Sharekhan has given Buy recommendation for Sudarshan Chemical Industries with a target price of Rs. 780 in its research report issued on May 31, 2021
Sharekhan’s research report on Sudarshan Chemical Industries
Sudarshan Chemical Industries Limited (SCIL) reported solid Q4FY2021 results with stronger-than-expected revenue growth of 19.8% y-o-y and resilient margin at 15.1% (up 169 bps y-o-y). Sharp 19%/44% beat in operating profit/PAT at Rs. 87 crore/Rs. 53 crore, up 44%/58% y-o-y. Strong revenue growth was driven by 32.4% y-o-y revenue growth for the pigment segment to Rs. 533 crore, supported by volume growth of 27%/42% y-o-y for specialty/non-specialty products. Capex plan of Rs. 600 crore is nearing completion in FY2022 with incremental revenue potential of Rs. 1,000 crore-1,200 crore over the next 3-4 years. Rise in share of specialty chemical in revenue (versus 69% in FY2022) to improve margins. We expect SCIL to sustain high double-digit earnings growth over FY2022E-FY2023E with RoE of ~24%, led by its dominant position in the pigments market and capacity augmentation plan.
Hence, we retain Buy on SCIL with a revised PT of Rs. 780.