Prabhudas Lilladher is bullish on Sharda Cropchem has recommended buy rating on the stock with a target price of Rs 444 in its research report dated January 25, 2019.
Prabhudas Lilladher's research report on Sharda Cropchem
Sharda Cropchem reported better than expected set of results. Topline growth of 44.9% was driven by both the segments whereas bottomline growth was largely driven the Belts division. Agrochemical segment reported 170 bps decline in EBIT margins to 3.7%, lowest Q3 margins in the last 4 years, due to (a) its inability to pass on the higher raw material cost and (b) higher revenue growth from less profitable geographies. Other expenses shot up 66.2% on account of sharp jump in write offs (Rs 314 mn in Q3 and Rs 422 mn in 9MFY19) of intangible assets in CWIP. Consequently, EBITDA margin contracted by 92 bps to 10.0% (8th consecutive quarter of decline). PBT grew 41.6% YoY but lower tax rate in Q3FY19 @ 28.0% vis-à-vis @50.2% in Q3FY18 led to APAT growth of 1.7x for the company.
SHCR has been among the most severely impacted due to short-supply of raw material, but at CMP the stock has prices in most of the concerns. Topline and bottom-line are expected to clock CAGR of 14.7% and 11.9% between FY18-21E. Maintain Buy with a target price of Rs 444.
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