Buy Sudarshan Chemical Industries, target price Rs 683: HDFC Securities

HDFC Securities has buy call on Sudarshan Chemical Industries with a target price of Rs 683. The current market price of Sudarshan Chemical Industries is Rs 571.25. 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 4010.68 Crore) operating in Chemicals sector.

Sudarshan Chemical Industries Ltd. key Products/Revenue Segments include Inorganic Pigments, Export Incentives and Other Operating Revenue for the year ending 31-Mar-2021.


Financials
For the quarter ended 31-12-2021, the company reported a Consolidated Total Income of Rs 603.32 Crore, up 20.90 % from last quarter Total Income of Rs 499.03 Crore and up 18.55 % from last year same quarter Total Income of Rs 508.93 Crore. Company reported net profit after tax of Rs 36.38 Crore in latest quarter.


Investment Rationale
Sudarshan Chemical Industries’ (SCIL) Q3FY22 EBITDA dipped 7.2% YoY, which was disappointing and due to higher input costs and operating expenses, particularly power and freight. Company has been taking price hikes to pass on inflation, benefit of which should come in the next quarter as well. SCIL sees acceleration in revenue growth from Q4FY22 with encouraging response for its new products and commercialisation of new facilities. It is likely to complete its capex spend by FY23 and thereafter focus on increasing utilisation and FCF generation. While the brokerage cut FY22E EPS by 9%, the brokerage increases the same for FY23E and FY24E by 5.7% and 3.1%, respectively. It rolls over valuation to FY24E, but assign 21x P/E (vs 26x earlier). Consequently, the target price for the stock increases to Rs683 (from Rs668).

Promoter/FII Holdings
Promoters held 35.73 per cent stake in the company as of 31-Dec-2021, while FIIs owned 8.49 per cent, DIIs 10.91 per cent.