Prabhudas Lilladher has given Buy recommendation for Sharda Cropchem with a target price of Rs. 750 in its research report issued on May 13, 2022

Prabhudas Lilladher’s research report on Sharda Cropchem

Sharda Cropchem (SHCR) reported strong operational performance in 4QFY22, primarily led by healthy revenue growth across regions. Key highlights are: (1) Volume/Price/FX growth of -11%/42%/0.3% YoY (FY22 24%/25%/1% YoY) respectively; (2) Gross margin declined 210bps YoY to 29.2% led by higher freight cost; (3) Better operating leverage coupled with superior geographical and product mix has resulted into EBITDA margins expansion of 100bps YoY to 20.9% (incl. IU&AD write-offs of Rs178mn in 4QFY22; FY22 Rs292mn); and (4) Working capital days up by 3 days YoY to 89. Citing positive growth momentum across regions, management remains confident of achieving 15-20% YoY revenue growth for FY23E, while maintaining margins at current levels aided by better geographical mix and higher contribution from recently received new registrations. That said, factoring in better FY22 performance and positive demand momentum we increase our EPS estimates for FY23/24E by 8%/3% respectively.

Outlook

Maintain ‘BUY’ with a revised TP of Rs750 (earlier INR630 based on 13x FY24E EPS) based on 15xFY24E EPS (assigning 5- year average multiple). We believe that risk reward remains favorable for the stock.

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