BackICICI Securities bullish on these two specialty chemical stocks
The brokerage has retained 'Buy' rating on the chemical stock and revised its target price on the back of better growth outlook
PremiumDomestic brokerage and research firm ICICI Direct in a recent note said that it has retained its Buy rating on the chemicals company Sumitomo Chemical India (SCI) stock and revised its target price upwards on the back of better growth outlook from outsourcing opportunity of SCC Japan.
SCI provides solutions for insecticide, herbicide, fungicide, plant growth regulator (PGR) under agro segment. Under animal nutrition, it manufactures methionine for feed additive use. In terms of revenue contribution, insecticide constitutes around 51% while around 19% is from herbicide, 9% from fungicide and 20% from other segments such as PGR, AND & EHD, the brokerage said in a note.
The stock appreciated at 63% CAGR (Compound annual growth rate) in the last two years. The brokerage has revised its target price upwards for the stock to ₹505 per share (earlier ₹400 per share).
Apart from Sumitomo Chemicals, in its chemical coverage, ICICI Securities said it also likes another chemical company, Neogen Chemicals. ''Trigger for Neogen Chemical’s future revenue growth would be increasing CRAMS opportunity,'' the brokerage said in the note. The brokerage has a 'Buy' for Neogen Chemicals with a target price of ₹1,085 per share.
Sumitomo Chemical India's Q1FY22 numbers were almost in line with ICICI Securities's estimates. Its net profit for the quarter increased 33% on a yearly basis to ₹105.7 crore owing to higher other income. The company reported revenue growth of 20.7% year-on-year (YoY) to ₹782 crore, led by higher growth from herbicide segment (up 67.2% YoY). Gross margins rose 140 bps YoY to 36.1% while EBITDA margin improved to 19.2%, due to higher other operating cost. Its EBITDA was up 26% YoY to ₹149.8 crore.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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