Prabhudas Lilladher has given Buy recommendation for Sharda Cropchem with a target price of Rs. 740 in its research report issued on Jul 25, 2022

Prabhudas Lilladher’s research report on Sharda Cropchem

Sharda Cropchem (SHCR) reported strong revenue growth of 32% YoY in 1QFY23. However, adverse currency impact coupled with increased freight cost has in turn resulted into an overall miss into estimates. Key highlights are: (1) Volume/Price/FX growth of -2.5%/+38%/-3.3% YoY respectively; (2) gross margins contracted by 390bps YoY to 25.4% largely led by adverse forex impact (Euro/USD depreciated by 7% during 1Q); (3) While higher freight cost coupled with higher legal and professional charges and one-off impact of Rs121.5mn pertaining to loss on fair value of investments has resulted into an EBITDA margin contraction of 480bps YoY to 11.7% (incl. IU&AD write-off of Rs28mn) and (4) Working capital days up by 3 days YoY to 91.


Citing positive growth momentum across regions coupled with price hikes in the recent past, management remains confident of achieving 15-20% YoY revenue growth for FY23E, however adverse currency movement is likely to exert pressure on the margins in the near term. That said, factoring in adverse pressure on margins we trim our EPS estimates for FY23/24E by 8%/2% respectively. Maintain ‘BUY’ with a revised TP of Rs740 (earlier INR750) based on 15xFY24E EPS.

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