Buy Atul; target of Rs 7100: Motilal Oswal

What happened

Motilal Oswal reported that Atul's second-quarter FY27 EBITDA fell 8% year over year to INR2.5b, as Life Science Chemicals EBIT dropped 35%, partly offset by 23% EBIT growth in Performance & Other Chemicals. The broker cut FY27 and FY28 earnings estimates by 6% each and reiterated BUY with a Rs 7,100 target.

Confirmed

Global impact / market context

Lower earnings estimates mean Atul is expected to generate less profit, so the same share price buys a smaller slice of future earnings. The broker still rates the stock BUY, implying it believes the Rs 7,100 target leaves room for gains despite the weaker results.

Analyst inference

The profit decline comes from Life Science Chemicals, which means the earnings mix now leans more on Performance & Other Chemicals, the segment that grew 23%. Investors are therefore relying more heavily on that business holding up to justify the valuation behind the target.

Analyst inference

What to watch

1. Atul's Life Science Chemicals EBIT fell 35% year over year, while Performance & Other Chemicals EBIT rose 23%; whether that split reverses is the key operational signal. Confirmed
2. Motilal Oswal cut FY27 and FY28 earnings estimates by 6% each; further cuts would lower the earnings that support the Rs 7,100 target, which uses 23x FY28 estimated EPS of INR309.9. Analyst inference
3. The broker values Atul at 23x FY28 estimated earnings per share, so watch whether the company meets the FY28 EPS forecast of INR309.9 that supports the Rs 7,100 target. Proposed

Evidence

• Original source link unavailable