IGI Logo

On a growth path

Sudarshan Chemical Industries (SCI) is one of the leading producers in India and has been serving for over 70 years in Indian and global pigment markets. It manufactures an extensive range of organic, inorganic, effect pigment and dispersions. It has two manufacturing facilities located at Roha and Mahad in Maharashtra, India and 2 dedicated R&D centre globally. In addition, it exports to 85+countries and has 10 sales offices in India, US, Europe, China, Mexico, and Japan.

Investment Rationale

* Opportunities in the sector to aid growth: The overall chemical sector has gained momentum particularly the specialty chemical due to increasing demand as well as the use of chemicals in various industries such as agriculture, construction, packaging, personal care & cosmetics, food & beverages, etc. Also, its capacity utilization levels are getting back on track and demand for Indian chemical companies is improving globally as opportunities like the adoption of China +1 strategy and Chinese shutting manufacturing due to environmental reasons have led customers to shift their focus to India.

* Core focus on growing pigment segment: Global pigment market is estimated to be ~USD10bn, out of which ~USD 8.6bn market is accessible for the company to grow and this would be driven by higher demand for pigment from the coating, inks, plastics and textiles industries as well as consolidation of global players. Also, SCI is one of the leading players in India, with a market share of ~35% in pigment market. Over the last 2-3 years, the company’s focus has been on expanding its portfolio of high-performing products and adding new capacities. Going forward, given a robust product portfolio for domestic as well as global markets, we believe SCI will continue growing its pigment segment as well as gain market share.

* Capacity expansion as planned: SCI has initiated a capacity expansion plan of Rs 600cr in FY20 and it is in the final stage of completion. Due to Covid, there was some delay, but with reopening and things getting back on track, the management is confident of commencing new manufacturing capacity by FY22. With this expansion, the company will add more products in the high-growth pigment industry equivalent to global competitors as well as generate additional revenue growth for the company. We have estimated its revenue to grow in double digits at a CAGR of 14.5% over FY22-24E.

Outlook & Valuation

We believe SCI is well placed to capitalize opportunities in the global as well as Indian pigment sector driven by positive industry growth trend, high entry barrier in the sector and wide range of products in their portfolio. Besides, they’re highly cost competitive amongst the peer group. On the financial front, the company’s track record has been decent and we have estimated its revenue and PAT to grow at a CAGR of 14.5% and 14% over FY22-24E. We have a positive view on the company and have initiated a Buy on the stock with a target price of Rs 720.

To Read Complete Report & Disclaimer Click Here

Please refer disclaimer at https://www.religareonline.com/disclaimer

SEBI Registration number is INZ000174330

Views express by all participants are for information & academic purpose only. Kindly read disclaimer before referring below views. Click Here For Disclaimer