Anand Rathi's research report on Sumitomo Chemical India
Robust Q4FY2021 results with better-than-expected revenue growth of 19.6% y-o-y to Rs. 534 crore and 81 bps beat in OPM at 13.4% (up 408 bps y-o-y). Operating profit/PAT at Rs. 71 crore/Rs. 54 crore, up 72%/128% y-o-y and beat of 20%/40% versus our estimate. Strong revenue growth was led by growth across product categories (excluding herbicides). Revenue from insecticides/PGR/metal phosphides/fungicides/AND & EHD up 15%/52%/82%/20%/15% y-o-y. Capex in existing products and new capex of Rs. 100 crore -110 crore for five proprietary products (revenue potential of Rs. 200 crore - 250 crore) for supply to the parent would drive industry-leading revenue growth.
We expect Sumitomo Chemical India Limited (SCIL) to continue to enjoy premium valuation over domestic peers, given massive contract manufacturing opportunity from the parent and robust balance sheet. Hence, we maintain Buy on SCIL with a revised PT of Rs. 370.