Sharekhan's research repor on Sudarshan Chemical Industries
Sudarshan Chemical Industries Limited (SCIL) reported better-than-expected recovery in revenue at Rs. 429 crore (up 1% y-o-y versus our expectation of 4.9% y-o-y drop), led by better performance in the domestic business. EBITDA margin was in-line at 15.4% (up 75 bps y-o-y). Strong recovery was seen in August-September in the domestic business (up 70% q-o-q) across products especially for coating, plastic, and inks; exports demand remained healthy. Utilisation rate also recovered to 85%-90%. Long-term growth outlook intact, given capex plan of Rs. 585 crore over FY2020-FY2022E to augment capacities. Thus, we expect EBITDA/PAT to register a CAGR of 20%/25% over FY2021E-FY2023E.
Outlook
We recommend Buy on SCIL with a PT of Rs. 567, given its dominant position (fourth largest player globally), double-digit earnings growth outlook, and strong RoE of 22%. The stock is trading at 17.1x FY23E EPS.
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