Dolat Capital is bullish on Sharda Cropchem has recommended buy rating on the stock with a target price of Rs 415 in its research report dated July 25, 2019.
Dolat Capital's research report on Sharda Cropchem
Sharda Cropchem’s 1QFY20 performance was below our expectations, Sales de-grew by 7.5% YoY to ` 4.23bn (D.est: ` 5.25bn). EBITDA/PAT de-growth was even sharper by 13.3/33.5% YoY to ` 616/228mn respectively. Gross margin contraction of 337 bps YoY and 331 bps QoQ was a function of consistently rising raw material prices and a sharp gross margin decline in Europe of 560bps YoY (to 36.5% in 1QFY20). The stress on gross margins is largely attributed to innovators not taking price hikes eventually deterring Sharda’s ability to take pricing action.
We continue to value Sharda cropchem at 15.0x FY21E EPS of ` 27.7, due to a correction in the stock price by 16.4% we foresee an upside of 43.0% with a target price of ` 415. We thus have to change our rating to Buy.
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