Add Sudarshan Chemical Industries, target price Rs 762: ICICI Securities

ICICI Securities has add call on Sudarshan Chemical Industries with a target price of Rs 762. The current market price of Sudarshan Chemical Industries Ltd. is Rs 683.45. Time period given by analyst is one year when Sudarshan Chemical Industries Ltd. price can reach defined target.

Sudarshan Chemical Industries Ltd., incorporated in the year 1951, is a Mid Cap company (having a market cap of Rs 4727.18 Crore) operating in Chemicals sector.

Financials
For the quarter ended 30-06-2021, the company reported a Consolidated Total Income of Rs 474.59 Crore, down -18.02 % from last quarter Total Income of Rs 578.88 Crore and up 34.60 % from last year same quarter Total Income of Rs 352.60 Crore. Company reported net profit after tax of Rs 26.16 Crore in latest quarter.

Investment Rationale
Sudarshan Chemical Industries’ (SCIL) Q1FY22 EBITDA was lower than expected at Rs620mn, down 29% QoQ / up 8% YoY, and was hit due to lockdown in India (revenues down 26% QoQ) and rise in operating costs. Gross profit margin expansion of 430bps QoQ was result of low-cost inventory, and SCIL sees near- term margins to remain volatile due to higher raw material prices. Further, higher coal and freight costs have put margins under pressure. Q2FY22 revenues will be adversely impacted due to Mahad plant closure for two weeks. Company sees new plant commissioning and product launches to help grow revenues from H2FY22 onward. It marginally cuts EPS estimates by ~1% each year for FY22E and FY23E, but increase the target price to Rs762 (earlier: Rs708), implying 26x FY23E P/E (earlier: 24x).

Promoter/FII Holdings
Promoters held 39.6 per cent stake in the company as of June 30, 2021, while FIIs held 9.2 per cent, DIIs 8.9 per cent and public and others 41.3 per cent.