11 February 2020 SH Kelkars (SHKL) 3QFY20 operating performance was driven by improved demand in the Fragrances business (~90% of revenue). We expect growth momentum to be driven by demand pick-up in the underlying industry. Albeit the delay in CFF consolidation, we cut our earnings estimates for FY20 and increase estimates for FY21 on account of better demand outlook and easing RM pricing pressure. Reiterate Revenue grew 13% YoY (v/s est. EBIDTA increased 8% YoY to INR431m (v/s est. INR492m) with margin contracting 75bp YoY to 14.9% (v/s est. Adj. PAT was up 20% YoY at INR256m (v/s est. However, SHKL reported net loss of INR109m (v/s INR214m profit in 3QFY19) owing to one-time exceptional expense of INR365m on impairment of PPE and other cost related to the shutdown of a research facility in the Netherlands. Fragrances biz grew 14% YoY to INR2,595m, largely driven by growth in the domestic segment (+22% YoY), while the overseas segment remained muted at 1%.