Reduce Sudarshan Chemical Industries: target of Rs 780: ICICI Securities

ICICI Securities's research report on Sudarshan Chemical Industries

Sudarshan Chemical Industries’ (SCIL) Q1FY25 print was slightly weaker than expected with pigment revenue growing only 10% YoY (down 8.4% QoQ on seasonality) while RIECO revenue dipped 38% YoY, and slipped to EBIT loss. Gross profit margin normalised completely, and rise in revenue may drive operating leverage with improvement in EBITDA margin for pigment business. SCIL remains excited on rising enquires and engagement from international customers with industry consolidation tailwind; it expects acceleration in revenue in ensuing quarters.

Outlook

We retain our estimates and TP at INR 780 (FY26E P/E multiple to 20x). However, we downgrade the stock to REDUCE (from Hold) on recent run-up in stock price already factoring in the optimism.