Sharda Cropchem Ltd. share price target

Sharda Cropchem's 1QFY20 performance was below our expectations, Sales de-grew by 7.5% YoY to 4.23bn (D.est: 5.25bn). EBITDA/PAT degrowth was even sharper by 13.3/33.5% YoY to 616/228mn respectively. Gross margin contraction of 337 bps YoY and 331 bps QoQ was a function of consistently rising raw material prices and a sharp gross margin decline in Europe of 560bps YoY (to 36.5% in 1QFY20). The stress on gross margins is largely attributed to innovators not taking price hikes eventually deterring Sharda's ability to take pricing action....

Margin headwinds + higher Opex and depreciation dent profitability Sharda Cropchem (SHCR)'s sales/EBITDA/PAT declined 0.2/20.2/6.7% YoY to ` 7.64/1.54/1.05bn, respectively, in 4QFY19. The gross margin contracted 340 bps YoY, as an explosion in a chemical park in China in March-19, created supply shortage and increased raw material prices. Sales de-growth of 0.2% YoY was on account of a volume de-growth of 21.1%, value growth of 16.7% and forex led growth of 4.2%. SHCR has virtually no debt on its balance-sheet (net cash of ` 3.35bn as on 31st...

due to (a) its inability to pass on the higher raw material cost and (b) higher revenue growth from less profitable geographies. Other expenses shot up 66.2% on account of sharp jump in write offs (Rs 314 mn in Q3 and Rs 422 mn in 9MFY19) of intangible assets in CWIP. Consequently, EBITDA margin contracted by 92 bps to 10.0% (8th consecutive quarter of decline). PBT grew 41.6% YoY but lower tax rate in Q3FY19 @ 28.0% vis--vis @50.2% in Q3FY18 led to APAT growth of 1.7x for the company....

by Europe and NAFTA regions. Situation in China is expected to ease out in the coming months as per the management, which will lead to improvement in gross margin in FY19. We cut FY19E EPS by 3% to Rs23.5 to factor in higher interest cost but raise FY20E EPS by 3% to Rs28.3, as we anticipate improvement in product mix and lower interest cost. We raise our TP to Rs509 (from Rs494 earlier) based on 18x FY20E EPS. Upgrade to BUY. Healthy volume growth and better product mix propel overall performance Sharda reported robust revenue growth of 29% yoy at Rs7.7bn, which was better than our estimate of Rs6.8bn on the back of healthy volume growth of 18% yoy, favorable price/product...

Sharda reported robust revenue growth of 34% yoy to Rs3.3bn driven by favorable price/product mix change of 31.1%, volume growth of 3.1% and adverse currency impact of 0.3%. Europe and NAFTA regions reported 42% and 104% yoy growth respectively. Gross margins contracted by 610bps yoy to 29% and was lower than our estimate of 32% due to increasing cost pressure from China. EBITDA margin contracted by 240bps yoy to...

Sharda Cropchem Ltd. (SCL) is one of India's leading agrochemical companies, engaged in the marketing and distribution of generic active ingredients and formulations, with a differentiated asset light business model. SCL focuses on product registrations in regulated markets, catering to this demand through supplies from Chinese vendors. It operates in formulations and active ingredients solely based on generic (off-patent) molecules. Exports account for ~95% of the company's agrochemicals sales with EU being the largest market with ~47% of agro-chemical sales in 9MFY17 and a steadily increasing its portfolio of new registrations in the EU/ LATAM, we see strong growth ahead for Sharda (15%/12% revenue/...

Sharda Cropchem LTD ('SCC') is a generics agrochemical company, follows a differentiated asset-light business model focusing on product registrations and outsourced manufacturing. It operates in formulations and active ingredients solely based on generic (off?patent) molecules. This differentiates it from an innovator company which expends capital, time and resources primarily towards R&D...;.