ICICI Direct's research report on Sudarshan Chemical Industries
Q2FY21 revenues grew 1% YoY, 21.7% QoQ to Rs 428.9 crore. Pigment segment grew mere 0.4% YoY, 17.8% QoQ to Rs 402 crore. Muted YoY growth was mainly due to production disruption in July amid Covid-19. EBITDA margins improved mere 18 bps YoY to 15.8% (I-direct estimate: 15.5%), 111 bps improvement in gross margins was largely offset by higher employee cost and other expenditure. EBITDA grew 2.1% YoY, 27.8% QoQ to Rs 67.7 crore vs. I-direct estimate of Rs 63.3 crore. PAT declined 34.4% YoY (up 66.7% YoY) to Rs 30.3 crore (I-direct estimate: Rs 27.3 crore) due to increase in depreciation, interest cost and tax outgo.
Margins are also likely to improve due to backward integration, change in product mix towards margin accretive products. We have a BUY rating with a target price of Rs 550 (22x FY23E EPS of Rs 25).
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