Buy This Agrochemical Stock For 31% Gain, Reports Strong Revenue Growth Of 32% YoY: Prabhudas Lilladher

Reputed brokerage firm Prabhudas Lilladher, in a report, suggests investors buying the stocks of Sharda Cropchem (SCHR), which has reported strong revenue growth of 32% YoY in 1QFY23. SCHR has spent Rs. 1.02bn of capex in 1QFY23 as against Rs. 635mn in the same period, a year ago.

Stock To Buy: Target Price, Current Market Price

The Current Market Price (CMP) of Sharda Cropchem is Rs. 564. Prabhudas Lilladher has estimated a Target Price for the stock at Rs. 740. This stock has the potential to give 31.91% return, in the upcoming 1 year. This is a small-cap stock with a market capitalization of around Rs. 4,748 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 564
Target Price	Rs. 740
Potential 1 year return	31.91%
52 week high share price	Rs. 769.15
52 week low share price	Rs. 285.65

The company's PAT fell by 40% YoY, in Q1FY23, as a result, its share price fell by around 7% in intra-day trading today. In the past 5 days, its stock fell by 24.13%, so the stock is available at a lower price now. The brokerage firm said, "Adverse currency impact coupled with increased freight cost has, in turn, resulted into an overall miss into estimates."

Prabhudas Lilladher Says: Why Should You Buy This Stock?

According to Prabhudas Lilladher, "Sharda Cropchem's (SHCR) Volume/Price/FX grew -2.5%/+38%/-3.3% YoY respectively, while gross margins contracted by 390bps YoY to 25.4%, largely led by adverse forex impact. Higher freight cost coupled with higher legal and professional charges and one-off impact of Rs. 121.5mn pertaining to loss on fair value of investments has resulted into an EBITDA margin contraction of 480bps YoY to 11.7%. Additionally, agrochemical revenues increased 15% YoY to Rs. 6.1bn; while non-agrochemicals revenues grew by 137% YoY to Rs. 2.0bn respectively."

"Citing positive growth momentum across regions coupled with price hikes in the recent past, management remains confident of achieving 15-20% YoY revenue growth for FY23E, however, adverse currency movement is likely to exert pressure on the margins in the near term. That said, factoring in adverse pressure on margins we trim our EPS estimates for FY23/24E by 8%/2% respectively," the firm added.

Sharda Cropchem: Company

Sharda Cropchem is a fast-growing global agrochemicals company with a leadership position in the generic crop protection chemicals industry. It has made deep inroads in the highly developed European and US markets which are characterized as high entry barrier markets. It also has a significant presence in other regulated markets such as LATAM and the rest of the World. The product portfolio in the non-agrochemical business comprises Belts, general chemicals, dyes and dye intermediates which enables the Company to cater to varied demands. The company's recent robust performance was primarily on the back of higher agrochemicals growth across regions with Europe/ NAFTA/ ROW up 24%/10%/22%/ YoY respectively.

Disclaimer

The above stock was picked from the brokerage report of Prabhudas Lilladher. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.