Buy Sharda Cropchem; target of Rs 836: Khambatta Securities

Khambatta Securities' research report on Sharda Cropchem

Sharda Cropchem Limited (SCL) recorded strong volume growth during FY22, which was further assisted by better product mix and price realisations, resulting in robust topline growth. Aided by healthy traction across the product range, the company’s business continues to be driven by identification of new product registration opportunities, expansion and strengthening of distribution reach, and cost management with an eye to improve margins. Management has guided 15%-20% sales growth going forward and an EBITDA margin of 20%-22% in FY23, which is expected to be maintained in the medium term. The SCL stock appreciated by 56% since our BUY rating in the 3Q FY22 update report dated 25 January 2022, and by 114% since we initiated coverage on the company on 10 August 2021. With 4Q FY22 results beating our expectations and basis overall solid performance in FY22, we revise our forecasts upwards. At current levels, the SCL stock trades at 12.3x FY24E EPS. We believe the robust FY22 numbers and healthy guidance make a strong case for re-rating SCL as we increase our target P/E multiple to 15.0x (from 12.0x) FY24E.

Outlook

We maintain a BUY rating on the stock based on an upwardly-revised price target of Rs 836, informing an upside of 22%.

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