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Multibagger chemical stock surges 110 percent in 1 year, Anand Rathi sees more upside

18 May , 2022   By : Kanchan Joshi

Multibagger chemical stock surges 110 percent in 1 year, Anand Rathi sees more upside

Sharda Cropchem shares have risen 10.95 percent in the previous five trading days, outperforming the benchmark Sensex, which has gained 0.35 percent. Despite the BSE Sensex having fallen 8.92 percent in the previous six months, the stock has produced a multibagger return of 110.84 percent. The stock is up 98.43% year to date (YTD), including a multibagger return of 105.53 percent vs the benchmark's 8.22% increase in 1 year. After the company's Q4 results, the brokerage firm Anand Rathi is bullish on the stock and has given a buy rating for a target price of Rs835 per share against the current market price of Rs706.

For the financial year ended March 31, 2022, the company's consolidated revenue from operations increased by 31.8 percent YoY to Rs1,434.5 crore in 4Q FY22 from Rs1088.13 Cr and 49.4 percent to Rs3,579.8 crore in FY22 which was Rs2395.60 in March 31, 2021. In 4Q FY2, the company's net profit, or profit after tax (PAT), increased by 32.2 percent y-o-y to Rs177.0 crore from Rs133.93 crore the year-ago quarter. The company recorded an EPS of Rs.19.62 for the quarter ended March 31, 2022, compared to Rs. 14.84 for the same quarter in the previous year. The company's Board of Directors has also recommended a final dividend of Rs3 per share with a face value of Rs10 for the fiscal year 2021-22, subject to the approval of shareholders.

“On 24% volume and 25% pricing growth, Sharda’s revenue/PAT grew 49%/52% in FY22. Management talked of 15-20% revenue growth in FY23 with a 20-22 percent EBITDA margin supported by strong agri demand globally. We are positive about Sharda’s future performance, considering its focus on registrations, rising share of high margin products and deeper penetration in markets. Further, internally-funded capex and FCF would strengthen its balance sheet. We expect its revenue/profit to clock 15%/16 CAGRs over FY22-24," said the brokerage firm Anand Rathi.

Capex is expected to be between Rs3.8 billion and Rs4 billion in FY24, according to management. Short-term supply and logistics issues would have no significant impact on Q1 FY23 performance, according to the company, but if lockdown in China continues, it will have a short-term impact on supplies, the management added. The management has also stated that it is seeing positive traction in old and new products. The company is expanding its range of products in each region for future growth.

By expecting high growth momentum, a strong balance sheet, free cash-flows and strong return ratios over FY 22-24, Anand Rathi has maintained its buy rating on the stock with a revised target price of Rs. 835 based on 16x FY24e.

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