Buy Sumitomo Chemical India; target of Rs 450: Prabhudas Lilladher

About this update from Sumitomo Chemical India Ltd.

Prabhudas Lilladher's research report on Sumitomo Chemical IndiaWe trim our FY24/25/26E EPS estimates by 17%/16%20%, citing challenging environment both in domestic and exports markets in terms of higher channel inventory and pricing pressures. Sumitomo Chemicals India (SUMICHEM) reported lower than estimated results with Revenue/EBITDA/PAT decline of 20%/32%/29% YoY largely led by subdued demand environment in both domestic and export markets (down 10% and 62% YoY respectively). With provisioning of high cost inventory largely behind, GM’s expanded 50bps YoY to 38.4% as against 37.9% in Q2FY23. However, higher employee costs coupled with higher other expenses up 170bps YoY and 280bps YoY to 6.5% and 11.1% has resulted into EBITDA margin contraction of 400bps YoY to 20.8% during Q2FY24.OutlookGoing forward, management remained cautious on exports market citing higher channel inventory exerting pressure on revenue growth as well as margins (likely to take couple of quarters to normalize). We expect Revenue/ EBITDA/PAT CAGR of 12%/16%/15% over FY24-26E (FY18- 23 CAGR of 13%/25%/28%). Maintain ‘BUY’ with revised TP of Rs450 (Rs500 earlier) based on 40XFY26E EPS.For all recommendations report, click hereDisclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.Sumitomo Chemical India - 31 - 10-2023 - prabhu

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