31 Dec , 2021 By : Kanchan Joshi
Powered by its focus on registering formulations and active ingredient across regions, Sharda Cropchem’s strong growth would continue, said Anand Rathi. A strong pipeline and distribution network would add to growth. Internally funded capex and FCF generation would strengthen its balance sheet, resulting in higher return ratios, as per the brokerage firm.
It has initiated coverage on the chemical stock Sharda Cropchem, with a Buy rating and a target price of Rs480, over 37% upside potential from current stock levels of Rs350. Sharda Cropchem shares are trading at the lower end of its historical P/E multiples, Anand Rathi highlighted.
“The company focuses only on registering formulations and active ingredients for regions, globally. Its revenue has clocked a 15.1 percent CAGR from FY13 to FY21. We estimate revenue from new and existing registrations to register a 16.6 percent CAGR (Compound annual growth rate) over FY22-24. We estimate 16% and 10% revenue CAGRs over FY22-24 in its agrochemicals and nonagrochemical businesses, respectively," the brokerage note stated.
Its identification of off-patent high-demand molecules, high registration cost and a long gestation period in registering formulations and active ingredients are high entry barriers, it added.
Though, Anand Rathi sees forex movements, dependency on china for RMs and delay in registrations as key risks.
“We expect an average ~18.6 percent EBITDA margin over FY22-24. Revenue/PAT to clock 15%/ 19 percent CAGR over FY22-24e. Capex for new registrations would be funded internally (Rs2.5bn-3bn each year). The company is virtually debt-free. We expect return ratios to improve supported by topline growth and stable margins," said Anand Rathi.
0 Comment