Buy Sumitomo Chemicals; target of Rs 570: ICICI Direct

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ICICI Direct's research report on Sumitomo Chemicals

Incorporated in 2000, Sumitomo Chemical India (SCI) is present in the three business verticals of agro solutions (ASD), environmental health (EHD) and animal nutrition business (AND). SCI provides solutions for insecticide, herbicide, fungicide, plant growth regulator (PGR) under agro segment. Under animal nutrition, it manufactures methionine for feed additive use • In terms of revenue contribution, insecticide constitutes ~51% while ~19% is from herbicide, 9% from fungicide and 20% from other segments like PGR, AND & EHD.

Outlook

We retain BUY rating on the back of 1) Better growth outlook from outsourcing opportunity of SCC Japan, 2) management capability to tackle glyphosate situation and 3) increase in farmer’s income and the company’s ability to pass on the elevated cost. We value Sumitomo Chemicals at 45x FY24E EPS of Rs 38.7 to arrive at a target price of Rs 570/share (earlier Rs 565/share).

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Sumitomo Chemicals - 02-11-2022 - icici