Buy Sumitomo Chemical India; target of Rs 550: Sharekhan

About this update from Sumitomo Chemical India Ltd.

Sharekhan's research report on Sumitomo Chemical IndiaCompany reported a revenue of Rs. 674 crore (up 3.5% y-o-y and 24.4% q-o-q), in line with expectations. Operating margin at 20.8% (up 840 bps y-o-y) was far ahead than expectations of 16.2%. The margin beat was led by high gross margins as the company had liquidated all the high cost inventory by Q2. PAT of Rs. 110 crore was up 52% y-o-y. This year’s domestic performance was affected by below normal monsoons and low reservoir levels. Export sales were impacted due to the low demand, pricing pressure and inventory de-stocking.Management expects domestic demand to start normalizing in the coming year, which would improve product realization and support domestic sales. Overall, company expects volume growth of 12-15% in FY25.OutlookImprovement in the domestic demand on the back of normal monsoon forecast, ramp-up of already completed capex and increase in margins bodes well for the ompany. We have increased both our FY25/26 earnings estimates by 17%. Hence, we revise our rating to Buy from Hold on SCIL with a PT of Rs. 550.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_12062024_Sharekhan

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