Buy Sharda Cropchem; target of Rs 1162: Khambatta Securities

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26 Aug, 2025 12:21

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Sharda Cropchem Limited (SCL) reported a 25% y-o-y increase in total revenue for 1Q FY26, reaching Rs 984.8 crore. This growth was driven by a 13% increase in overall volume and recovery in pricing. The nonagricultural segment saw a volume growth of 59% y-o-y, while the agrochemical segment grew by 11% y-o-y in volume. The company's Gross margin expanded 630 basis points to 35.5% in 1Q FY26, which is attributed to stabilizing input costs. The company anticipates similar gross margins for the rest of FY26. Adjusted EBITDA (excluding write-off of intangible assets and intangible assets under development, and loss on fair valuation of investments) for the quarter increased 66.5% y-o-y to Rs 142.2 crore. Adjusted EBITDA margin expanded 356 bps to 14.4% during 1Q FY26. 1Q FY26 Adjusted PAT increased 423.9% y-o-y to Rs 142.8 crore. Adjusted PAT margin expanded 1103 bps y-o-y to 14.5%.

At current levels, the SCL stock is trading at ~14.7x FY27E EPS after appreciating 198% since we initiated coverage on the company in August 2021. Based on an improved outlook for demand and profitability, we have revised our target P/E multiple from 16x to 18x for FY27E. This adjustment leads to an increased price target of Rs 1,162 from our previous target of Rs 793, resulting in an upside of 22% from current levels. Hence, we upgrade our rating to BUY.

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