Domestic brokerage house HDFC Securities believes Sudarshan Chemical is in a sweet spot to seize the opportunity of the two major global players to move away from the pigment business by offering products similar to those of global players and Indian pigment manufacturers. can act as a tailwind for
It has maintained a buy recommendation on chemical stock with a target price of 790 per share. The chemical maker’s Q3 EBITDA/PAT was above brokerage estimates, driven by 8% higher revenue, lower-than-expected raw material costs and other expenses, lower-than-expected depreciation, and lower-than-expected tax expense.
“The demand momentum from the domestic market continued. EBIT margin for the segment came in at 10%, -222/+345 bps YoY/QoQ. The pass-through of intermediate price increases to customers continued through Q3, leading to a sequential increase in margins. Capacity utilization in the third quarter was at around 80% of operating capacity,” the brokerage and research firm’s note highlighted.
The company’s exports account for 45% of the Pigments segment’s revenue and have grown by 22% sequentially as compared to Q2FY22. Specialty pigments accounted for 67 per cent of the pigment segment’s revenue in the third quarter. Margins in specialty pigments are 1.5x that of non-specialty pigments. Management has set capital expenditure target for FY 2012 3 billion.
HDFC Securities expects Sudarshan Chemical’s net profit to grow at 45% CAGR (Compounded Annual Growth Rate) in FY 2012-24E, led by 33% CAGR in EBITDA.
Sudarshan Chemical is a leading color and effect pigment manufacturer in India. Its shares are up just 15% in a one-year period.
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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