Buy Sudarshan Chemical Industries; target of Rs 615: Sharekhan

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Sharekhan's research report on Sudarshan Chemical Industries

Q3FY21 numbers were strong with better-than-expected revenue growth of 19.6% y-o-y to Rs. 506 crore led by double-digit volume growth while OPM at 15.2% was resilient and in line with estimate. Management hinted at strong demand traction for its product portfolio - coatings, plastics, and inks in domestic and exports market, which would help sustain volume growth in coming quarters. Capex of Rs. 585 crore, new launches (including yellow high-performance pigment) and a likely price hike to pass on raw material costs would drive strong growth in coming years. EBITDA/PAT set to register a CAGR of 20%/25% over FY2021E-FY2023E.

Outlook

We maintain a Buy on Sudarshan Chemical with a revised PT of Rs. 615, given its dominant position in pigments market, double-digit earnings growth outlook and strong RoE of 23%. At CMP, stock trades at 17.3x FY2023E EPS.

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