Dynamic Levels recommend a chemical scrip for target of Rs 2500

Dynamic Equities | June 20, 2017, midnight

Atul is a chemical conglomerate company serving about 5700 customers belonging to 31 industries across the world. With depth in science and technology, Atul manages almost all unit processes and unit operations to manufacture about 1380 products and formulations and has state-of-the-art facilities and processes to ensure safety and treatment of gaseous, liquid and solid pollutants.

The company has established subsidiary companies in the USA (1994), the UK (1996), Germany (1998), China (2004), Brazil (2012), and the UAE (2015) to serve its customers and thus enhance breadth and depth of its business. It has


- Production facilities in India (Ankleshwar and Valsad, Gujarat and Tarapur, Maharashtra)


- Subsidiary company with production facility in the UK (Bristol)


- Joint venture companies with production facilities in India (Valsad, Gujarat and Jodhpur, Rajasthan)


- Distribution network for brand sales across India


- Wholly-owned subsidiary companies in Brazil (Sao Paulo), China (Shanghai), the UAE (Dubai), the UK (Wilmslow) and the USA (Charlotte, North Carolina)


- Manufactures about 920 products and 460 formulations divided into Life Science Chemicals and Performance and Other Chemicals Segments » Serves about 6,000 customers in 68 countries

- Owns 69 brands

Businesses of Atul


Atul Aromatics

With a portfolio of 29 world-class products, Atul Aromatics is serving 289 customers in 27 countries. The R&D facility of Atul is located in Ankleshwar. The main focus of this department is to improve the existing processes and introduce new products.

Atul Aromatics has a strong team of 244 people and is well equipped to serve its customers around the world.

Bulk Chemicals and Intermediates

Atul Bulk Chemicals and Intermediates was established in 1960 to meet the captive requirement of the Company of Sodium hydroxide, Chlorine, Sulphuric acid, Oleum, Sulphur trioxide, etc. It has a distinction being the only manufacturer of Resorcinol in India. It also manufactures value added products like Resorcinol formaldehyde resins, 1-3 Cyclohexanedione and Anisole.

With a portfolio of 26 world-class products, Atul Bulk Chemicals and Intermediates is serving over 200 customers in more than 20 countries.

Colors Business


Colors business is the oldest business of Atul. The business was established in 1952 to meet the requirements of textile dyestuffs then entirely imported into India. It offers a complete range of textile and paper dyestuffs; it also manufactures high performance pigments. Rudolf Atul Chemicals Ltd, a 50-50 JV between Rudolf GmbH and Atul offer a complete range of textile chemicals to its customers in India. It has a distinction of manufacturing several dyestuffs and pigments for the first time in India. With a portfolio of 526 world-class products, Atul Colors is serving 700 customers in 40 countries.

Chemical Industry Outlook

The chemicals industry faced significant headwinds in 2015: a strong dollar, slowing emerging economies, malaise in Brazil, stagnation in Europe and Japan, and a cyclical downturn in the agricultural sector. In addition to having to operate in an unfavorable economic environment, many chemicals companies also found themselves the target of activist investor campaigns last year.

The World Chemical industry (size US$4.4 tn) grew by 2% in 2015: Indian Chemical industry (size US$103 bn) grew by 3%, but is still ranked 7 after China (size US$1.5 tn), the USA (size US$630 bn), Germany (size US$198 bn), Japan (size US$190 bn), South Korea (size US$165 bn) and France (size US$107 bn). According to a leading consulting firm, India has the potential to grow its Speciality Chemicals industry at 9%. 

Oversupply, continued volatility in crude oil prices and changing trade flows are just some of the common themes experienced by global chemical markets in 2015.


Government Policies and FDI Investments


Indian Government recognizes Chemical industry as a key growth element of Indian economy. In Chemical Sector, 100% FDI is permissible.

The Government had Target to increase the share of manufacturing in GDP to at least 25% by 2025 (from current 16%). Investments in manufacturing in the chemical sector are absolutely essential to ensure growth of the Indian chemical industry.

The Government had proposed to set up of a technology up-gradation fund of USD 80 Mn in the 12th plan for chemicals.  

Proposal to establish an autonomous USD 100 Mn chemical innovation fund by securing 10% of the total inclusive national innovation fund set up by the National Innovation Council to encourage commercialization efforts for innovations generating inclusive growth.

Investment Rationale


Atul is a diversified Indian company meeting the needs of varied industries such as Adhesives, Agriculture, Animal Feed, Automobile, Composites, Construction, Cosmetic, Defence, Dyestuff, Electrical and Electronics, Flavour, Food, Footwear, Fragrance, Glass, Home Care, Horticulture, Hospitality, Paint and Coatings, Paper, Personal Care, Pharmaceutical, Plastic, Polymer, Rubber, Soap and Detergent, Sports and Leisure, Textile, Tyre and Wind Energy across the world. It manages complex chemical processes in a responsible way.


Crop Protection: Product groups: Herbicides, Insecticides, Fungicides. The size of world Crop Protection Chemicals industry is estimated at US$ 52 bn and is growing at about 4%. There are about 60 major companies which dominate the world marketplace. The size of world Agriculture industry is estimated at US$ 3.35 tn and is growing at about 3%.


Pharmacuetical: Product groups: API intermediates, Active Pharmaceutical Ingredients. The size of world Pharmaceutical industry is estimated at US$ 1.75 tn, of which the conventional pharmaceutical segment is US$ 1.2 tn and is growing at about 8%. Of this, the size of world API industry is estimated at US$ 150 bn and is growing at about 7%. There are about 20 major companies which dominate the world marketplace.


Aromatics: Product groups: Intermediates, Perfumery. World market of p-Cresol (a key product) is estimated at 63,000 mt and is growing at about 2%. Though earlier the product used to be manufactured in the UK and the USA, China and India are now the major suppliers of the product. The size of world Fragrance industry is estimated at US$ 11 bn and is growing at about 4% and the size of world Personal Care industry is estimated at US$ 400 bn of which personal care ingredient segment is US$ 20 bn and is growing at about 4%.


Bulk Chemicals and Intermediates: Product groups: Bulk chemicals, Adhesion promoters. The size of world Chlor-alkali industry is estimated at US$ 70 bn and is growing at about 6%. World market for Resorcinol (a key product) is estimated at US$ 320 mn and is growing at about 3%. The size of world Tyre industry is estimated at US$ 220 bn and is growing at about 6.5%.


Colors: Product groups: Textile dyes, Pigments, Paper dyes, Inks, Textile chemicals. The size of world Dyestuff industry is estimated at US$ 6 bn and is growing at about 3.5%. China is the largest manufacturer of dyes followed by India. World market for high performance pigments is estimated at US$ 4.3 bn and is growing at about 2.7%.


Polymers: Product groups: Epoxy Resins and Hardeners, Reactive Diluents, Sulphones, Rubber and Polyurethane based Adhesives. World market for Epoxy Resins and Hardeners is estimated at US$ 6.3 bn and is growing at about 2% and Indian market is estimated at US$ 250 mn and is growing at about 6%. There are about 7 major companies which dominate the world marketplace. World market for Sulphones (a hardener) is estimated at US$ 320 mn and is growing at about 4%.


The Company will participate in this growth by i) building a strong sales and marketing organisation and broadening and deepening its presence in other countries, particularly in Africa and South America, ii) promoting its brand sales, iii) improving its manufacturing and working capital efficiencies, iv) generating and adding capacities and v) introducing new products and formulations.

We recommend Atul Limited as a BUY @2075 with a TARGET of Rs 2500.

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