Chemical stock surges over 42% in 5 sessions. Brokerages see more upside after Q3 results
Premium- Brokerages are further bullish on the chemical stock after its Q3 results announcement and have Buy rating
Shares of Sharda Cropchem have outperformed by rallying more than 42% in the last five trading sessions as compared to a 4% fall in the benchmark Sensex. The chemical stock has given over 53% return in the last one month whereas it is up over 90% in a year's period. Now, brokerages are further bullish on the stock after its Q3 results.
On strong volume growth across regions, higher realisations and a better product mix, Sharda's revenue in the quarter ending December rose 78% year-on-year (YoY) and 37% on a sequential basis.
“We are positive about Sharda’s future performance, considering its focus on registration, rising share of high margin products and deeper penetration in markets. Further, internally-funded capex and FCF would strengthen its balance sheet. We expect its revenue/profit to clock 14%/15% CAGRs over FY22-24," said brokerage house Anand Rathi.
It has retained its Buy rating on Sharda Cropchem stock with a revised target price of ₹600 per share. Though, the brokerage sees forex movements, dependence on China for raw material, delay in registrations as key risks.
The company's management said short-term issues regarding supplies and logistics would improve in the near future. Further, raw material prices would soften. Management added that it is seeing positive traction in old and new products. The company is expanding its range of products at each region for future growth.
"We believe Sharda Cropchem's performance has suffered in the past on account of multiple factors like inferior geographical mix; sharp uptick in RM cost and inability to pass on inflated cost and higher capitalization cost. However, these cloud of concerns are largely overdone.
That said, factoring in better 9MFY22 performance, the brokerage has increased its EPS estimates for FY22/23/24E and has maintained its ‘buy’ rating on the chemical stock with a revised target price of ₹570 (earlier ₹450).
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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