Buy Sharda Cropchem, Stock Target Price and Stock Analysis.

Anand Rathi is bullish on this Indian chemical stock with a 40 per cent upside on the current market price. 

 The biggest Domestic Brokerage firm Anand Rathi has initiated buy recommendations on the chemical manufacturing stock Sharda Cropchem.

Sharda Cropchem is principally engaged in the export of agrochemicals (technical grade and formulations) and non-agro products such as conveyor belts, rubber belts/sheets, dyes and dye intermediates to various countries across the world.

According to the Brokerage firm, Sharda Cropchem focuses on the formulation and active ingredients across the region. growth will continue strong order book in the pipeline and distribution network will add to growth.

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Sharda Cropchem has the following positive growth outlook to watch out for:

1, Peculiar business model. The company focuses only on registering formulations and active ingredients for regions, globally. Its revenue has clocked a 15.1% CAGR from FY13 to FY21. 

2, Increase in registrations, strong pipeline driving growth. 

3, Niche business with strong entry barriers. Its identification of off-patent high-demand molecules, high registration cost and a long gestation period in registering formulations and active ingredients are high entry barriers.

4, Strong financials. We expect an average ~18.6% EBITDA margin over FY22-24. Revenue/PAT to clock 15%/ 19% CAGR over FY22-24e. Capex for new registrations would be funded internally (Rs2.5bn-3bn each year). The company is virtually debt-free. We expect return ratios to improve supported by topline growth and stable margins.

Valuation. Currently, the stock trades at 10.9x FY23e and 9.2x FY24e earnings. Sharda is trading at the lower end of its historical P/E multiples (avg 16x over FY15-21).

Sharda Cropchem Stock Recommendation.

Brokerage Firm Anand Rathi has buy recommendation the Sharda Cropchem stock with a target price of Rs 550. The Current Price of the Sharda Cropchem stocks is  Rs 350.

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