Buy Sumitomo Chemical; target of Rs 620: Anand Rathi

Anand Rathi's research report on Sumitomo Chemical

Sumitomo Chemical (Sumitomo) reported subdued 4Q numbers below our and consensus estimates with flat revenue growth while EBITDA and PAT declined by 15% and 9% y/y respectively. Key highlights are: a) Domestic revenues up 18% y/y; exports down 22% y/y in 4Q’25. b) Exports sluggish due to lower revenues from LATAM and Africa down 30%/24% y/y. c) GM’s contracted by 170bps y/y/210bps q/q to 40% led by pricing pressure in the exports markets. d) Specialty/generic contributed 29%/71% in 4QFY25 v/s 31%/69% in the same period last year. e) Barrix Agro sciences (Subsidiary) delivered remarkable performance with revenue growth of 82% y/y in FY25, with positive EBITDA margins of 16% v/s 15% negative in FY24. f) two new capex announced- 1) 2nd plant for a key SCC product at Bhavnagar with capital investment of Rs550mn to be completed by 4QFY27, and 2) product innovation of a newly launched innovated molecule at Tarapur with capital outlay of Rs100mn to be completed by 4QFY27.

Outlook

Factoring in FY25 performance, we marginally trim our FY26e/27e EPS 3%/2%. We expect the company to clock 18%/23% revenue/PAT CAGRs over FY25-27. We maintain a Buy rating, with a revised TP of Rs620 (earlier Rs630), 40x FY27e EPS.

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