Both #NIFTY50 & #NIFTYBANK are well poised after recording highest ever monthly closing. While BNF has already broken out, NF is yet to break out on MTF. 17900-18100 is supply zone in higher TF above which we are welcome a new ATH. 17000-17200 is hell of a base now and would be a tough but to crack. Buy in every dip.
Sectors in Focus: FMCG, Energy & Realty.
Stocks to watch: #ASAHIINDIA, #SUMICHEM, #HINDUNILVR
Wishing you a profitable day ahead!
Sharekhan target on SUMICHEM
Price @ Call: 426
UPL First buyback after 8 years and future scenario
On Monday, UPL was one of the few companies in the Nifty 50 index to finish higher. The board of the agro supplies supplier authorised a repurchase of equity shares last week, amid allegations that the company's promoters are in discussions to sell it. The repurchase was authorised by the board on March 2, and the share sale reports were released the following day.
This will be UPL's first repurchase in eight years, according to Moody's Investors Service. The business last did a stock repurchase in 2014. Listed firms are increasingly using buybacks to return cash to shareholders. The IT services business is a good example.
The promoter group for UPL is not anticipated to participate in the repurchase. As a consequence, according to Moody's estimates, a successful repurchase may increase promoters' share in UPL by 50 basis points to 28.7%.
A repurchase, on the other hand, might offer support for the stock, particularly in light of the current equity market fall, assisting its valuation and the promoters' share sale discussions. It's worth noting that the repurchase price is 20% more than the stock's current market price. The Rs 1,100 crore repurchase also sends a crucial message about UPL's financial situation. It means the business is on track with its profits, cash flow, and debt reduction goals.
"In this context, a repurchase is expected as a result of the company's robust cash inflows in Q4" (FY22). In general, 80% of yearly OCF for UPL is produced in the second half of the year," Investec Securities analysts said in a report. The OCF stands for operational cash flows.
Readers may remember that UPL was plagued with debt as a result of its $4.2 billion purchase of Arysta LifeScience Corp. UPL has concentrated on deleveraging and debt repayment in the aftermath of the Arysta acquisition. UPL's readiness to perform its first buyback after the Arysta purchase suggests the firm is well on its way to debt reduction, with enough cash put aside for a buyback.
In January, UPL prepaid a number of debts. It is expected to repay additional debt in the current quarter, bringing the net debt to EBITDA excluding perpetual bonds down to less than 2 times by the end of the current fiscal year, perhaps as low as 1.9 times. Net debt to EBITDA was 2.2 times at the end of FY21, down from 3 times in FY20. Earnings before interest, taxes, depreciation, and amortisation are referred to as EBITDA.
"The buyback will be paid for with UPL's consolidated cash, which is expected to total $500 million by December 2021. "However, we estimate UPL's strong free cash flow production to allow a $500 million decrease in gross debt each year," Moody's says.
Despite the epidemic and other hurdles, UPL's steady development has allowed it to repay its debts. Revenues increased in the previous two fiscal years, and the company's performance in the first nine months of FY22 surpassed growth expectations.
For UPL, the fourth quarter of the fiscal year is often robust. The corporation liquidates inventory created in the previous quarter (9M FY22) and utilises the profits to pay off working capital debts throughout the quarter. These ideas seem to be on the right track. The company's sales growth estimate for FY22 is expected to be exceeded by the majority of analysts.
"A positive agricultural forecast in Latin America and North America (weather + robust farm commodity prices) bodes well for UPL and should assist in debt reduction," says Investec.
Of course, not everything is as it seems. Commodity prices have risen again, and supply chain limitations have resurfaced as a result of the European war. UPL may face difficulties as a result of its global presence.
Raw material price increases may drive up manufacturing costs, while supply chain bottlenecks might cause demand fulfillment challenges. Furthermore, it is unclear why the promoters desire to leave the firm after growing it into a worldwide corporation. The stock will also benefit from clarity on the stake sale and earnings performance.
#UPL #RALLIS #DHANUKA #SUMICHEM
Nirmal Bang target on SUMICHEM
Broker: Nirmal Bang
Price @ Call: 395
Buy #SUMICHEM @400 tgt1- 450 tgt2- 520
Nirmal Bang target on SUMICHEM
Broker: Nirmal Bang
Price @ Call: 378
#SUMICHEM #GAEL are two fundamentally strong companies under 400. Allocate your short term trading profits to long term investments.
Big positive for Sumitomo chemicals.
Glufosinate, glyphosate prices rise on huge shortages. Sumitomo makes these products
10-12-20 Exit Alert - Sumitomo LTP 300.70/- Entered At 317/- Exit trade, Average loss of 2%
**Sumitmmo Chemical - Q4 FY20 (Audited –Cons)**
Total revenue from operations 445.7 Cr
421.7 Cr (5.71%) YoY | 523 Cr (-14.92%) QoQ
Year ending revenue: 2,424 Cr Vs. 2,228 Cr (8.79%)
Net Profit of 22.9 Cr
(1.1) Cr (2181.18%) YoY 0.60 Cr (3716.13%) QoQ
Year ending Net profit: 204.6 Cr Vs. 165.7 Cr (23.61%)
EPS (in Rs.) 0.46
(0.02) YoY | 0.01 QoQ
Year ending EPS: 4.10 Vs. 3.32
View: Result is overall good and fair. YoY revenue increased and profit increased multifold as YoY company posted losses and QoQ company posted very nominal profit.
**Business Updates & Highlights**:
Q4FY20 EBITDA is around INR 46.9 Cr Vs. 29.7 Cr in Q4FY19 therefore up by 57.9% in YoY and FY20 EBITDA is around INR 338.9 Cr Vs. 294.9 Cr in FY19 therefor up by at 14.9%.
Q4FY20 EBITDA margin is around 10.5% Vs. 7.01% in Q4FY19. FY20 EBITDA margin is around 13.9% Vs. 13.3% in FY19.
Q4FY20 Agro chemicals business which contributed around 90% in topline grew by 5.5% in YoY and others grew by 5.6% in YoY. Bottomline in agro chemicals business grew by 38% (*Very Positive*) in YoY and others grew by (37.8%).
**Recently the Government of India released a draft notification for public comments regarding proposed ban of some agro-chemical products. The list of products proposed to be banned includes some of the Company's products (two technical grade products and some other formulated products). The matter is being discussed at various forums such as various industry associations and farmers associations. Such forums and the Company are expected to take necessary actions to defend these products such as filing suitable explanations and technical justifications with authorities for favorable technical assessment and if necessary, other legal recourse. Based on the management understanding and expectations, the matter is not likely to have material adverse impact on the Company's operations as restrictions, if any, are not expected to be applicable to exports**
**Board of Directors has declared dividend for the F.Y. 2019-20 of Re 0.55 per equity share which is subject to the approval of the members in the Annual General Meeting**
ROE and ROCE is around 17% and 26% respectively and book value per share is around INR 21 and share is currently trading at 13.5x of its book value. Company is currently trading at annualized PE of around 69 which is high as per industry benchmark. Promoter holding is around 80.3% in the company which is very strong and stable. Insurance cos and Mutual fund hold around 3.7% and 0.9% in the company. Cash and cash equivalent from operating activities as of March 2020 is around INR 221.3 Cr Vs. 77.7 Cr as of March 2019 which is also very positive. Company is virtually debt free
Position: Share strong support price is INR 248/218. Long term investor should continue with the company for the target price of INR 400. Short term share can go till 295/310.
**Share View**: Share price high 281 (52 week) and now 274. Sumitomo Chemical India Ltd. (SCIL) manufactures, imports and markets products for Crop Protection, Grain Fumigation, Rodent Control, Bio Pesticides, Environmental Health, Professional Pest control and Feed Additives for use in India. SCIL has also marked its presence in Africa and several other geographies of the world.
Opportunities: Company product range comprises of conventional chemistry sourced from parent company, Sumitomo Chemical Company and biological products sourced from USA based subsidiary, Valent Biosciences LLC, a leader in producing a range of naturally occurring, environmentally compatible pesticides and plant growth regulators, for over 40 years. Strong management and highly follow corporate governance mechanism. Highly diversified product ranges which domestic and international market formulation. During this pandemic time also company business marginally impacted only due to logistics and supply chain related things.
Risk: Expensive valuation at present as compare to peers like Godrej Agro, Arti Ind, Vinati organics etc. although no direct competition or different product categories.
Disclaimer: Views are shared based on market research and study and personal in nature. Others can take the different view and opinions. Please do the thoroughly study before enter or exit the shares.