HDFC Securities has 'Buy' on this chemical stock, sees upside over the next 2 quarters
Premium- The brokerage and research firm has a Buy rating on the chemical stock with the time frame of over the next two quarters
S H Kelkar (SHK) is one of the largest domestic players with market share in Flavour and Fragrance market. It is among India’s largest aroma chemicals company. Domestic brokerage and research firm HDFC Securities has a Buy rating on the specialty chemical stock.
Recently global giant Firmenich Aromatics took 10% stake in the company. This would help SHK in technological & R&D newer product development, as per the brokerage.
Analysts at HDFC Securities feel that investors’ can buy S H Kelkar stock at in the band of ₹155-158 and add on dips at ₹137 for base case target price of ₹172.5 and bull case target price of ₹184 over the next two quarters.
The company derives over 80% of its revenue from India EM (including Asia ex-Japan and MENA regions) as against MNC players which derive slightly over 40% from developing countries. The brokerage believes SHK is well placed in terms of geographical exposure, which have high growth potential.
Fragrance segment is witnessing good traction of new product development with a slew of new launches seen around health soaps, sanitisers, and specific health-benefit products. The company is working with existing and new clients to cater to these growing needs. The company has an edge over competitors, given its strong leadership in the FMCG category, the note stated.
“We believe SHK would be a major beneficiary of increasing demand from FMCG companies specifically present in personal care, packaged foods & dairy products. Management guided for 12-13% CAGR (Compound annual growth rate) in revenue over the next 3-4 years. Company said that gross margin would be sustainable at 42-43% area in the medium term," it stated.
The company's management has said that the company will maintain distribution policy of 30-40% via dividend/buybacks as no major capex is planned in the medium term.
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The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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