%

Atul Rajasthan Date Palms Ltd * India 74%

Atul USA Inc ( formerly known as Atul Americas Inc) USA 100%

DPD Ltd * UK 88%

* Investment held through subsidiary companies

Financial Highlight

Balance Sheet as on 31st March 2012

FY12 FY13E FY14E

EQUITY AND LIABILITIES:

Shareholders’ Funds:

Share Capital 296.80 296.60 296.60

Reserves and Surplus 6122.50 7584.15 9202.65

Net worth (a) 6419.30 7880.75 9499.25

Non-Current Liabilities:

long-term borrowings 1449.00 1840.23 2355.49

Deferred Tax Liabilities [Net] 223.10 227.56 232.11

Long Term Provisions 33.30 41.63 51.62

Long term liabilities (b) 1705.40 2109.42 2639.22

Current Liabilities:

Short-term borrowings 1996.30 2395.56 2874.67

Trade Payables 2756.40 3293.90 3853.86

Other Current Liabilities 1049.70 1060.20 1070.80

Short Term Provisions 533.50 546.84 561.60

Current Liabilities © 6335.90 7296.49 8360.93

Total (a+b+c) 14460.60 17286.66 20499.40

ASSETS:

Non-Current Assets:

Fixed Assets:

Tangible Assets 4175.50 4551.30 5006.42

Intangible Assets 2.20 3.74 5.95

Capital work-in-progress 559.50 951.15 1284.05

(d) 4737.20 5506.19 6296.42

other non-current assets 275.60 311.43 347.24

Non Current Investments 1250.00 1825.40 2537.31

Long Term Loans and Advances 281.10 303.59 310.66

(e) 1806.70 2440.42 3195.21

Current Assets:

Inventories 2929.90 3369.39 3841.10

Trade Receivables 3682.20 4602.75 5707.41

Cash and Bank Balances 174.60 202.54 232.92

Short Term Loans and Advances 954.90 907.16 861.80

Other Current Assets 175.10 258.23 364.55

(f) 7916.70 9340.06 11007.77

Total (d+e+f) 14460.60 17286.66 20499.40

Annual Profit & Loss Statement for the period of 2011 to 2014E

Value(Rs.in.mn) FY11 FY12 FY13E FY14E

Description 12m 12m 12m 12m

Net Sales 15477.10 17955.70 19606.05 20782.41

Other Income 57.90 116.40 186.98 233.73

Total Income 15535.00 18072.10 19793.03 21016.14

Expenditure -13502.20 -15979.80 -16913.27 -17831.31

Operating Profit 2032.80 2092.30 2879.76 3184.83

Interest -254.60 -431.00 -343.12 -360.28

Gross profit 1778.20 1661.30 2536.64 2824.55

Depreciation -385.40 -436.50 -495.43 -544.97

Profit Before Tax 1392.80 1224.80 2041.21 2279.58

Tax -492.80 -343.50 -579.56 -661.08

Net Profit 900.00 881.10 1461.65 1618.50

Equity capital 296.60 296.60 296.60 296.60

Reserves 5374.10 6122.50 7584.15 9202.65

Face value 10.00 10.00 10.00 10.00

EPS 30.34 29.71 49.28 54.57

Quarterly Profit & Loss Statement for the period of 30th June-2012 to 31st Mar, 2013E

Value(Rs.in.mn) 30-Jun-12 30-Sep-12 31-Dec-12 31-Mar-13E

Description 3m 3m 3m 3m

Net sales 5019.80 5434.60 4508.20 4643.45

Other income 31.40 56.80 48.90 49.88

Total Income 5051.20 5491.40 4557.10 4693.32

Expenditure -4287.60 -4611.50 -3955.80 -4058.37

Operating profit 763.60 879.90 601.30 634.95

Interest -111.70 -59.60 -78.10 -93.72

Gross profit 651.90 820.30 523.20 541.23

Depreciation -110.80 -121.00 -128.60 -135.03

Profit Before Tax 541.10 615.90 394.60 406.20

Tax -166.30 -182.70 -115.60 -114.96

Net Profit 374.80 487.00 279.00 291.25

Equity capital 296.60 296.60 296.60 296.60

Face value 10.00 10.00 10.00 10.00

EPS 12.64 16.42 9.41 9.82

Ratio Analysis

Particulars FY11 FY12 FY13E FY14E

EPS (Rs.) 30.34 29.71 49.28 54.57

EBITDA Margin (%) 13.13% 11.65% 14.69% 15.32%

PBT Margin (%) 9.00% 6.82% 10.41% 10.97%

PAT Margin (%) 5.82% 4.91% 7.46% 7.79%

P/E Ratio (x) 11.91 12.17 7.34 6.62

ROE (%) 15.87% 13.73% 18.55% 17.04%

ROCE (%) 27.01% 25.64% 29.35% 28.05%

Debt Equity Ratio 0.58 0.54 0.46 0.40

EV/EBITDA (x) 6.81 6.69 4.91 4.49

Book Value (Rs.) 191.19 216.42 265.70 320.27

P/BV 1.89 1.67 1.36 1.13

Charts

Outlook and Conclusion

� At the current market price of Rs.361.50, the stock P/E ratio is at 7.34 x FY13E and 6.62 x FY14E

respectively.

� Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.49.28 and

Rs.54.57 respectively.

� Net Sales and PAT of the company are expected to grow at a CAGR of 10% and 22% over 2011 to 2014E

respectively.

� On the basis of EV/EBITDA, the stock trades at 4.91 x for FY13E and 4.49 x for FY14E.

� Price to Book Value of the stock is expected to be at 1.36 x and 1.13 x respectively for FY13E and FY14E.

The Third Quarter witnesses a healthy increase in overall sales as well as profitability on account of Innovative

products,. We expect that the company surplus scenario is likely to continue for the next three years with new

New Business like Commercialization of 6 formulations in Crop Protection, Introduction of 3 products in

Pharma & Inters, Launch of 23 products and (or) formulations in Polymers, Purchase and integration of Polygrip

brand and sales, Exclusive distributorship of WD-40 for India, So, the company will keep its growth story in the

coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs.409.00 for Medium

to Long term investment.

Industry Overview

Agrochemical a contraction of agricultural chemical is a generic term for the various Chmeical products used in

agriculture. In Most cases, Agrichemical refers to the broad range of pesticides including insecticides, herbicides

and fungicides. It may also include synthetic fertilizers, hormones and other chemical growth agents and

concentrated stores of raw animal Manure. Agriculture is the key to economic growth and prosperity. Moreover,

every year, significant amount of crop yield is lost due to non usage of crop protection products. This necessitates

the use of pesticides. So in order to and improve agricultural productivity in the country and provide livelihood

for majority of farmers living in rural areas, many countries use of agrichemicals is highly regulated.

Government-issued permits for purchase and use of approved agrichemicals, with this the Companies continues

to bring in a number of novel and effective solutions to the farmers in the field of crop protection in order to keep

pace with the ever-changing and dynamic scenario. The 40 leading global companies account for 90% of the

global agrochemical industry.

The global agrochemicals industry is growing at about 12% CAGR and is likely to cross Rs 13 lakh crore marks

from the current level of about Rs 8.5 lakh crore, according to the study. The most significant crop protection

market growth occurred in developing markets, especially Latin America. The world market for crop protection

chemicals is estimated to be USD44 bn which declined by 6% during the year and that for seeds are estimated to

be USD30 bn which grew at an average of about 5%.

Indian Market for Agrochemicals industry has developed substantially and has contributed significantly towards

India’s agriculture and ensuring food security for more than 1 billion Indians. The agrochemical sector is

growing at a CAGR of about 15 %, and pegged the current size of the sector at Rs 16,000 crore. India is the fourth

largest producer of agrochemicals globally, after United States, Japan and China. India is a predominant exporter

of pesticides to USA, Europe and African countries. The growth in organised retail segment and thriving

domestic horticulture and floriculture industries are fuelling the growth in agrochemical market and the sector is

expected to cross Rs 25000 cr by 2015, according to the Associated Chamber of Commerce and Industry in India.

The Indian seed industry is the eighth largest in the world is growing at the rate of 12% as compared to 6-7%

internationally. The current Indian market size of commercially marketed seeds is estimated about 7,000 Crores

and commercial Seeds account for only 25%. The future of the seed industry in India is expected to be very good,

with the demand for branded and quality seeds increasing and providing a huge opportunity in this space. Export

opportunities for Indian companies are immense with key markets being USA, France, Netherlands, South Africa,

and Bangladesh. There are 20 multinational companies and 40 Indian companies engaged in this business though

generally it is the multinational companies which dominate the marketplace across the world. According to

Agrow, Bayer Crop Science led the agrichemical Industry in Sales in 2007. Syngenta was Second, followed by

BAST, Dow Agrosciences, Monsanto, DuPont & Makhteshim Agan.

Demand and supply

The Indian pesticides industry has been growing at 8-9% p.a an the Industry size is estimated to be $3.8 billion in

FY11 with domestic demand growing at 8-9% p.a. and export demand at 15-16% p.a. The consumption of

pesticides in India is low in comparison to other countries. Insecticides account for 76% of the total domestic

market. The Indian pesticides industry is characterized by low capacity utilization. The present total installed

capacity is 146,000 tonnes and has a low capacity utilization of <60%. The industry suffers from high inventory

owing to seasonal and irregular demand on account of monsoons. On the other hand, herbicides and fungicides

have a significantly higher share in the global market. Crops like cotton wheat and rice together account for 70%

of total agrochemical consumption. To fuelling the growth and increased usage of agrochemicals in India.

Growing awareness about the positive impact and benefits of agrochemicals on the agri-produce and the need for

crop protecting.

Exports

India is the 4th largest producer of pesticides after USA, Japan and China. India is the second largest producer of

pesticides in Asia. Industry size is estimated to be $3.8 billion in FY11. Exports account for ~50% of the

pesticides market. Indian exports of pesticides grew at ~15% p.a. during the 11th plan period, exports accounting

for 50% of the market and the segment is expected to grow at 12-13% p.a. with domestic demand growing at 8-

9% p.a. and export demand at 15-16% p.a. Indian companies in the sector should also increase their investment

in research from current level of about two per cent to at least eight to 10 per cent to spur its exports and be

more competitive in the global scenario. India is a net exporter of pesticides and will continue to grow at the

same rate during the 12th five year plan period. The key export destination markets are USA, France, Netherlands,

Belgium, Spain, South Africa, Bangladesh, Malaysia and Singapore. Some of the agro-chemicals exported over the

years include Isoproturon, Endosulphan, Aluminium Phosphide, Mancozeb, Cypermethrin, Thiomethaxam,

Imidacloprid etc. Based on the export potential and potential for increased penetration in the domestic market,

the Indian agrochemical industry target a size of US $7.7 billion by FY17.

Conclusion

Agriculture is gaining in significance the world over, with the rising needs from cultivation coupled with limited

availability of land under cropping against the backdrop of the growing population. In order to meet the needs of

a growing population, agricultural production and protection technology have to play a crucial role. Up to 40% of

the world's potential crop production is lost annually because of the effects of weeds, pests and disease. These

crop losses could double if existing pesticide use is abandoned. The future of the seed industry in India is

expected to be very good, with the demand for branded and quality seeds increasing and providing a huge

opportunity in this space. This necessitates use of high yielding variety of seeds, balanced use of fertilizers,

judicious use of quality pesticides along with education of farmers and use of modern farming techniques. With

the advent of the integrated pest management (IPM) technique, the use of bio pesticides and genetically modified

(GM) seeds has increased globally. Growth in organized retail segment and thriving domestic horticulture and

floriculture industries are fuelling the growth and increased usage of agrochemicals in India.

Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale

of any financial instrument or as an official confirmation of any transaction. The information contained herein is

from publicly available data or other sources believed to be reliable but do not represent that it is accurate or

complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s affiliates shall

not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the

information contained in this report. This document is provide for assistance only and is not intended to be and must

not alone be taken as the basis for an investment decision.

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