Buy Sharda Cropchem; target of Rs 358: Prabhudas Lilladher

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Prabhudas Lilladher's research report on Sharda Cropchem

Sharda reported better than expected results driven by strong demand from Europe & NAFTA region, new product introduction and better penetration. Declining raw material cost led to 412 bps expansion in gross margin. With improving operating environment, FY21 is expected to be a turnaround year for SHCR with both Europe and NAFTA to be growth levers. Growth momentum is expected to continue driven by expanding distribution reach, new molecule introduction and strong demand for generic molecules. Cushion on gross margin pressure is expected to continue with better availability and reduction in raw material prices.

Outlook

We have increased our Topline/EBITDA/APAT estimates by 1%/3%/1% for FY21, 1%/4%/1% for FY22 and 2%/7%/5% for FY23. Maintain BUY with revised TP of Rs358 (Previous 348) based on 13x Sep’22 earnings.

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