Hold Sudarshan Chemical Industries; target of Rs 430: Sharekhan

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26 Aug, 2025 12:21

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Sharekhan's research report on Sudarshan Chemical Industries

Q2FY23 performance was subdued with a 4.7% q-o-q decline in revenues to Rs. 528 crores, due to pressure on pricing and 9% q-o-q decline in volumes. OPM at 8.1% (down 250 bps y-o-y; up 64 bps q-o-q) was in-line with our estimate of 7.9% as sharp miss in gross margins (38.7% versus our estimate of 41%) was offset by benefit of operating leverage. PAT of Rs. 4.5 crore (down 80% y-o-y; down 36% q-o-q) was 57% below our estimate of Rs. 10 crore due to higher-than-expected interest and depreciation and lower-than-expected other income. Pigment domestic/export revenues declined by 13%/6% q-o-q to Rs. 235 crore/Rs. 242 crore given the deferment of purchase decisions by domestic customer and subdued global demand. Pigment specialty revenue segment declined by 6% q-o-q to Rs. 331 crore due to weak demand for plastics. Capex plan of Rs. 750 crore will be entirely completed by Dec 2022. Ramp up of new products is slow but the yellow pigment launched earlier is performing well with margins set to improve going forward.

Outlook

We maintain our Hold on Sudarshan Chemical Industries Limited (SCIL) with a revised PT of Rs. 430 (to reflect cut in earnings estimate) given subdued earnings outlook (expect FY23 PAT to decline by 47%) and see limited upside from CMP. Stock trades at 39.4x/17.3x its FY2023E/FY2024E EPS.

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Sudarshan Chemical Industries - 14 -11-2022 - khan