Sharekhan has given Buy recommendation for Sumitomo Chemical India with a target price of Rs. 448 in its research report issued on Jul 01, 2021
Sharekhan’s research report on Sumitomo Chemical India
Robust export growth prospects led by 1) CRAMS opportunity from parent SCC (to supply five products worth Rs. 200-250 crore), 2) higher sales to LatAm (SCC acquired Nufram’s distribution business in LatAm) and 3) doubled capacity of tebuconazole. We expect a 13% revenue CAGR over FY21-24E. Focus on high margin PGRs/herbicides, rising share of specialty chemicals, further synergies from Excel Crop Care to drive 346 bps expansion in margins and take EBITDA margins to ~22% in FY24. Promising H1FY22 outlook in volume terms, price hikes and margin given good agronomics in India (above normal monsoon and higher crop prices in India) and adequate inventories to supply products in the upcoming Kharif season.
We maintain our Buy rating on SCIL with a revised PT of Rs. 448 as massive contract manufacturing opportunity from parent provides superior growth prospects and expect SCIL to enjoy premium valuation over domestic peers.