ICICI Direct has given Buy recommendation for Sumitomo Chemicals with a target price of Rs. 360 in its research report issued on Feb 08, 2021
ICICI Direct’s research report on Sumitomo Chemicals
Sumitomo Chemical reported topline growth of 7.2% YoY to Rs 561 crore largely led by herbicide (+21% YoY), PGR (+57% YoY), animal nutrition & environmental health segments (+41% YoY). On the other hand, revenue from insecticide (-4.3% YoY, ~39% of revenue) and metal phosphides (-4% YoY, ~10% of revenue) stayed subdued, denting the topline performance to that extent. OPM for the quarter expanded 514 bps YoY to 13.9% owing to improvement in gross margins due to a change in the product mix, leading to EBITDA growth of 70% YoY to Rs 78 crore. OPM from agrochemical business expanded 565 bps YoY to 14.5% while the same from other segments was up 277 bps YoY to 7.9%. PAT was at Rs 54.1 crore (+2274% YoY) against our estimate of Rs 58.7 crore. The bottomline growth was led by a better operational performance and lower tax outgo (24% vs. 94%).
We value the company at 40x PER FY23E and arrive at a target price of Rs 360 (vs. Rs 335 earlier). We maintain our BUY recommendation on the stock.
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