Sumitomo Chemicals - Q2FY21 Result Update - ICICI Direct

Sumitomo Chemical reported topline growth of 8.7% YoY to Rs. 902 crore vs. our expectation of Rs. 875 crore. The topline performance was led by higher growth from crop protection segment, which was at Rs. 868 crore (up 9% YoY) while revenues from other segment fell 4.8% YoY to Rs. 33.8 crore. Revenue from crop protection was led by better performance from herbicide (up 18% YoY) along with decent performance from PGR (up 13% YoY) and fungicides (up 8% YoY). Better gross margins (up 493 bps YoY) owing to change in the product mix along with benign RMAT prices translated into expansion in the operational performance by 501 bps YoY to 24.3%, leading to EBITDA growth of 37% YoY to Rs. 218.9 crore vs. our estimate of Rs. 185 crore. OPM from crop protection segment inched up to 25% (up 549 bps YoY) while the same from other segment fell 748 bps YoY to 6%. Higher taxes (26% vs. 15% in Q2FY20) impacted bottomline growth, which was up 20% YoY to Rs. 157.8 crore.

Valuation & Outlook

We value the company at 45x PER FY22E and arrive a target price of Rs. 335/share, potential upside of 21%. We maintain BUY rating on the stock.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_SumitomoChemicals_Q2FY21.pdf

Source : Equity Bulls

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